The Government should take action to lower the New Zealand dollar's exchange rate and help the Tiwai Point aluminium smelter survive, Labour's economic development spokesman David Cunliffe says.

The smelter announced last month it planned to lay off 100 workers, 35 of whom have already gone through natural attrition, amid a 25-year low in global aluminium prices made worse by the high New Zealand dollar.

It has also tried to renegotiate a lower price for electricity in its contract with Meridian Energy. It uses 15 per cent of New Zealand's electricity production.

Mr Cunliffe visited the smelter yesterday before meeting party supporters in Invercargill.

He said general manager Ryan Cavanagh had told him a realistic exchange rate was needed.

For that to happen, though, there would need to be monetary reform, Mr Cunliffe said.

Labour is backing a Winston Peters-authored bill which would change the Reserve Bank's policy targets.

The bank is required to control inflation, but Labour believes it must be able to take action on the overvalued dollar, which is hurting exporters like Tiwai.

The kiwi is trading at US0.82c.

Mr Cunliffe said the Government's "hands off, neoliberal monetary policy" was about as useful as a fish on a bicycle. "They are refusing any serious discussions about exchange rates," he said.

The Government has said pursuing devaluation of the dollar would give New Zealand consumers less buying power.

"By that reckoning, it should be NZ$5 to the US," Mr Cunliffe said.

Asked why Labour had not done anything about the Reserve Bank when it was in power from 1999-2008, he said the world had changed.

"It was called the global financial crisis, which the Government don't seem to have noticed," he said. "Before [it] the primary concern was managing inflation in a credit boom. Now there's been a bust and [inflation] is not the problem. But the Government hasn't changed its policy approach."

A wise man changes his mind when confronted with new information, he said.

"The New Zealand dollar is the eighth most highly traded currency in the world. More dollars are traded every day than are required to fund our total exports and imports for a year. There is something going on, it's not about the needs of real people. It's a trader's plaything."

Internationally, economics was seeing a resurgence of Keynesian and neo-Keynesian ideas, calling for government involvement with grassroots business to help grow the economy, he said.

The system now favoured banks, capital farmers and property developers, not the productive economy and exporters, he said.

alex.fensome@stl.co.nz

- © Fairfax NZ News

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