Our Prime minister, John Key, has decided to say the following:
Prime Minister John Key has indicated he thought the New Zealand dollar’s fair falue was around 65 USc and that it would be logical for the Reserve Bank to intervene to push the New Zealand dollar lower, given it was currently well above where it was fundamentally fairly valued.
Key restated his view that currency intervention was not effective in the long term to try to shift the underlying value of the currency, but agreed it was “fairly logical” for the Reserve Bank to intervene when the currency was so far away from its fundamental value.
Lots of people may think this, most of them without any thought or interest about asking “why” the dollar is where it is, but lots of people do think it. But a sudden drop in the New Zealand dollar is akin to a cut in wages – all those imports suddenly become more expensive.
Given their standing and thereby ability to seemingly signal intervention in markets, the prime minister and finance minister really need to keep quiet about policy where there is an independent body involved – as it both creates volatility and indicates that such things are a more political issue. I was pissed off when Cullen did this, pissed off when Key has done it in the past, and I’m pissed off hearing it now. I don’t care if someone asked the frikken question, part of central bank independence is having fiscal authorities show a bit of discipline with their comments.