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Corin Dann: Greens had to drop money-printing

opinion Corin Dann

By Corin Dann ONE News Political Editor

Published: 1:23PM Wednesday June 19, 2013

It's a not great surprise to see the Greens do a U-turn on their policy of money printing/quantitative easing.

Putting aside any economic arguments there might be for such a policy, politically it was damaging the party and it was simply too hard a sell.

Since floating the idea last year National has flogged the Greens over the policy using any opportunity to highlight what it claims are the Greens whacky economic policies.

Think John Key in Parliament waving around Zimbabwean million dollars notes to highlight the effects of money printing under Mugabe.

Key has had a field day and the Greens had to put a stop to it.

Technically of course what Russell Norman is proposing is not a whacky idea at all.

Our Reserve Bank would I'm sure print money and buy Treasury bonds if conditions demanded it. In other words, if interest rates were at zero and deflation (a downward spiral of falling prices and demand) was at risk of taking hold.

It is after all exactly the policy that's been used by the US Central bank for the last couple of years to prevent deflation and keep the US economy afloat.

However the circumstances between the US and here are quite different. Our interest rates are at 2.5 percent and there is still plenty of scope to cut rates if the economy were to worsen.

Using QE when the New Zealand economy was still growing and showing no real signs of deflation was never going to be a popular policy response.

Why Dr Norman didn't see that and that the policy would be a big political drag is a bit of a mystery for someone normally so politically astute.

However he's made up for that to a degree by fronting publicly and ditching the policy before it's too late.

While it won't be comfortable for him to swallow the dead rat and effectively admit that he was wrong, it was the best thing to do politically.

John Key's line of attack on the Greens will now be blunted and the embarrassment of the U-turn will be old news soon enough.

The message it sends to the public is also that the Greens are prepared to listen, adapt and moderate their views.

This is crucial as the party prepares to build its relationship with the Labour going into the next election.

Like the Greens, Labour is keen on monetary policy reform, but it was never comfortable going as far as money printing.

The U-Turn then is a boost for Labour as it shows the Greens being forced to follow its more moderate stance on monetary policy reform.

However don't expect Russel Norman to go easy on Labour from here or to stop taking on John Key when he attacks Green Policy.

Mr Norman has developed a tough streak of late and it won't go away because of this defeat.

He made that clear when refusing to give up on his dream of being Finance Minister in the next Labour/Greens government, telling journalists today that as far as he's concerned all Cabinet positions are still on the table going into the campaign.