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John Key - Source: ONE News -
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The Prime Minister is picking holes in Labour's plans to re-address the monetary policy of the Reserve Bank.
Labour leader Phil Goff has called for a new approach on the bank's tools and policy targets to get an exchange rate that is better for New Zealand exporters.
"Our Reserve Bank policy targets are not well designed to produce a stable and competitive exchange rate, nor to keep interest rates as low as possible," Goff told Federated Farmers in Wellington on Thursday.
But John Key says if Goff is suggesting a move away from a free floating exchange rate, he is buying into a very interesting fight.
He says New Zealand is a major importer of capital, has high levels of foreign debt and does not have the currency reserves to defend a fixed exchange rate.
Key says Labour is doing in opposition what it did in government - very little on monetary policy.
He is critical that Goff is not actually putting any alternatives on the table, saying if you're going to break a consensus like this you really should have a clue of where you're going.
It is understood that under Labour's proposals the Reserve Bank would have to consider factors such as the level of unemployment and the strength of the dollar when setting the benchmark interest rate - rather than focusing on controlling inflation.
But any change to such a major aspect of economic policy is a big step for a mainstream political party.
