Saturday, September 22, 2012

Hard rains gonna fall...Again

I posted awhile back on the declining Maori and Pasifika media wage. Coupled with high unemployment from these two communities and it’s easy to see why the government (mainly in the increasingly bizarre persona of PM John Key) retains a certain degree of popularity.

Quite simply, mainstream New Zealand, aren't carrying their load which is disproportionately shouldered by Maori and Pasifika communities.

But before this mainstream cries foul, let visit current political economic debate and its examination of the exchange rate.Two camps are evident.

The first argue that the exchange rate is too high by which is meant the $NZ dollar is somehow falsely valued by international exchange of the Kiwi, currently 82 US cents to our dollar. This makes are goods more expensive and more difficult for our exporters to compete. One option is for the Reserve Bank of NZ to cut the Official Cash Rate (currently at a record low of 2.5%) although proponents accept restrictions would be needed to diffuse the risk of runaway house prices.

While it is widely accepted our dollar is overvalued (perhaps by 20%), and that a correction will take place one day, the second camp argue that manipulating the $NZ exchange rate is too difficult - indeed possibly beyond the tools and competence we have at our disposal - and doomed to (expensive) failure. The current Minister of Finance lives in this tent. In a recent interview, he recommits to a floating exchange rate and accepts it may go even higher.

While this may seem a good thing if you are buying imports (which we all do as this includes petrol) or travelling offshore, we're a trading nation and need to sell more - and make more profit from what we do sell - to cover our debts and presumably pay them off.

But here's the kicker. As the minister goes on to explain: "... reducing [the exchange rate] would reduce the standard of living of all New Zealand households."

Maybe. But as we already know, the burden of recession is carried on Maori and Pasifika shoulders. The correction will come. And our people will be even poorer.

As an interesting parallel, a recent article in The Guardian notes that the 'dismembering of the welfare state is presented as a technocratic exercise of 'balancing the books' '. In this way Bill English and John Key both speak of the current reforms as being a necessary exercise. 'Democracy is neutered in the process and the protests against the cuts are dismissed.' Just as in Christchurch. The description of the externally imposed Greek and Italian governments as "technocratic" is the ultimate proof of the attempt to make the radical rewriting of the social contract more acceptable by pretending that it isn't really a political change. Be under no illusions, political change is taking place in Aotearoa?NZ in the form of even more radical wealth transfer from the have-not-enoughs to the have-plenty's.

Hard rains gonna fall.

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Simon Lambert

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