Goff on 'right track' with RBA

When Phil Goff announced that the Labour Party was going to revisit the current Reserve Bank Act (RBA) with a view to making it a more effective controller of the economy he was greeted with predictable cries of scorn and derision from the monetarists on the right.

Round Table executive director, Roger Kerr, claimed that reliance on the Official Cash Rate (OCR) was totally conventional and in line with best practice overseas. Subsequent events, however have confirmed that Goff is on the right track.

No less an authority than the International Monetary Fund has come out supporting capital controls to protect countries from having an exchange rate governed by speculators. They consider countries should broaden their monetary tools and force banks to hold bigger capital reserves.

In this country the Manufacturers and Exporters Association has issued a report claiming that the OCR has allowed the exchange rate to become volatile and overvalued. Their recommendations include such things as printing more money (quantitative easing) to control the exchange rate.

BIRL economist Ganesh Nana considers that the present system has embedded in processes and policies that create a low wage economy. Others such as former UK politician and Vice Chancellor of Waikato University, Bryan Gould, point to the Canadian experience with use of a Wellbeing Index which outlines a comprehensive set of indicators that put a value on factors like educational achievement,economic security ,clean environment,social equity and health. Including this type of index in our RBA would be well worth considering.

No doubt we will find out exactly what Phil Goff and the Labour Party have in mind when their election manifesto is announced but whatever is decided, it is becoming increasingly obvious that a significant change in economic policy is necessary.