By Paul McBeth
Nov. 7 (BusinessDesk) - Reserve Bank head Graeme Wheeler's first appearance in front of a parliamentary select committee descended into farce when the room was cleared to let politicians argue for more time with the new governor.
Finance and expenditure committee chairman Todd McClay turfed everyone out, including governor Wheeler and his officials, when opposition MPs opposed his move to wrap up proceedings at 1pm in Wellington after starting 15 minutes late. Several minutes later, NZ First leader Winston Peters and Labour finance spokesman David Parker emerged saying the hearing was over and Wheeler headed back to his office.
Wheeler was making his first appearance in front of a Parliamentary committee as central bank governor having released the bank's six-monthly financial stability report earlier today.
Before being ejected, he told politicians that quantitative easing policy undertaken by central banks in the US, Japan and Europe were "a sign of desperation" and that New Zealand had scope to cut the benchmark interest rate if needed.
"If the issue is should we move to quantitative easing in New Zealand, we don't think that's something that deserves serious thought at this point," Wheeler said.
He quashed suggestions lowering the official cash rate would rein in the strength of the New Zealand dollar, saying the currency is more closely aligned with the nation's terms of trade over the long term than interest rate adjustments.
"It's hard at this point to see any factor that would lead to a major depreciation in the exchange rate in the short-term," he said. "There's no easy solution out there that simply says cut interest rates 25 pips and the exchange rates will come off 10 percent, that just doesn't work."
Wheeler backed the level of local bank profits, saying lenders' return on assets was about average among developed nations and low in terms of a return on equity. He didn't agree with the view that high bank profits are the price New Zealand pays for financial stability.
"The banking system here as we see it at this point is healthy, it's sound and it makes what we believe acceptable rates of return that aren't out of line with international comparisons," he said. "We see a lot of competitiveness and a lot of efficiency."