Fiscal policy: Governor Marcus should stick to her mandate
Reserve Bank Governor, Gill Marcus', remarks yesterday regarding fiscal policy interventions to restrain the appreciating rand are off-sides and should be reconsidered (see report). The Democratic Alliance (DA) is firmly in support of an independent Reserve Bank and we have repeatedly come out in support of the Bank when it has been placed under pressure from parties driven by a particular self-interest. For that reason, we would vigorously oppose any attempt by government to instruct or influence the Bank in its decisions on reducing or increasing interest rates.
Ms Marcus' remarks are extraordinary given that these extend well beyond her monetary policy mandate as Governor into the domain of fiscal policy. The DA agrees that monetary and fiscal policy should not contradict each other, but there is no doubt that fiscal policy falls within the mandate of the Minister of Finance, Pravin Gordhan, and it is not the place of the Governor to pronounce on fiscal policy interventions. Her remarks are also extraordinary because they are misplaced and appear to be feeding off a misapprehension that protectionist measures will shield our economy. What Ms Marcus should be saying is that our economy needs to become more productive and competitive and that government needs to take urgent steps to correct the policy failures that have left us trailing far behind the growth of the BRICs that we aspire to join.
The DA agrees with the Governor that the rand is overvalued, but we do not agree with her solution. We shall set out our views in the DA Position of the Medium Term Budget Policy Statement that will be issued on Monday. While we appreciate that the governor did once serve as the nation's deputy minister of finance, we believe that she should stick to her current remit and focus exclusively on monetary policy. The DA will write to the Governor to set out why we believe that she is off-sides on this matter and should not interfere in the realm of fiscal policy.
Statement issued by Dr Dion George, MP, Democratic Alliance Shadow Minister of Finance, October 20 2010
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