As the opposition’s parliamentary inquiry into manufacturing gathers pace, it is worth taking another look at manufacturing and the chief culprit blamed for its troubles: the high dollar and the monetary regime.

First, the recent decline of manufacturing has been grossly overstated. There are substantial quarterly variations in manufacturing employment, and the figure has hovered between 240,000 and 260,000 for the past few years. Admittedly, there was a decline through the 2000s, which has stablised somewhat. It is now at its lowest level since late 2009. Not good, but not a crisis or collapse either.

As it is, the usual proposals seem to be creeping to the fore: the dollar is too high and needs to be constrained, and growth or employment targeted by the Reserve Bank instead.

These calls are understandable in one sense. It is certainly difficult for exporters with solid businesses who are squeezed just because of the high dollar. But it fundamentally misunderstands the purpose of inflation targeting through the Reserve Bank Act.

There is a view that the Act should abandon inflation targeting and target economic or employment growth. But these are not either/or propositions. The very purpose of keeping prices stable is to facilitate economic growth as accurate price signals are important for allocating resources, and for letting firms know what consumers want and the price they are prepared to pay for it.

By abandoning stable inflation and ‘going for growth’, neither would be achieved. As growth targets are not met, more arbitrary interventions would be needed to ‘tweak’ the economy. Unpredictable lever-pulling would become a way of life, completely undermining the reputation for sound money that New Zealand has built over the past 25 years.

It is also worth noting that once the inflation genie is out of the bottle, it can be tremendously difficult to put it back in and would often require a major downturn and high unemployment.

The manufacturing sector does have legitimate gripes with government for driving up the dollar in the first place – by increasing non-productive areas of government spending, and squeezing the tradables sector by increasing the non-tradables sector and the size of government.

This is one lever the government does have firmly under its control should it wish to pull it. In the meantime, the word crisis should be reserved for more than some cyclical job losses.