The Reserve Bank's stagflation warning is further confirmation of the serious economic malaise the Labour Government has inflicted on the country, according to ACT's Finance Spokesman, Rodney Hide.

"They have done an amazing 'riches-to-rags' transformation in just under a year, turning a booming economy around to the brink of recession. Just look at their record:
 The highest ever balance of payments deficit;
 * Turn around of economic growth into contraction;
 * All-time low NZ Dollar;
 * Inflation about to break through 3%;
 * loss of 10,000 jobs;
 * Record numbers of skilled NZrs leaving permanently;

"Clark and Cullen have managed to do more damage than Muldoon in a shorter time, and now they're delivering the double-hit of low growth and rising prices.

"Dr Brash's statement warns that "a situation of that kind robs savers, savages those on fixed incomes, and enriches speculators. In that situation, the Bank would have to increase the Official Cash Rate to control inflation, even though, in the short term, that would further damage economic growth.

"I believe the negative economic situation is becoming entrenched, and there is a very real danger of a downward economic spiral. Instead of enjoying 1-2% quarterly growth we have a contraction, and now the Reserve Bank's stated response to the prospect of stagflation around the corner signals 'further damage to economic growth' according to Dr Brash's statement.

"The Reserve Bank news heightens my fears of a further quarter of negative growth, as already predicted by the BNZ. This news comes out on 21 December, and I believe a recession could be Clark and Cullen's Christmas present to all of us, to mark their one-year anniversary in Government," said Rodney Hide.

ENDS

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.

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