Interest Rate Rise Due To Creeping Government Spending

The Reserve Bank Governor's decision to lift the official cash rate will have an impact on New Zealand's export and manufacturing industries, ACT leader Richard Prebble says.

"The government's spin that it is the inevitable result of a good economy, is nonsense. Economic growth last year was just 2.1 percent.

"It's the result of the continuing creep in government expenditure. Central government spending is now $1 billion more than Treasury forecast two years ago and we are about to go on an election year spending spree in social policy.

"Local body expenditure is, if anything, even further out of control, with rates increasing on average at double the rate of inflation.

"Dr Brash has continually warned that sound fiscal policy depends on the government, which controls 40 percent of GDP, exercising restraint - otherwise he is forced to increase interest rates.

"The New Zealand business community notes that while New Zealand is increasing its interest rates, the United States is holding its interest rates steady, way below New Zealand.

"The interest rate rise is the cost of policies such as the Air New Zealand bailout, Kiwibank, Maori TV and Closing the Gaps," Mr Prebble said.

ENDS

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