David Carter National Finance Spokesperson

15 May 2002

Up, up and away?

"The Reserve Bank's decision to lift interest rates, again, is due to inflationary pressures building in the economy and the unsustainability of current growth rates," says National's Finance spokesman David Carter.

Today the bank lifted the Official Cash Rate from 5.25 per cent to 5.5 per cent. It also signalled that further interest rate hikes are likely in the months ahead.

"The Reserve Bank cites feedback it has had from manufacturers and employers who say they can not grow faster, without increasing costs and margins - all of which leads to higher inflation.

Mr Carter says the challenge for policy makers is to develop a credible plan to lift New Zealand's sustainable growth rate.

"If we want our economy back in the top half of the OECD, New Zealand needs to adopt policies which foster sustainable economic growth which will allow the economy to grow faster without generating inflation."

"That means policies which remove the barriers to growth, reduce the cost of doing business in New Zealand, improve the skills of the workforce and get the Government's investment plans lining up with the objective of higher growth."

"Higher sustainable growth is important because that's the only path to more jobs, higher incomes, and better quality social services.

"Clearly, today's decision reflects the judgement that current policies have not raised New Zealand's sustainable growth rates, Mr Carter concluded.

Ends

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