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Reserve Bank Moves - Not Justified?

Media Release
Auckland Chamber of Commerce

The action of the Reserve Bank to lift interest rates to avoid inflation pressures building is unconvincing....

"Combined with the uncertainty created by repeal of the Employment Contracts Act and re-nationalisation of Accident Compensation, businesses will want to respond cautiously to this latest change to ensure the cost of doing business is kept under control in coming months."

Michael Barnett, Chief Executive of the Auckland Chamber of Commerce, said that just when the economy starts to grow and hum, we continue to be the only OECD economy that persists in intervention to fuel another self-induced recession.

The warning from Reserve Bank Governor Dr Brash of further intervention to maintain low inflation is a message to politicians as much as the business market.

Impact of increased government spending arising from the upcoming Budget will obviously have potential to fuel inflation, and simply encourage the Reserve Bank to intervene further, with business and consumers picking up the cost!

"Surely, the global message is clear - that inflation is no longer the enemy, and all the Bank is doing is using an outdated blunt instrument that will increase the cost of money to business and send the wrong signal about the need for a growth-led economy," said Mr Barnett.

"What we need is action to break the cycle of holding the economy down as soon as growth shows its potential, and instead develop a strategy to build up a bigger economy, with a strong core of export-led enterprises leading the way. “

For more information contact: Michael Barnett, Ph: (09) 309-6100 or Mob: 021 631 150

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