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Fall in unemployment is good news!

Media Release 4 February 2000

Fall in unemployment is good news! Not inflationary

The sharp fall in unemployment just announced is excellent news, and the shock horror reports of some commentators are wildly astray; neither should the figures be treated negatively by the Reserve Bank, the Employers and Manufacturers Associations says.

“Some reports seem to be missing the fact that it is far more productive for people to be employed than unemployed and on welfare,” said the Chief Executive of the EMA (Northern) Alasdair Thompson.

“Fewer people dependent on the dole and welfare means government spending is reduced, which reduces inflationary pressure.

“It is really annoying to hear economists and other commentators again putting a negative interpretation on good economic news.

“Of itself the increase in employment is no reason to prompt a tightening of monetary conditions with higher interest rates.

“Similarly, higher capacity utilisation in our industries can improve the use of capital equipment and lower unit costs without necessarily raising prices in our open, competitive economy.

“Overall, prices could well remain neutral over the next few months, even if our questionable productivity figures are not showing positive gains just yet. The Reserve Bank should reflect on its recent hasty statement just hours ahead of an unexpectedly, very low inflation figure.

“The risk from raising interest rates too soon is that the investment in new equipment and other capacity expansion could be delayed, and we would then be genuinely at risk.”

Further comment: Alasdair Thompson
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