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Reserve Bank Gets It Right

The Reserve Bank's decision to wait and see before raising interest rates is the right one for business, according to the Employers & Manufacturers Association (Northern).

"That aspect of inflation generated by demand that the Reserve Bank controls is not going anywhere, so Dr Brash's decision not to lift interest rates is the best approach," said EMA's chief executive, Alasdair Thompson.

"There is still a risk that the expectations of high pay settlements set off by Government policies will feed into second round inflationary effects.

"Dr Brash will have factored that possibility into the Bank's forecasts over the next year or so, though it is too early for these particular chickens to be home roosting.

"The Bank is giving us the benefit of large doubt, with an opportunity to grow the economy before bickering over who should be getting the biggest slice of it.

"In the meantime there's time for second thoughts; big and wide spread pay demands will ensure the economic pie does not grow, with a loss of jobs, bankruptcies and more debt.

"If we can take advantage of this window of restraint, higher interest rates further down the track may be staved off."

Ends

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