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RB's Warning Timely; We Must Take Heed, Says EMA

The Employers & Manufacturers Association is pleased the Governor of the Reserve Bank has decided to hold interest rates for the time being and acknowledges his advance warning for next year.

"The Reserve Bank's message is unusually blunt and explicit on this occasion," said Alasdair Thompson, the EMA's chief executive. "We're being told interest rates are going to go up early in the New Year unless everyone demonstrates considerable restraint over the price margins that business adds on, and the pay increases people go after.

"The same message applies equally to the price and cost impacts of proposed changes to Government policy.

"The plain fact is we can't compensate ourselves for events that happen outside the country.

"If businesses try and restore their margins, and employees do achieve higher pay rates, then interest rates will go up. The trading banks will benefit most if they do.

"The alternative is for all groups - Government, business and employees alike - to let the present inflation spike from oil, tobacco tax hikes and high agricultural commodity prices pass through and outside the present inflation measurement cycle."

Further comment: Alasdair Thompson tel 09 376 0911 (bus)

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