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Growth cycle peaked; lower interest rates sought

Media Release Tuesday, April 17th, 2001

Growth cycle peaked; lower interest rates sought

The Employers & Manufacturers Association (Northern) is urging the Reserve Bank not to wait until May to cut interest rates.

The call comes in response to a 36 per cent turnaround in manufacturers business confidence locally, and the association's own survey showing an 11 per cent fall in export turnover for February.

"The present growth cycle has peaked," said Alasdair Thompson, EMA's chief executive.

"We need the Reserve Bank to cut interest rates again on Thursday by at least 25 basis points to keep investment in new projects on track.

"Sluggish market conditions overseas are making exporting much harder, and our recent growth has all been export based.

"We realise the Producer Price or wholesale inflation input prices have been pushing the fear of inflation upwards as a result of our low dollar and fuel prices, but they are the only factors that are.

"Business is acting responsibly towards these increased price pressures by absorbing much of their extra costs. Wage claims are likewise extremely responsible and muted.

"The manufacturers business confidence figures extracted from NZ Institute of Economic Research results show a large and sudden turnaround in business opinion. Last quarter a net 24 per cent foresaw conditions improving; now a net 12 per cent see them worsening. These figures square away with our own survey showing a turn down in export and domestic demand.

"The Reserve Bank should cut the official interest rate by at least a quarter of a per cent now and the same again in May."

Further comments: Alasdair Thompson tel 09 367 0911 (b) 09 303 3951 (h) 025 982 024

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