Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Should High Employment=High Interest Rates?

High employment + commodity dependent growth = inflation + high interest rates

We can kiss goodbye to thoughts of lower interest rates next week after today's excellent employment figures, says the Employers & Manufacturers Association (Northern).

Though unemployment at 5.2 per cent is still too high, it's hard to see how it can get much lower while the economy dawdles along as it is, the association says.

"Despite employment and wage pressures rising, the Reserve Bank should not raise interest rates next week," said Alasdair Thompson, EMA's chief executive.

"Economic growth is too weak.

"The Bank missed the opportunity to make a meaningful reduction earlier on, and it has now passed.

"The good employment figures and significant wage settlements trending up to four cent and more, and above the inflation rate, mean the Bank is unlikely to cut the OCR without evidence of substantial productivity improvements.

"That evidence is hard to find.

"The present level of economic growth is inadequate despite our relative employment strength. Growth at present results mainly from high world prices for our agricultural commodities and the competitive currency position.

"The main policy levers for better rates of growth are in the hands of Government, not the Reserve Bank.

"Though exports of elaborately transformed manufactures have been growing strongly, up 19 per cent to $9 billion for the year ended June, the most recent figures show investment for this sector lagging far behind at about three per cent a year after a lengthy decline.

"Our successful companies in the sector relocate production offshore at around the same pace as new firms grow.

"So long as we're tied to an over dependence on commodity exports, our inflation rate will be dictated by market conditions offshore.

"To break out of this pattern, we need to leverage off today's modest surpluses to boost productivity by investing urgently in education, skills training and new technology at all levels.

"In general we're still behaving as if we can lift economic growth by producing more volume rather than investing further in knowledge intensive, higher quality and higher margin differentiated products.

"The truth is our country, with a population smaller than many world cities, should be able to identify the barriers to growth and overcome them. If our political leaders continue to fail in this respect, we'll keep on sliding to the bottom rung of OECD country performance."

Ends


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Climate Summary: NZ’s Equal-2nd Warmest Year On Record

Annual temperatures were above average (+0.51°C to +1.20°C above the annual average) across the majority of New Zealand... 2018 was the equal 2nd-warmest year on record for New Zealand, based on NIWA’s seven-station series which began in 1909. More>>

ALSO:

GDP: Economic Growth Dampens In The September Quarter

Gross domestic product (GDP) rose 0.3 percent in the September 2018 quarter, down from 1.0 percent in the previous quarter, Stats NZ said today... GDP per capita was flat in the September 2018 quarter, following an increase of 0.5 percent in the June 2018 quarter. More>>

ALSO:

Up $1.20: $17.70 Minimum Wage For 2019

Coalition Government signals how it will move toward its goal of a $20 p/h minimum wage by 2021... “Today we are announcing that the minimum wage will increase to $17.70 an hour on 1 April 2019." More>>

ALSO:

Retail: IKEA To Open In New Zealand

Inter IKEA Systems B.V. is today announcing its intentions to grant the Ingka Group exclusive rights to explore expansion opportunities in New Zealand. More>>