Cut Interest Before Power Costs Impacts Economy

Monday, 13 August 2001, 2:39 pm
Press Release: Business New Zealand

Cut Interest Rates Before Electricity Costs Impact On Economy

Interest rates should take into account the prospect of price rises caused by the electricity crisis says Business New Zealand Chief Executive Simon Carlaw.

"The Reserve Bank should take the opportunity to cut the official cash rate this week," Mr Carlaw said.

"Global markets remain uncertain, as shown by our faltering export performance in manufactured goods. The domestic economy is still fragile and the level of investment in future capacity is still a concern. Domestic inflation is not a significant issue.

"Action now would offset problems ahead. Drought will have a double banger effect on the economy - commodity returns will be checked, and electricity price increases on business and industry will inevitably be passed on. The impact needs to be taken into account now, not when it hits consumers.

"The Reserve Bank should be well aware of the effects of shutting the stable door after the horse has bolted."

Ends

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