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High NZ interest rates disappointing

Media statement Thursday, September 4th, 2003

High NZ interest rates disappointing

Today's decision by the Reserve Bank to maintain a relatively high Official Cash Rate at 5% is inconsistent with our low inflationary outlook, the Employers & Manufacturers Association (Northern) says.

"Inflation is scarcely above the bottom limit of the Reserve Bank's target range and sinking," said Alasdair Thompson, EMA's chief executive.

"Growth on the domestic market is slowing as well, according the NZIER, hence today's call by the Reserve Bank can only be described as predictably conservative.

"Why the Bank does not heed the implications of its own forecasts is difficult for exporters to understand.

"The Bank is projecting inflation to keep sinking, and if so, it will break it's 1 to 3% target range at the bottom end.

"Without good returns from the export sector, it's increasingly difficult for traders to understand how the domestic market can keep on growing as fast as it has been.

"We have the highest OCR in the OECD, well above the US at 1%, Japan's under 1%, and the Eurozone at 3%.

"The NZIER's projection for economic growth is also just 2% a year for the next two years.

"At this rate, perhaps Government can explain how we are going to get back into the top 10 of the OECD because, without investment and export-led growth, no one in business knows."

ENDS

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