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Cutting Spending Only Half The Necessary Medicine

17 March 2005

With inflation building, the Reserve Bank’s “cut spending” call is only half the medicine needed for fixing our faltering economy….

“We also urgently need to get ourselves motivated to the task of building a bigger economy by creating a higher level of wealth and improving productivity.”

Michael Barnett, chief executive of the Auckland Chamber of Commerce was responding to today’s confirmation that the rate of inflation is above the Reserve Bank’s 1-3% guideline, which in turn signals a likely hike in interest rates by the Bank later this month.

“It is all very well for the Reserve Bank to force New Zealanders to tighten their belt, but the real answer is to find a way to create more wealth so that we can afford to pay for the living standards we want to have and which match those of countries we like to compare ourselves with,” said Mr Barnett.

“While I agree that if you don’t have the income to sustain a desired way of life you shouldn’t take on excessive debt, the real challenge facing the new government will be to shift the focus of the economy from redistribution and spending of what wealth we create to building a higher earning economy.”


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