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Cash rate rise will hurt exporters and cost jobs

MEDIA RELEASE

08 December 2005

Official cash rate rise will hurt exporters and cost jobs, says CTU

"Higher interests rates are pushing up the dollar, increasing the cost of investment and will affect jobs in the export sector," Council of Trade Unions Economist Peter Conway said today.

Reserve Bank governor Alan Bollard increased the Official Cash Rate (OCR) this morning by 25 points to 7.25 per cent.

"Hopefully this is the last increase in this cycle and the next move will be down," said Peter Conway. "As well as hurting first home buyers, a further increase in the OCR also affects low income workers already in the property market, who will now pay higher interest rates."

"We make the point again though, that business leaders suggesting the Government cut or slow spending to take pressure off inflation undermine their credibility when at the same time they are arguing for large tax cuts - which is itself inflationary," said Peter Conway.

"We also note that wage increases are not impacting on inflation to any significant extent, with the Labour Cost index showing wages increasing by 3% in the last year in comparison to house prices rises of around 17%," said Peter Conway.

ENDS

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