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Cullen Going Soft On Inflation?

25 June 2002

"Finance Minister Michael Cullen has created unnecessary confusion about his attitude to inflation and his agreement with the Reserve Bank," says National Party Leader Bill English.

At a press conference today, Dr Cullen alluded that the Reserve Bank's interpretation of the Policy Targets Agreements was different to the Government's and appeared to be proposing changes to it.

"Firstly, he criticised the Bank for targeting the mid point of its 0-3 per cent target band, but when pressed Dr Cullen conceded that he would not widen the inflation band.

"If Michael Cullen wants higher inflation then he should say so. He's just playing politics with inflation management, which means he cannot be trusted to make the right decisions for our economy when he's trying to make political capital out of it.

"It seems obvious that the best way for the Reserve Bank to avoid any inflation breaches is to aim for the middle of the target band.

"Dr Cullen must explain what his 'different interpretation' is and just how higher inflation will help New Zealand's economic growth."

Mr English says inflation has averaged higher than 1.5 per cent over the last few years, which suggests that if the Reserve Bank were rigidly aiming for 1.5 per cent monetary policy should have been much tighter.

"Dr Cullen has to stop playing petty politics with important things like inflation targets. His posturing will do New Zealand's international reputation no favours.

"The biggest challenge facing New Zealand's economy is not the inflation target band or the interpretation of it, but the fact that Labour's policy framework doesn't allow us to sustainably grow at more than 2.5-3 per cent.

"That is why National has outlined a serious and substantial plan to lift the long-term performance of the New Zealand economy," Mr English said.


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