Govt must help Reserve Bank address inflation

Green Media Release 24th January 2008

The Green party is calling on the Government to help the Reserve Bank reduce inflationary pressures in the New Zealand economy by rapidly implementing measures to deal with one of the key drivers of inflation – rising oil prices.

“The decision by the Reserve Bank this morning to leave the Official Cash Rate unchanged leaves home buyers under intense pressure to meet their mortgage payments and actually makes life harder for manufacturers as it will result in a higher dollar,” says Dr. Russel Norman, Green Co-leader and Economics’ Spokesperson.

“The Reserve Bank has indicated that one of the key reasons for leaving the OCR unchanged is the inflationary pressure coming from rising fuel prices.

“The Government needs to help the Reserve Bank deal to underlying inflation pressures by rapidly accelerating policies to reduce the oil dependency of the New Zealand economy.

“These policies include better and safer public transport, cycling and walking. They include investing in rail to move freight off roads and onto rail. The Government has increased spending on some of these but at the same time has increased spending on roads much more. We also need to seriously improve the fuel efficiency of the vehicle fleet.

“The reality is that finite resources in all areas are adding to inflationary pressures in a world reaching its limits. We are seeing this with food prices at the moment where increased demand from biofuels and rising populations is meeting finite supply of arable land. The result is rising food prices.

“We can’t passively rely on the Reserve Bank to magically sort out the inflationary pressures coming from increased demand for resources in a finite world. The Government needs to lend a hand where it can and this includes reducing our oil dependence.”

ENDS

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