8 June 2008

Trying to catch a Fish with a Teaspoon

Green Party Co-Leader Jeanette Fitzsimons has answered John Key's call to lower the OCR to counter high oil prices by saying that is like trying to catch a fish with a teaspoon.

"Dr Bollard admitted to the Finance and Expenditure Select Committee on Thursday that the oil price forecasts on which the Bank relies have been wrong every time for the last four years, yet still expressed confidence in them this time.

"However he admitted, in reply to my questions, that if rising oil prices turned out to be structural rather than cyclical that would "stress the policy targets agreement," Ms Fitzsimons says.

More and more people are admitting that rising oil prices will be a permanent part of the future because we have reached the point where the world's oil fields can't produce fast enough to keep up with demand. And it's not just oil - the price of food is racing ahead, water is scarce in many places, most fish stocks are in decline or at least can't sustain increased catches and the capacity of the atmosphere to absorb more greenhouse gases is at its limit too.

Key and Cullen argue about whether the OCR should go down or stay up but no-one is recognising that we need different tools to control inflation that is driven by long term resource limits, Ms Fitzsimons says.

"Instead of a teaspoon we need a fishing rod made of better resource management. Only if we reduce our demand of scarce oil, water, carbon emissions, fish and grain-fed animal protein will we get those prices under control. The OCR is the wrong tool to cope with a world that is bumping up against the limits to growth."

ENDS

© Scoop Media