30 January 2014

Imminent OCR rises highlight National’s big economic fail

The signalled Official Cash Rate (OCR) hikes over this year highlight National’s failure to build a strong, resilient, jobs-rich economy, the Green Party said today.

The Reserve Bank Governor made his strongest hint yet of imminent OCR hikes saying that ‘the Bank expects to start this adjustment soon’ in response to inflationary pressures driven by rising house prices in Auckland and the Canterbury rebuild.

“The National Government’s failure to fix the housing crisis in Auckland is going to result in interest rate hikes hurting the whole economy,” said Green Party Co-leader Dr Russel Norman.

“Higher interest and exchange rates will effectively cost jobs, exports, and raise the cost of living for all those with mortgages.

“A possible one percent hike in the OCR will raise the average homeowner’s interest payments by $70 a fortnight.
“Wage rates are not keeping pace with inflation, so adding further costs to households will hurt.

“Once again, New Zealand’s economic recovery is betraying the same underlying structural weaknesses of the last recovery; National has materially failed to rebalance our economy away from borrowing and consumption towards savings, investment, and exports.

“New Zealand is enjoying the highest terms-of-trade since 1973 yet we’re still running the third highest current account deficit in the developed world. If this is as good as it gets, we haven’t made the kinds of changes needed to secure our long-term prosperity.

“National’s failure to address the Auckland housing shortage with a mixture of demand and supply-side measures are forcing the Reserve Bank to hike rates, hurting the real economy.

“National’s failure to introduce a comprehensive capital gains tax (excluding the family home) has meant property speculators will continue to be rewarded at the cost of the productive economy and all those seeking to buy their own home.

“Rising interest rates will mean that New Zealand will lead the OECD hiking rates presenting a huge upside risk to our exchange rate, hurting exports and jobs,” Dr Norman said.

ENDS

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