25 February 2014

Stable inflation expectations show interest rate hikes not the answer

Stable inflation expectations released today show that the Reserve Bank doesn’t need to start hiking interest rates, Green Party Co-leader Dr Russel Norman said.

The Reserve Bank released its March 2014 Survey of Inflation Expectations this afternoon which shows that inflation prospects remain stable at two percent – the mid-point of the Bank’s Policy Targets Agreement.

The last Consumer Price Index figures released by Statistics New Zealand show that inflation was 0.1% in the December quarter and 1.6% in the past year. Housing and electricity were significant contributors to the little inflation there was. The Reserve Bank has indicated it intends to raise interest rates this year.

“New Zealand families don’t deserve to be hit with higher mortgage rates when inflation is stable,” said Dr Norman.

“Raising the Official Cash Rate now would hurt the economy and hurt families with mortgages.

“We need smart policies to address inflation in the sectors where prices are rising too rapidly – the Auckland housing market and National’s broken electricity system.”

The Green Party has laid out practical steps to address rising housing and power prices.

“The Greens will introduce a capital gains tax, restrictions on the foreign buy-up of housing, a government-led programme of affordable house building, and Progressive Ownership for first home buyers to stabilise house prices,” Dr Norman said.

“Our NZ Power plan will bring an end to spiralling electricity prices.

“New Zealand’s interest rates are already high by international standards, which contributes to our over-valued currency. Pushing interest rates higher would just hurt exporters, widen our current account deficit, and destroy jobs.

“We need smart policies to fix the causes of inflation, not the blunt tool of higher interest rates that hurts families and businesses,” said Dr Norman.

More information:

Reserve Bank Inflation Expectations

http://www.rbnz.govt.nz/statistics/tables/m14/

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