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Governor delivers verdict on Government

“The Reserve Bank’s decision to leave the Official Cash Rate at 1.75 per cent is good news for mortgagees but a long-term indictment on the Government, showing a soft private sector propped up by Government spending”, says ACT Leader David Seymour.

“Normally record low unemployment would lead to predictions of interest rate hikes, if not actual hikes. Added to that, inflation is taking off around the world and other central banks are raising interest rates. Our Reserve Bank says it ‘expects to keep the OCR at [1.75 per cent] through 2019 and into 2020.’

“Flat interest rate projections are the bank’s subtle message that this Government is slowly crashing the economy. The Bank says demand is boosted Government spending and low interest rates, but confidence is low as is new private sector investment. It is a story of Government propping up the economy but, as the saying goes, socialists always run out of other people’s money.

“Compounding the problem is the Government’s Reserve Bank Amendment Act, currently before Parliament. When conditions do soften, the Bank will have a mandate to boost short-term employment. The Government is baking in more monetary stimulus in election year, corrupting the purpose of the Bank when what we need is private sector growth.

“It didn’t have to be this way. This Government could have instilled confidence but instead chose to make abrupt and rushed regulatory decisions around oil and gas exploration and foreign investment. This Government could have practiced fiscal discipline and even offered tax relief, but instead has gone on a spree of low-quality spending on tertiary students, winter energy payments, and provincial boondoggles.

“Sooner or later, bad spending and regulatory decisions will bite this Government in the form of lower growth. The Reserve Bank is already quietly predicting it will."

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