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Government Should Do Its Bit

6 December 2005 PR 152/05

Government Should Do Its Bit

The government could do a lot more to contain inflation, which would help keep interest rates down and take the heat off the kiwi dollar, said Don Nicolson, Vice President of Federated Farmers of New Zealand.

“Farmers’ returns are being eroded by the dollar at a 20 year high. It would be wrong to single out the government as the sole reason for the kiwi’s strength and our high interest rates, but it must shoulder its share of the blame,” Mr Nicolson said.

“Ultimately, the government should be responsible for improving confidence and reducing inflation pressure by ensuring that all its policies are working together for a common aim. This means stopping growth in central and local government spending. The government’s total spending has jumped a staggering 50 percent in the past six years.

The government must also maintain a flexible labour market, improving infrastructure, reform the RMA, and roll back compliance costs.

“Over the past few months business confidence has slumped, commodity prices have eased, and the economy has been slowing as exporters gag on the high dollar. Meanwhile, exporters are sending jobs overseas.

“While a slow-down was probably necessary to ease inflation pressures, there is now a real risk that the economy will undershoot and suffer a hard landing, especially if interest rates are ramped up further this Thursday or in the New Year,” said Mr Nicolson.

“If the government was serious about taking some heat off interest rates and the dollar, it should do its bit to hose down inflationary pressures,” he said.

ENDS

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