Spending Constraint needed to Avoid Rate Increase

Media Release
23 November 2009

Constraint in Spending needed to Avoid Interest Rate Increase

Rapid population growth and rising visitor numbers risk an early rise in interest rates if government doesn’t contain its expenditure according to the Wellington Regional Chamber of Commerce.

Figures out today put New Zealand’s annual net migration at a five-year high.

“There are signs that house demand is rising again in line with continued growth in net migration,” said Chamber CEO Charles Finny.

“The population is growing faster than the housing stock which is putting upward pressure on prices.

“We welcome the population growth but the last thing businesses need now is a rise in interest rates.

“To avoid the Reserve Bank responding to the resurgent house prices with higher interest rates, the government has a responsibility to constrain its expenditure growth.

“Today’s figures also show a significant drop in permanent and long-term departures to Australia.

“New Zealand’s economic climate relative to Australia’s is increasingly favourable as Australian interest rates rise. It is in New Zealand’s interests to sustain this competitive advantage,” Mr Finny concluded.

ENDS

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