Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search


Bollard: NZ inflation pressures slow to abate

NZ inflation pressures slow to abate, Bollard says

Dec. 10 – New Zealand’s economy still has pockets of high inflation that haven’t responded to the steep series of interest rate cuts and sliding prices for commodities, according to Reserve Bank Governor Alan Bollard.

Short-term mortgage rates offered by banks haven’t fallen as much as cuts to the official cash rate would imply, costs for utilities and local body rates have climbed and there’s more room for prices of petrol and food to decline, Bollard said in a speech to the Wellington Chamber of Commerce.

“Many commentators are of the view that lower commodity prices and weak economic activity will drive inflation lower,” Bollard said. “It is worth remembering that for the moment, however, inflation rates in New Zealand and many of our trading partners remain very high.”

The consumer price index peaked at 5.1% in the 12 months through September, an eight-year high and outside the central bank’s 1% to 3% target range. Bollard last week slashed the official cash rate by 150 basis points to 5% to revive a shrinking economy and predicted inflation would fall back to within the target range by the middle of 2009.

Bollard said the scope for further rate cuts would be enhanced if there were signs of a wider reduction in inflationary pressures and prices.

“We need to see inflationary pressures reducing significantly across the board if we are to keep on easing monetary policy,” Bollard said.

Increases in local authority rates “have run well in advance of overall CPI inflation” for a number of years, while cost increases have been particularly noticeable among electricity utilities, he said. Banks could also narrow their profit margins by passing on more of the benefits of a lower cash rate, he said.

“Banks should not expect to be able to maintain high profit margins in the current environment,” he said. For dairy prices, “now that global prices have crashed, there is plenty of room for retail price cuts,” he said.



© Scoop Media

Top Scoops Headlines


Dunne Speaks: Robertson's Budget Gamble On Treasury
The popular test of the success or failure of Grant Robertson’s fifth Budget will be its impact on the soaring cost of living. In today’s climate little else matters. Because governments come and governments go – about every six to seven years on average since 1945 – getting too focused on their long-term fiscal aspirations is often pointless... More>>

Keith Rankin: Liberal Democracy In The New Neonationalist Era: The Three 'O's
The proposed ‘New Zealand Income Insurance Scheme’ (‘the scheme’) has attracted strong debate among the more left-wing and liberal groupings, within New Zealand-Aotearoa. This debate should be seen as a positive rather than negative tension because of the opportunity to consider and learn from the implications and sharpen advocacy... More>>

Dunne Speaks: Words Matter, Prime Minister
Words matter, especially when uttered by politicians. History is littered with examples of careless or injudicious words uttered by politicians coming back to haunt them, often at the most awkward of times. During the 1987 election campaign, when electoral reform was a hot issue, Prime Minister David Lange promised to have a referendum on the electoral system... More>>

Digitl: Infrastructure Commission wants digital strategy
Earlier this month Te Waihanga, New Zealand’s infrastructure commission, tabled its first Infrastructure Strategy: Rautaki Hanganga o Aotearoa. Te Waihanga describes its document as a road map for a thriving New Zealand... More>>

Binoy Kampmark: Leaking For Roe V Wade
The US Supreme Court Chief Justice was furious. For the first time in history, the raw judicial process of one of the most powerful, and opaque arms of government, had been exposed via media – at least in preliminary form. It resembled, in no negligible way, the publication by WikiLeaks of various drafts of the Trans-Pacific Partnership... More>>

The Conversation: Cheaper food comes with other costs – why cutting GST isn't the answer

As New Zealand considers the removal of the goods and services tax (GST) from food to reduce costs for low income households, advocates need to consider the impact cheap food has on the environment and whether there are better options to help struggling families... More>>