The warnings signalled by the Reserve Bank Governor must be taken very seriously by the Government, Opposition finance spokesperson Bill English said today.

"New Zealand has been drifting into decline for the last few months and the Government doesn't seem to care.

"Hopefully now even Dr Cullen will sit up, shut up with his wise-cracks and explain honestly to New Zealanders why they will be feeling worse-off for the next few years.

"The Reserve Bank Governor has outlined a possible scenario for the New Zealand economy that has not been seen for many years - stagflation.

"This is the scenario whereby economic activity remains subdued, but where inflation moves sharply higher to which the Reserve bank needs to respond.

"Dr Cullen has dismissed this scenario as unlikely. However, the longer that business and consumer confidence stay pessimistic and the further the New Zealand dollar falls, the more likely this scenario becomes.

"The New Zealand dollar traded under 40 US cents today for the first time ever.

"Households and businesses are really struggling with the impact of these events - and Dr Cullen needs to do more than just dismiss their concerns," Mr English said.

Ends

Inquiries: Bill English 026 110 860

John Goulter 04 4719 719 025 232 4303

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