21 January 2014

Inflation numbers show smart polices, not interest hikes, needed

Today’s low inflation numbers show that the Reserve Bank doesn’t need to hike interest rates, which would hurt exporters and families with mortgages. Instead, smart policies are need to fix sectors where prices are rising too rapidly, Green Party Co-leader Dr Russel Norman said today.

Consumer Price Index figures released by Statistics New Zealand today show that inflation was 0.1% in the December quarter and 1.6% in the past year, in the lower half of the Bank’s 1-3% target range. The figures reveal that purchase of new housing and electricity were significant contributors to what inflation there was. The Reserve Bank has indicated it intends to raise interest rates this year, which are already high by international standards.

“New Zealand families don’t deserve to be hit with higher mortgage rates when inflation is not a problem,” said Dr Norman.

“What inflation there is in the economy is being driven by the Auckland housing market and National’s broken electricity system. The Green Party has laid out practical steps to fix both these issues.

“The Greens will introduce a capital gains tax, restrictions on foreign investment in housing, a government-led programme of affordable house building, and Progressive Ownership for first home buyers to stabilise house prices. Our NZ Power plan will bring an end to National’s failed experiment which saw electricity prices rise 3% last year even as demand fell.

“Families are already struggling with stagnant wages and high unemployment; they can’t afford to pay thousands of dollars more a year on their mortgage because of higher interest rates.

“Our interest rates are already high by international standards, which is why our currency is so over-valued. Pushing interest rates higher would just hurt exporters, widen our current account deficit, and destroy jobs.

“We need smart policies to fix the causes of inflation, not the blunt tool of higher interest rates that hurts families and businesses,” said Dr Norman.

ENDS

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