28 October 2005
Northern EMA not credible on interest rates
The Northern Employers and Manufacturers Association attempt to blame Government spending for interest rate rises is not credible said Peter Conway, Council of Trade Unions Economist.
“After all Northern EMA were among those supporting massive tax cuts by the National Party. Just imagine what an additional $2.2 billion from next April would do to interest rates,” said Peter Conway.
“This may have been bold politics but it was certainly reckless economics and the Northern EMA should have said so at the time.”
“The Government may have room to bring forward the much more modest bracket adjustments but the hugely inflationary cuts proposed by National were always going to be a disaster,” said Peter Conway.
Business has also been slow to support Kiwisaver, which will incentivise workplace savings and eventually help the first home buyers who are so disadvantaged in the housing market, Peter Conway said.
“We do agree that the export sector is being hurt by a combination of a high dollar and rising interest rates. If the economy does slow as predicted, then the latest rise in the official cash rate will be seen as a mistake, but it is hard to be too critical of the Reserve Bank when inflation is already at 3.4%.”
“Higher interest rates hurt workers by threatening export sector jobs, reducing investment, and also mean higher mortgage payments. It is also particularly hard on low income workers saving to buy a first home.”