Independent Candidate calls for Rate cut
 

 
Otago independent parliamentary contender Richard Prosser is calling on the Government to pass legislation requiring the Reserve Bank to cut the Official Cash Rate by half.
 
Mr Prosser said that the New Zealand dollar was over-valued largely because our high interest rates made it profitable, and therefore attractive, to foreign currency speculators, and the resulting high value dollar was making business impossible for local manufacturers and exporters.
 
"Everyone from farmers to homeowners are hurting because of the high dollar, and the dollar is high because interest rates are high," he said. "They're by far the highest interest rates in the Western world - our base rate is more than fourteen times that of Japan."
 
Mr Prosser said that the Government should act to over-ride the Reserve Bank's statutory independence, because attempts to control inflation by raising interest rates were counter-productive. "Interest rates are one of the inflationary drivers in the economy," he said. "A high OCR pushes up the cost of everything from mortgages and business finance to overdrafts and credit cards, and the increased cost of finance has a flow-on effect to every part of the economy. Raising interest rates in fact increases inflationary pressure."
 
Cutting the base rate in half would take the heat out of the dollar, and make exporters and manufacturers competitive again, Mr Prosser said. It would also allow New Zealanders to repay debt more quickly, and make home ownership far more affordable through lower mortgage costs.
 
"Intervention is necessary because the Reserve Bank is not able to correct the dollar's value through this inflation causing mechanism," Mr Prosser said. "The Governor has only one tool with which to do his job, and it doesn't work. The continual raising of the cash rate is a blunt instrument which has the opposite effect to the one intended. The Government has to step in, because let's face it, the dollar isn't going to fix itself," he said.
 
 
ENDS
 
 
 

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