Media Release

10 December 2008

Bollard Repeats Call for Local Government Constraint

Mr Bollard told a business audience of more than 100 at the Wellington Regional Chamber of Commerce today that if lower interest rates are to be sustained, all sectors of the economy need to play their part in reducing inflationary pressures.

Mr Bollard singled out the energy, transport and food banking and local authority sectors as needing to avoid passing on costs.

"We expect competitive pressures will act to keep prices down in many of those sectors but we agree with the thrust of Mr Bollard's message that some parts of the economy are slow to reduce prices in response to reduced demand," said Chamber CEO Charles Finny.

"One sector not exposed to competitive pressures which we are particularly concerned about is local government.

"We are pleased that some councils are taking steps to cut costs and constrain rate increases and we urge others to do the same.

"Mr Bollard said that local authorities need to set rates increases below inflation for a change.

"The consequences of local government excesses are not only excessive rate increases but potentially higher interest rates as well.

"The main thrust of Mr Bollard's argument is that for New Zealand to sustain lower interest rates, inflation needs to be reduced. We argue that government also has a role here.

"Businesses facing tight margins and competitive pressures will welcome the call for lower costs to be passed on," Mr Finny concluded.

ENDS

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