Media Release 4 February 2000
Fall in unemployment is good news! Not inflationary
The sharp fall in unemployment just announced is excellent news, and the shock horror reports of some commentators are
wildly astray; neither should the figures be treated negatively by the Reserve Bank, the Employers and Manufacturers
Associations says.
“Some reports seem to be missing the fact that it is far more productive for people to be employed than unemployed and
on welfare,” said the Chief Executive of the EMA (Northern) Alasdair Thompson.
“Fewer people dependent on the dole and welfare means government spending is reduced, which reduces inflationary
pressure.
“It is really annoying to hear economists and other commentators again putting a negative interpretation on good
economic news.
“Of itself the increase in employment is no reason to prompt a tightening of monetary conditions with higher interest
rates.
“Similarly, higher capacity utilisation in our industries can improve the use of capital equipment and lower unit costs
without necessarily raising prices in our open, competitive economy.
“Overall, prices could well remain neutral over the next few months, even if our questionable productivity figures are
not showing positive gains just yet. The Reserve Bank should reflect on its recent hasty statement just hours ahead of
an unexpectedly, very low inflation figure.
“The risk from raising interest rates too soon is that the investment in new equipment and other capacity expansion
could be delayed, and we would then be genuinely at risk.”
Further comment: Alasdair Thompson
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