Government Must Assist the Reserve Bank

Government Must Assist the Reserve Bank in Controlling Inflation

Today's CPI data highlights the urgent need for the Government to take more responsibility for reducing inflationary pressures according to the Wellington Regional Chamber of Commerce.

"The figures show that in order to take pressure off high interest and exchange rates, supportive measures are required to assist the Reserve Bank to maintain low inflation," Chamber CEO Charles Finny said today.

"Monetary policy is not enough. Other pillars of government policy are needed.

"We fully support the Reserve Bank's broad monetary policy framework including the Bank's independence and its focus on price stability. However, policy imbalances mean that monetary policy is having to work too hard.

"For example, the figures show that the central and local government charges component of the consumers price index increased 3.3% in the June 2007 year compared with 2.0% overall.

"We also note that adjusting for the effect of petrol prices, most of the inflation is being driven by the non-tradable sector, yet the tradable sector is bearing more than its share of the burden of fighting inflation through high interest and exchange rates.

"We urge Parliament's Finance and Expenditure's Committee to consider the causes of inflation as part of its inquiry into the monetary policy framework and to recommend supplementary measures.

"The productive sector is tired of bearing the burden of fighting inflation it has not caused", Mr Finny concluded.

ENDS

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