Control inflation in the non-traded sector

Control inflation in the non-traded sector - 18 October

The latest Cost Price Inflation figures show that the Official Cash Rate (OCR) hikes have had the inevitable impact on the tradeable sector say the New Zealand Manufacturers and Exporters Association (NZMEA). Tradeable inflation has dropped again to 0.3% compared to last year while non-tradeable inflation continues to grow, up to 2.5%.

NZMEA Chief Executive John Walley says, “We are seeing banks easing lending criteria to encourage more domestic spending while the high New Zealand dollar cramps export earnings. We have returned to 2007/08 where activity in the tradeable sector was sacrificed to hide inflation in the non-tradeable sector.”

“The evidence clearly shows that the OCR has had an adverse impact on non-tradeable inflation, which has been a persistent problem. Non-tradeable inflation has gone up rather than down as the OCR has been hiked over the past cycle and the latest upturn in non-tradeable inflation confirms this trend.”

“The RBNZ needs to do more through the Core Funding Ratio and other capital requirements from the banking sector to target the area that is causing the inflationary pressure – the domestic economy.”

ENDS

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