OCR cut shows more concern for recession than inflation

Media statement Thursday, March 10, 2011

OCR cut shows more concern for recession than inflation

The 0.50% cut to the Official Cash Rate (OCR) is a clear indication that the Reserve Bank is very worried about our economy and the propensity for recession, says Alasdair Thompson, chief executive of the Employers and Manufacturers Association Northern Inc (EMA).

“The indication is that recession is more of a worry than the currently high inflation, especially in fuel, food and rents.

“The government apparently shares that concern, with the Prime Minister and Finance Minister unusually calling for an OCR cut earlier this week.

“The Bank’s decision recognises the impact of the high oil prices, which alone could put the world back into recession. It also recognises the impact of the latest earthquake in Christchurch and that our economy declined in the last reported quarter.

“But the cut is ignoring fuel, food and rent price increases as a reality beyond the Reserve Bank’s control.

“The challenge now is for the government in its Budget (on May 19) to support price stability on the one hand and meet our need for infrastructure investment, which has greatly increased in Christchurch, on the other hand,” Mr Thompson says.

ENDS

© Scoop Media