Hon Dr Michael Cullen
Minister of Finance

15 April 2008 Media Statement

CPI figures a timely reminder of economic challenges

Further increases in consumer prices are a reminder of the seriousness of current global economic challenges and the need for responsible fiscal policy in New Zealand, Finance Minister Michael Cullen said today.

The Consumer Price Index released by Statistics New Zealand today showed a 0.7 per cent increase in prices over the last quarter, taking the annual inflation rate to 3.4 per cent. Without the increase in global petrol prices, annual inflation growth would stand at 2.5 per cent.

“These are challenging times for the world economy with significant increases in food and petrol prices hitting all nations,” Dr Cullen said. “New Zealand cannot be immune to these challenges and the government certainly can’t control the price of food or petrol.

“But the reality is for many families that these high prices are hitting at the same time that the fallout from the subprime mortgage crisis in the United States is pushing up mortgage rates here at home. The pressures on households are real.

“In next month’s Budget, I will announce a three year programme of personal tax cuts, building on the $4.5 billion per annum in tax cuts the government is already delivering to families, business, and savers.

“I hope that the personal tax cut programme will provide some relief to families who are trying to make ends meet. It is important that the programme is responsible so as to not put further pressure on inflation.

“We entered this period of economic challenge from a very strong base, with the longest period of economic expansion since the second world war and record low unemployment. We are very well placed to weather the current global downturn, but we must keep our eyes focused on New Zealand’s long-term prosperity.”

ENDS

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