Raising interest rates will only make life tougher

"We would be very concerned if the Reserve Bank raises interest rates more quickly than it had previously signalled," CTU Economist Bill Rosenberg said in response to the Reserve Bank's announcement on the OCR this morning. "We have had only one quarter of reasonable growth, and continuing high unemployment shows we run the risk of jobless growth."

"Many of the price rises we are seeing, which are hitting low income people especially hard, are imported price increases such as petrol, dairy, and construction costs through wood prices. Raising the OCR can't do much to stop those. However increasing interest rates for mortgages will only make life tougher."

Rosenberg said "there are continuing risks to the economy from the high New Zealand dollar which threatens many exporters - and especially exports in areas where the New Zealand economy should be heading: high added value products. A prospect of increasing interest rates over the next few years will only worsen that situation."

"In addition, badly handled debt situations in Europe and the US could well send the world back into recession even if the present crises are resolved."

"The Reserve Bank should be looking at alternatives to raising interest rates if it is concerned about monetary conditions," said Rosenberg.

ENDS

© Scoop Media