26 June 2002

Dr Cullen is confused about what message he is trying to send about the Reserve Bank and its mandate to maintain price stability, says National's finance spokesperson David Carter.

"The confusion he is creating is harmful to New Zealand's international reputation. On one hand he sounds like he wants the Reserve Bank to be more flexible, but then on the other side that he won't tolerate more inflation. Please explain what do you mean Dr Cullen.

"This morning Dr Cullen was critical of the Bank "squeezing the last bit out of inflation" in aiming for 1.5%. The fact is the Bank has never been that rigid. That's why over the last 10 years; inflation has actually averaged 2%.

"When that was pointed out to him, Dr Cullen suggested that meant the Reserve Bank had failed. Come on Dr Cullen - you can't have it both ways.

"Labour's Finance Minister and other advocates of "just a little bit more inflation" need to explain how that will lead to higher growth and lower interest rates.

"Seems to me this is all a tactic aimed at diverting attention away from the fact that Dr Cullen and the Labour Party have no idea about how to achieve higher growth - so that when growth slows in the next few months - they can just blame the Reserve Bank.

"If Dr Cullen is serious about higher growth, he should start talking about the things that matter, and that he can actually influence, like the regulatory environment, compliance costs, the tax burden, what's happening (or not happening) in schools, infrastructure and the quality of Government spending and investment.

"These are the things that matter when it comes to growth. Being tolerant of more inflation is simply a recipe for lower growth, higher interest rates and a further decline in our living standards," says David Carter.

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