Dr Bollard right not to increase interest rates

Media release

Newmarket Business Association

9.30am, 26 October 2006

Dr Bollard was right not to increase interest rates

New Zealand's leading retailing district said Dr Bollard was right not to increase interest rates, saying there were six good reasons for the Reserve Bank to hold the OCR.

There was much anticipation on whether Reserve Bank Governor Alan Bollard would lift the Official Cash Rate this morning. There has been no change to the 7.25% OCR all year.

The Newmarket Business Association said there was absolutely no need for Mr Bollard to actively cool off the economy because the economy was already showing many signs of cooling on its own:

Six reasons not to increase interest rates:
1. Retail spending has been flat across the country this year after sustained growth since 1998, according to Statistics NZ retail spend figures.
2. The housing market has cooled significantly according to Quotable Value’s latest figures, with Infometrics yesterday claiming the housing market is the “weakest since 2001.”
3. The domestic economy shrank 1.7 per cent for the June Quarter, its weakest performance for nearly five years.
4. Any benefits from petrol price falls in September have been outstripped by other increasing household costs such as rates and electricity.
5. Business confidence is lack-lustre, reflecting Dr Cullen’s predictions back in his May Budget speech that economic growth is “forecast to bottom out at 1.0 per cent in the year to March 2007.”
6. The annual inflation rate (CPI) fell from 4.0 per cent to 3.5 per cent in the September quarter, according to Statistics NZ yesterday.

“After seven or eight years of sustained growth, 2006 has been a tough year for the likes of retailers. It was clear the economy needed no cooling. Unfortunately for the country’s businesses and retailers the economy is cooling on its own across many fronts.

"There was absoultely no need for any monetary meddling. Hiking up interest rates at this point in time was certainly not needed,” said Cameron Brewer, head of the Newmarket Business Association.

ENDS

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