Reserve Bank decision appropriate

5 December 2008

Reserve Bank decision appropriate

The Reserve Bank's decision to drop the OCR 1.5 basis points was appropriate in light of recent events says Business NZ Chief Executive Phil O'Reilly.

"International inflation has dropped because of the drop in global demand, especially for oil and commodities including dairy.

"However there are still concerns over inflationary pressures in the non-tradable sector.

"While encouraging economic activity with lower interest rates, it will also be important to keep a rein on spending blowouts in local government and in areas of central government monopoly control such as ACC.

"Moreover producer input prices are still high - up 3.7% for the September 2008 quarter - and the Labour Cost Index is still recording record growth.

"There is still great need to ensure the economy is as competitive as possible."

ENDS

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