Media Release

Friday 20th April 2007

Dr. Bollard - the Inflation Driver

“Alan Bollard’s previous actions to raise interest rates have resulted in an increase to domestic inflation. Any further rises will compound the inflation rate increase as businesses of all shapes and sizes continue to add the cost of interest into their prices” says John Pemberton, Finance Spokesman, DSC.

New Zealanders have productive jobs, the Government spends money on desperately needed infrastructure projects that the electorate is demanding, and Banks continue to lend an ever increasing amount of money (at greater profits). For these three reasons the economy will continue to bubble along, despite the increases in the cost of money.

It could be 1988 all over again as interest rate increases are driven by an ideologue (Dr. Bollard) to the devastating levels of 20%. Domestic inflation can only be subsidised by imported cheap goods for so long.

Interest rate increases will ultimately destroy all but the best of our exporters as they are hit with two blows: high exchange rates and interest rates.

The fundamentals of sound investment are forgotten as punters chase the high returns.

It is time Mr. Bollard was removed as the “Inflation Driver” and does some retraining at School of DSC.

It is long past time that the “Drivers” of our economy learnt, that cost inflation, not demand inflation, is the demon. Cost inflation, which is primarily driven by the compounding effects of interest on our debt.

It is time that the “Drivers” of our economy learnt that a non inflationary source of lending could be made available through The Reserve Bank of New Zealand at a cost 1% or less.

“Driver”retraining is in order now rather than later for all our sakes.

ENDS

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