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Concern that Reserve Bank may raise interest rates earlier
Concern that Reserve Bank may raise interest rates earlier
The CTU is pleased the Reserve Bank has held interest rates. Their reduction after the February earthquake is likely to have contributed to the economy not being hit as hard as it could have been. But given that the government has removed its fiscal stimulus in its 2011 Budget, monetary stimulus is all that remains.
Bill Rosenberg, CTU Economist, said that "we do not think there is a case for the RBNZ to raise interest rates before 2012".
Wage growth projections by the RBNZ are modest, with increases in the Labour Cost Index peaking at 2.4% in March 2012 although overall earnings are projected to rise more quickly - probably because of the reconstruction effort in Christchurch.
"We would be very concerned if increases in wage and salary rates beyond that were used as reason for the RB to clamp down. Wage and salary earners are overdue for real increases in their incomes".
ENDS.
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