Reserve Bank governor sees long grind ahead
The Reserve Bank annual report published today gives little reason for optimism, coming hard on the heels of last week's credit ratings downgrades, says Labour’s Finance spokesperson David Cunliffe.
“Dr Alan Bollard says the developed world is struggling to cope with the aftermath of the global financial crisis and the very large accumulation of public and private debt in the last decade,” David Cunliffe said.
“Standard and Poor's and Fitch both criticised New Zealand's very high level of private debt, which Fitch called ‘an outlier among rated peers'.
“Labour has been warning for some time that the National Government's tax switch which increased GST has led to a ‘hefty rise' in inflation and the cost of living," David Cunliffe said. "So it is good to have that concern validated by the bank's latest report.
“But there is no comfort in the Reserve Bank's assessment of the growth outlook. The governor's words --- that ‘It is now clear that we have a slow grind ahead, with surprises and disappointments that we cannot necessarily foresee’ --- will cheer neither the markets nor the public,” David Cunliffe said.
Economic Development and Associate Finance spokesperson David Parker said that on monetary policy the Reserve Bank looks set to progress the Basel III reform agenda.
"The Reserve Bank has previously said that monetary policy 'needs friends'," David Parker said. "By that the bank means that there needs to be other policies to support the control of inflation than higher interest rates, and to deal with the effect of the exchange rate in terms of undermining exporters.
"That is why the Reserve Bank has supported the concept of a capital gains tax," David Parker said.
“Labour’s policies are about securing a prosperous long term future, not focused on just what is easy to do today.”