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Nats Say Monetary Policy Re-write Would Be Dangerous

Fuseworks Media
Fuseworks Media

Wellington, July 4 NZPA - The National Party is warning that a re-write of monetary policy would lead to higher inflation and push interest rates even higher.

Associate Finance Minister Trevor Mallard reignited debate yesterday on whether alternatives to the Official Cash Rate (OCR) were needed to keep inflation under control.

Finance Minister Michael Cullen later said the Government was unlikely to propose any alternative tools before the election.

The Reserve Bank uses the OCR to raise interest rates and cut down consumer spending, but mortgage rates are hurting families and politicians are looking for other ways to deal with inflationary pressures.

Dr Cullen said no specific options were under consideration and the Government was still awaiting the report of Parliament's finance and expenditure committee on monetary policy.

Mr English said today the Government's "planned re-write of monetary policy" threatened to load even more costs on to households which were feeling the pain from relentlessly high mortgage rates.

"Labour's policy would pave the way for higher inflation, and push interest rates higher for longer," he said.

"Inflation is the most corrosive on the incomes of those who are most vulnerable, and with inflation picked to rise as high as 5 percent, now is not the time to give up on sensible economic management."

New Zealand First leader Winston Peters is a strong advocate for changing the Reserve Bank Act so that it has to consider economic factors other than inflation when it raises interest rates.

"If you want the governor of the Reserve Bank to try to defeat massive imported inflation by hammering local consumers and businesses then carry on what we are doing," he told reporters.

"But this is a temporary spike and we have to take measures now in the interests of the New Zealand economy."

Mr Peters has said he will make the Reserve Bank Act an issue in the election campaign, but he has stopped short of saying changing it will be a bottom line in any negotiations to form the next government.

NZPA PAR pw nb

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