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Bollard speaks to WRCC


Adam was unable to attend today’s lunch at the Wellington Regional Chamber of Commerce to listen to Alan Bollard, but has just seen the good doctor’s sppech on the RBNZ web-site.

Dr Bollard makes a number of points, but Adam noted these especially:-

Headline CPI and inflation expectations


We need to see inflationary pressures reducing significantly across the board, if we are to keep on easing monetary policy, thus helping the New Zealand economy to recover. That depends on all sectors of the economy responding to the reduced demand and not adding inflationary pressures to the system.

Some examples: we would hope that the electricity industry does not take advantage of its market position and keep increasing rates, that local authorities realise they need to set rates increases below inflation for a change, that the construction materials industry respond to much weaker demand, that the food industry react to lower international commodity prices with price cuts, that petrol companies keep cutting forecourt prices, that the transport industry pass on fuel price cuts, and that the banks pass on interest rate cuts. Only then will all these firms be playing their proper role in New Zealand’s recovery.

Dr Bollard returns to a recent theme and enjoins all sectors, but some specifically to play their part.

In America this is sometimes referred to as ‘jawboning’ , but in this instance Dr Bollard is right. The key government can play it’s part by ensuring that the state owned generating companies behave themselves. Rodney Hide needs to deliver a very clear message to local government that if red-tape is removed, money saved should flow into controlling rate increases.

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  1. rocky permalink
    10/12/2008 14:20

    I don’t see a repeat of his assertion that the recession was almost over…As for rates being held below the level of inflation, it may happen at Wanganui and Auckland where that is stated policy but elsewhere it needs Rodney to impose a limit on how much they can rise.



  1. Everyone needs to play their part? « The visible hand in economics

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