The Reserve Bank should pause before it considers further increases in interest rates, said NZCTU economist Craig Renney.
“RBNZ today chose to increase interest rates by 0.5%, above market expectations. Internationally, inflation is falling in advanced economies.
“Some Reserve Banks such as the Reserve Bank of Australia are holding their interest rates. They have recognised that monetary policy operates with a significant lag, meaning that much of the impact of the increased interest rates have yet to be felt,” said Renney.
The New Zealand economy slowed in the last quarter, with growth falling 0.6%.
“The last NZIER Quarterly Survey of Business Opinion showed that capacity constraints were easing. Now is not the time to be adding further interest rates increases when the impact of existing OCR changes are yet to be discovered.
“The Monetary Policy Statement today made scant mention of the employment impacts of these changes.
“Unemployment in New Zealand has been rising in recent quarters, and too many New Zealanders are underutilised in the labour market. To say that unemployment is above its maximum sustainable level is accept that tens of thousands more Kiwis must become unemployed.
“We reject that approach, and the idea that some of the most vulnerable must pay the price for inflation control.
“We believe that the Reserve Bank should pause before its next interest rate decision and show how its plan will maintain employment within New Zealand. It should consider some of the ideas set forth with the recent NZCTU Inflation and Incomes Act paper.
“Placing the impact of inflation control onto the back of working people is neither fair nor economically sustainable.”
