The latest annual inflation data of 6.7%, which fell well short of the Reserve Bank’s own projections of 7.3%, shows the Reserve Bank needs to chill out, says Raf Manji, Leader of The Opportunities Party.
The inflation figures show the Reserve Bank needs to urgently reassess its approach to managing the economy, Manji argues. Two weeks ago, the Reserve Bank increased the Official Cash Rate by 50 basis points (to 5.25%) in a move that will really hurt those about to refix their home loans.
“The Reserve Bank needs to open its eyes and allow time for their interest rate hikes to take effect. The Australian and Canadian Central Banks have paused interest rate hikes, and so should we.”
Manji points to the sudden drop in imported inflation too, which highlights the need for the Reserve Bank to be more strategic and flexible in their approach to managing the economy.
In addition, Manji emphasises the importance of the Government getting more involved in addressing the underlying causes of inflation in New Zealand, which is being driven by the high cost of housing, transport, and other essential goods and services.
“The Government needs to have a more proactive and nuanced approach to managing inflation, focused on promoting long-term economic stability and growth. Increasing housing affordability and encouraging more competition in our key sectors, particularly supermarkets, should be top of mind.”
“Kiwis deserve better than the usual boom and bust cycles which have wide-reaching economic and social impacts. The Reserve Bank needs to start taking a longer term view, rather than just reacting to short-term fluctuations in inflation.