Andrew Dickens: The Reserve Bank and the Government need to work in tandem

Early Edition with Ryan Bridge

For a while now I’ve been thinking that the Reserve bank and the Government are working at cross purposes for the country.

Yesterday the Reserve Bank kept the OCR at the same rate it’s at. The reason: increasing inflation and little or no growth in GDP.

Now the Government has an agenda of growth, growth, growth.

So reduced interest rates could help stimulate the economy that has some very flat spots in between primary produce and tourism.

But the Reserve Bank's purview is inflation, and low interest rates fire on consumerism and inflation. So, the rate isn't lowered.

It's fair to say the Reserve Bank won’t do what the Government would like it to do.

Meanwhile, the Government pulls back on all government spending, including stuff that fires on an economy, like construction, public builds, roading, and more.

If you want proof: Government accounts in the 11 months to the end of May for investing and operational activities was $3 billion less than forecast and $6.4 billion less than the same 11 months a year ago.

So, the money isn’t stirring.

And as the interest rates have fallen, we’re not using the cheaper cash to spend. Our farmers and our businesses and households are choosing to pay back debt instead.

The Government wants private capital to invest in this country, but the cash isn’t cheap, and the investments aren’t coming, and as I said before why would anyone want to invest in this country when even the government is keeping it's wallet shut?

So welcome to year three of recession with no change in sight unless the policies of the Reserve Bank and the Government work in tandem.

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