Rates rise – inflationary threat is real

The decision of the Reserve Bank Board to raise interest rates is another sobering reminder of the seriousness of the inflationary threat, Innes Willox, Chief Executive of the national employer association, Ai Group, said.

“The latest rate rise comes at a time when there is an increasing pace of reports from businesses that orders and sales are slowing sharply as consumers retreat from spending and as businesses adjust their operations to match lower levels of expected demand in the months ahead,” Mr Willox said.

“With the full impacts of earlier interest rate rises yet to flow through to consumer and business spending, the fight to control inflation is clearly the leading priority for policy makers.

“To ensure that current levels of inflation are not embedded in future prices, policy measures need to be backed up by restraint in price setting and wage negotiations of businesses, governments, regulators and employees in the period ahead. With the minimum wage case being determined over the next few weeks, the clear message is that wage restraint is now more important than ever,” Mr Willox said.