Lower spending, lower interest rates

When the media asked people what was in the Budget for them most looked at the small picture of direct assistance.

Today’s announcement by Reserve Bank governor Alan Bollard that the official cash rate will stay at 2.5% is part of the bigger picture.

From 1999 to 2008 Labour’s high spending policies which resulted in unsustainable growth based on consumption fuelled by borrowing kept pressure on interest rates. That increased costs for households and businesses.

Since 2008 National has been focussed on reducing the burden of the state, cutting back room costs to the benefit of front line services.

Most of us have got the message that the cure for our economic malaise is savings, investment and export led growth.

Farmers are having the sort of year which probably only happens once in a generation but most are being very cautious with the unexpectedly good returns. Reducing debt is the major focus.

All of this has taken pressure off interest rates and inflation.

The real benefit of that from reduced costs for households and businesses is both greater and better than any direct assistance from government.

One Response to Lower spending, lower interest rates

  1. Paranormal says:

    Um, in case you hadn’t noticed, Labours high spending policies are still in place, and National are spending more than Labour did.

    Just saying…

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