‘Govt committed to reducing inflation’

Press, 20 July 1988, Page 8

‘Govt committed to reducing inflation’

PA Wellington Next week’s Budget will provide “ample evidence” of the Government’s commitment to further reducing inflation, said the Minister of Finance, Mr Douglas yesterday. “It is wrong for commentators to postulate that the Government is giving up the inflation race now we are round the corner and can see the tape,” he said. However, Mr Douglas acknowledged further drops in inflation could be achieved without the need for as much emphasis on monetary policy as had been the case in the past.

“This should not be confused with loosening monetary policy, which is not on this Government’s policy agenda. “A weaker domestic economy, falling infla-

tion expectations and improving fiscal and external positions mean that a different policy mix will achieve our inflation goals.” Mr Douglas said he was confident interest rates would fall as financial markets saw the finalisation of tax measures and had time to digest the “important messages” contained in the Budget. Mr Douglas said New Zealand needed to make more progress in combating inflation. “The New Zealand economy is now operating in an environment where sub-1 per cent quarters should be the

norm — and that should be the basis for pricing decisions, interest rate determination and the background for wage setting.”