Hi
Inflation is a BAD thing, when it is significantly greater than Growth
and caused by certain factors (wage / price spiral etc). It is not BAD
if your economy is growing and it is being caused by factors that the
economy has no control over (petrol prices for example).
The idea of looking a housing and saying it is causing to much inflation
yet ignoring fuel prices (which push up the price of everything) is
patently ridiculous. As is excluding Interest rates from the inflation
calculation.
There are better tools to control inflation that economists don't talk
about because they (generally) work for banks. For example what if we
had a compulsary extra mortagage payment percentage (cemp). So instead
of raising the general interest rate, add say 1% to the cemp. This
extra payment would go to the persons mortgage (paying it off faster,
and actually benefit the person), be immediate (not have a 2 yr lag) and
help savings. this would acheive the same thing as raising general
interest rates (make people have less money to spend). The only people
who would loose would be...... the banks.
The other thing is that GDP should be factored in to inflation calcs.
I.e if GDP is 5% (wouldn't that be nice), an inflation rate of 3.5%
wouldn't mean that the reserve bank needed to put the brakes on.
Rob Martin
Software Engineer
phone +64 03 377 0495
fax +64 03 377 0496
web www.chreos.com
Wild Software Ltd
Phil Scadden wrote:
And inflation is a BAD thing. The problem for government is how to reduce
consumer spending. OCR is very crude tool but other measures (limit
overseas investment, capital gains tax, etc are dubious and very hard to
parlimentary support for). Kiwisaver MIGHT reduce expenditure but I'll bet
sharemarket soars as fundmanagers desparately try to find places to invest
will in turn put more pressure on dollar. Shame government didn't have to
balls to tackle the property market 3 years ago.
----------------------------------------------------------
Phil Scadden, GNS Science Ltd
764 Cumberland St, Private Bag 1930, Dunedin, New Zealand
Ph +64 3 4799663, fax +64 3 477 5232
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