“The Reserve Bank is in uncharted territory, moving to triple shots when it thought doubles would mellow out inflation, but the Government has refused to change a single aspect of its approach,” says ACT Leader David Seymour.

“Back in April, the Reserve Bank did its first double shot, 50 basis point increase. At the time this was edgy and brave. It said it needed room to backtrack, ‘A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment.’

“Since April, inflation expectations have remained high and even increased in some forecasts, despite four more double shot increases. Now Adrian Orr is pulling out the triple shot, a 75 basis point increase, something unthinkable just seven months ago. This shows the Reserve Bank has lost control of the situation and needs help.

“The pattern is interest rates that don’t just rise but rise more than expected. If that pattern continues, and there’s no reason to think it won’t, then next quarter we’ll be looking wistfully back to the days of a five per cent OCR peak and seven per cent mortgages.

“The Government needs to offer the Reserve Bank a lifeline. The Governor has often said ‘monetary policy needs friends,’ referring to Grant Robertson’s budgets.

“Instead, Grant Robertson has increased spending $40 billion, nearly 50 per cent, above pre-COVID levels, and plans to make that increase permanent. As households tighten their belts in the face of mortgage and rent increases, it’s time for the Government to do the same.

“The Government should put a moratorium on expenditures that are not urgent. Below are three Government projects that are not time sensitive (and ACT questions at any time), but a nonetheless increasing demand and driving costs.

1. The Three Waters merger is costing the Crown hundreds of billions to simply reorganise a sector. That is inflationary spending that produces no tangible outcome today, it should be paused at the very least.

2. The firearms register is slated to cost $200 million; it will make nobody safer. At best, some criminal will steal a gun and grind the serial number off it so nobody can prove they stole it off the person who registered it. At worst the register will leak and become a steal to order list for a gang. It should be paused to save money.

3. The RNZ-TVNZ merger is slated to cost $350 million, but nobody in the business understands its purpose. Willie Jackson says he knows, but his answers change day-to-day. It should be paused to save money.

4. The Auckland Light Rail project was supposed to be underway by 2021. It is still not clear what the purpose of the project is or why it is being done.

5. Kainga Ora just asked for $2.75 billion so they can compete with the private sector to build homes. There is no logic to this in a resource-constrained market. It is only driving inflation. Kainga Ora should stop any new home building or purchasing, it is simply driving inflation.

“That is beside operating expenditure, where ACT’s fully costed alternative budget, which would reduce overall expenditure by 7.2 billion. Such a reduction would take pressure off the economy, so the Government does not have to kill it with high interest rates.”

More from

David Seymour