The Business Herald’s markets and banking reporter.

Fringe party policies 'mad', risk to NZ - economist

Economist also says Reserve Bank ‘stuck in the 80s’ in its preoccupation with inflation.

'Most of the small parties are not pursuing policies that are good for NZ,' says one of the country's top economists Shamubeel Eaqub. Photo / APN
'Most of the small parties are not pursuing policies that are good for NZ,' says one of the country's top economists Shamubeel Eaqub. Photo / APN
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A top economist has labelled small political parties' policies "mad" and a serious risk to New Zealand.

Addressing the Shareholders Association's annual conference at the weekend, NZIER principal economist Shamubeel Eaqub said National and Labour - despite their rhetoric - were largely centrist in their policies.

"What scares me are the policies that we see in the fringes and the fringe parties and they scare me a great deal because a few of them, quite frankly, are quite mad," he said. "So when you vote on the 20th of September, you're not voting for National or Labour, you're trying to keep out the influence of some of those crazy policies."

Eaqub said he did not want to go into the parties or policies he was most concerned about.

"I don't want to get into bad-mouthing particular political parties. Most of the small parties are not pursuing policies that are good for New Zealand - they are pursuing policies that are good for a small constituency."

That comment prompted a round of applause from the 300-strong conference audience.

Eaqub also said the Reserve Bank was "stuck in the 80s" in its preoccupation with inflation control and shouldn't be raising interest rates in the current economic environment.

The central bank has lifted the OCR by one percentage point to 3.5 per cent this year.

"When you look at the companies you invest in, how many are increasing margins rapidly? How many of those businesses are raising prices? New Zealand is not in a strong growth, high-inflation period," Eaqub said.

A Reuters poll of 14 forecasters found the majority did not expect the Reserve Bank, which will deliver its quarterly monetary policy statement on Thursday, to raise the OCR until March 2015. But Eaqub said interest rates shouldn't be raised until well into 2016.

Eaqub said the local and global economies were experiencing highly uneven growth.

"The risks that I see are manifold," he said. "Don't bet that every part of New Zealand is growing evenly because it's not."

Eaqub said the global financial crisis had resulted in exports becoming "incredibly concentrated" into certain economies, such as China.

"The demand in the global economy in the last few years has been in very localised places," he said. "Our economy has become narrower because of this recession because demand in the global economy is not even."

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- NZ Herald

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