A questionable policy

2008-05-30 00:00

Statistics published in the Reserve Bank’s Monetary Policy Review in May reveal that consumer prices in the more established economies have risen more slowly than those in the emerging economies. For example, in 2007, in the so-called “advanced economies”, the increase did not exceed 2,9% in any of the representative countries listed, while the average increase across the world was four percent. Africa’s average increase (not counting Zimbabwe) was 6,3%. During the same period, our consumer prices rose by 8,6%. In Tanzania, headline inflation matched food inflation at seven percent in 2007, while in South Africa food inflation was some 45% higher than headline inflation. I find this anomalous. After all, within the African context our economy is among the most developed, yet our inflation woes appear to be deeper than those of other African countries with less secure economies. At the Reserve Bank’s presentation in Durban last week I asked the deputy governor what accounted for this anomaly. I did not get a compelling response.

I struggle to understand how the curtailment of consumer spending controls prices which are not determined by the market. It is one thing to force the person in the street to be more circumspect about his or her accessing credit, but this strategy is also placing unnecessary restriction on the engines of the economy. We cannot improve employment unless business grows and business is constrained from growth by higher interest rates.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News
Traffic Alerts
Traffic
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.