Entry 244, on 2005-11-03 at 14:15:53 (Rating 3, News)
The New Zealand economy is undergoing increasing inflation pressure and the Reserve Bank is being forced to try to control it without killing economic growth at the same time. The governor, Allan Bollard, is blaming banks and real estate companies for encouraging people to buy expensive property and pushing the prices up, but is this a fair criticism?
Well, in a way it is. But at the same time, should he be critical of companies who are just doing what companies everywhere do: maximising their profits? Someone who is a bit left-leaning, like myself, would say business should be controlled so that their greed doesn't adversely affect the economy as a whole. But traditional economic thought would surely say that the free market just works that way, and we shouldn't intervene.
I mean, are we surprised by this? We sell off all our banks to overseas interests. Do they really care about the big picture of social and economic trends in New Zealand? Of course not. Business is there just to provide the best result for the shareholders at the end of the financial year. If a large percentage of New Zealanders can't afford a house any more without paying half their income into a mortgage, why should they care?
And the real estate companies are similar. Hopefully they are a bit more responsible, because at least most are owned or operated by New Zealanders, but their primary aim is too maximise their income, so if they can sell a property for much more than what its worth, who can blame them?
Until we reclaim more control over major business forces this is just going to continue to get worse. Hopefully we are seeing a trend away from the extreme free market policies of the past and can now resume a more reasonable course on these matters.
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