The Economic and Social Research Institute has called on the Government not to repeat the kind of pre-election tax cuts and spending increases introduced before the last election.
The institute said the result would be more inflation, which could damage the economy. The ESRI has also voiced concern about the possibility of a house price bubble and the prospect that such a bubble could burst.
In its latest quarterly commentary, the independent think-tank expresses concern that the economy is already losing competitiveness. It says we are being passed out by others in our export markets, where we are losing market share.
A pre-election splurge of Government spending and tax cuts would add to inflation and worsen our loss in competitiveness, according to the ESRI
The ESRI has also used its commentary to echo the growing concerns of the Central Bank and others about the possibility of a house price bubble.
It said house prices were already overvalued by 15% before the latest interest rate increases, but have since accelerated. The institute says that the longer this goes on the greater is the risk of a sharp setback to house prices in the future.
