Will the use of an interest free overdraft from the Reserve Bank cause inflation?
No, the use of this overdraft money from the Reserve Bank will replace the use of an overdraft facility or loan previously sourced from a private banking institution.
Interest cost contributes significantly to the price of goods.
Money will only be issued relative to production and to raw materials and labour available.
We will set up an authority free of political control to ensure that the money supply is balanced against available goods and services, so that demand inflation can not occur.
Inflation is not always the simple process of too much money chasing too few goods. Other factors can push prices up, e.g. a rise in oil prices, or interest rates.
Les Hunter (Courage To Change - 2002) compared inflation with the volume of money as a proportion of gross production in the seventies which showed clearly that the credit squeeze to reduce the money volume was accompanied by increased inflation.
As the money supply dropped from over 30 % to below 15%, price rises rose from about 4% to about 15%. Anyone can verify these figures from official publications. It seems the economists never have.
We aim to encourage real competition between banks; we will supply the nation's need for money, from a very efficient and cost effective source. The pressure on real inflation will be reduced as the lower cost of borrowing will see reduced pressure on taxes and rates.