Bermuda may have reached the stage where the costs of further economic growth will outweigh the benefits, economist Craig Simmons warns.

Mr. Simmons said Government has not developed a macro-economic vision for the Island. ?When I think about the principle macro-economic variables I think of inflation and unemployment or employment and those variables deserve targets,? he said.

In the UK, the macro-economic framework states that the objective of monetary and fiscal policy is an inflation rate of two percent, he added.

If the inflation rate deviates from two percent by more than 200 basis points either up or down someone has to be held to account from deviating from that stated goal.

?I don?t see that kind of framework in Bermuda, we are taking a more passive approach to those macro-economic variables,? he said.

?If we are going to remain competitive in the global economy, we have to ensure the inflation rate is in line with international inflation rates.?

Mr. Simmons said it is not easy to set inflation targets in Bermuda directly.

He also suggested that inflation originates in labour markets so if there are severe shortages in the labour market it will cause wage inflation, price inflation and inflationary expectations because real wages are declining.

?One way to mange the rate of inflation is to manage the supply of labour in Bermuda, recent labour market indicators point out that the unemployment rate is 2.1 percent which is clearly below the natural rate of unemployment.?

?As long as unemployment is that low, you should expect price inflation because of labour shortages. Bermuda?s immigration policy has a major role to play in regulating the supply of labour and in so doing manage wage inflation.?

Mr. Simmons said, in the construction industry for example, the demand for labour exceeds the supply of available labour and this problem has been addressed by importing foreign labour.

He said the drawback to having foreign labour is the need to supply housing for this labour.

?It is not enough to allow unfettered economic growth because there are social costs associated with unfettered growth just as there are benefits. Perhaps we have reached the stage where the costs of further economic growth outweigh the benefits of further growth.?

Apart from exacerbating housing and traffic problems, he said economic growth has led to the over consumption of water, as residents consume 1.5 million gallons a day.

?As per capita incomes rises people demand more and more water. People with higher incomes tend to consume more water than people with lower incomes and people with higher incomes tend to demand more cars than people with lower incomes.

?As we continue to prosper we should expect more vehicles on our roads, more severe water shortages, an increased demand for housing which will in turn drive rents beyond the affordable level.

?It?s about finding that delicate balance between consumption and production as opposed to the amount of consumption and production.?