Increased Government spending could ?add fuel to the fire? of Bermuda?s overheating economy, according to economist and Bermuda College lecturer Craig Simmons.

Mr. Simmons said rising inflation rates and decreasing levels of Bermudian employment over the past few years were both danger signs that efforts need to be made to slow the economy?s growth.

However, he warned a rise in spending in yesterday?s budget could make things worse. ?With respect to spending, it has increased,? he said. ?In light of the fact that the economy is in an overheated state, further increases in Government spending are unwarranted.

?Increased spending on things like home ownership is long overdue and is welcomed ? home ownership in Bermuda is rather low by international standards.

?But at the same time the amount of Government spending is simply adding fuel to the fire.

?If we continue down this path of growth, the effects will be felt by Bermudians in job losses.?

Mr. Simmons said trends appeared to show that as the economy grows, levels of Bermudian employment appears to fall.

He said: ?Between 2000 and 2004 the labour force grew by 340 jobs, but Bermudian employment fell by more than 1,400. It looks like the average rate of growth over the same period has been three percent per annum.

?It begs the question: as we continue to push the limits of our resources beyond a full employment level, will continued growth lead to decline in Bermudian employment?

?Is there a trade-off between growth and decreasing Bermudian employment?

?I think it goes back to the issue of the economy being overheated. There are way too many jobs. Because of labour shortages, wages are rising and with it the prices of goods and services. That can explain why the rate of inflation jumps.?

Mr. Simmons said figures released last month showed a 40 percent increase in the rate of inflation ? from three percent in 2004 to 4.3 percent in 2005.

?To my mind, that?s a serious increase,? he said. ?Essentially, the 40 percent increase in the rate of inflation is a manifestation of an overheated economy.

?That could create a rise in expectations when workers go into wage negotiations. Instead of asking for two or three percent pay increases, they could ask for five or six percent. We set in motion an inflation spiral.

?The cost of doing business in Bermuda is already high. If people?s expectations begin rising, you essentially get into a wage spiral which is very difficult to control.

?To end rises of inflation you need a recession. It?s an unfortunate reality that once expectations are out of control, drastic measures are needed.?

He added that many Bermudians were not feeling the benefit of the booming economy.

?There?s still the reality that 60 percent of householders in Bermuda are unable to save anything,? he said.

?You have got a significant group of Bermudians living on the edge, 25 percent below the poverty line. It?s pretty clear that continued growth is not helping those people.

?My recommendation would be to slow the rate of growth. There are some welcoming signs. International business growth is beginning to slow. That should slow the demand for labour and housing and financial services.?

He praised Ms Cox for using surplus cash to pay off debts to the US.

?Now would be the time to pay off as much of them as we can,? he said.