Heather du Plessis-Allen: We haven't seen inflation numbers this big since Geoffrey Palmer

 

We’re starting to get an idea of how much of a problem inflation is going to be for us, both globally and in NZ. 

The figures out today put annual inflation in our country at 6% for last year. 

That’s huge. 

We haven't’ seen a number that big since Geoffrey Palmer was the Prime Minster back in 1990, and those were not good days for the country. 

The troubling thing is that this is increasingly looking like it’s going to stick around, because you’ll remember, the big question around inflation last year was whether it was temporary or more permanent. 

Central banks around the world – including ours – kept openly wishing it was something temporary; just caused by supply chain issues. 

But noises they’re now making – including from the US Federal Reserve this morning – indicate they now suspect it’s bigger than that. 

It’s more entrenched. It’s clearly sticking around. 

So, get used to those price rises you’re seeing. 

They’re not one-offs. You’ll see more of them.  

And yes, that means that every dollar that you earn now is worth less than it did a year ago. 

It means that you already need a 6% pay rise to keep up with those price rises you’re seeing. 

And now, watch as the Government and the Reserve Bank start to play the game of pretending that none of this is their fault. 

They’ll tell you it’s a global problem, and they are right. It is. It’s happening around the world. 

But they have the choice of making this worse or better, and they have and are making this worse. 

The Reserve Bank – it is now widely accepted among economists – completely over-heated the economy by printing way more than money than it needed. 

And even in public comments less than a year ago clearly didn’t see this coming. 

And the government?  

Well, keeping borders closed is one of the key things making this a lot worse. 

Because employers who can’t find staff are now poaching from other employers with big pay increases and that is a big driver of inflation. 

Yes, it’s a global problem but it doesn’t have to be this bad. 

Our closest neighbor – Australia – just this week registered a much milder inflation rate of 3.5%. 

So, brace yourself for inflation to be a big topic this year. 

Not only in politics, as the government and the central bank try to spin themselves out of copping the blame. 

But in your home as well, as the reality of this hits your budget. 

Heather du Plessis-Allan is a journalist and commentator who hosts Newstalk ZB's Drive show.