Tuesday, April 26, 2022

Mike Hosking: Inflation number paints a grim economic and political picture

Along with the number, came the commentary, and the commentary was the thing that clearly stung the most.

Our inflation number is a disaster. 6.9 percent is something we all see, feel, and fear. There was no escaping it, given it's a statistic. It's a number, and numbers don't lie.

But Adrian Orr's commentary to the International Monetary Fund is the bit that clearly got under the governments, and particularly Grant Robertson's skin.

His line was we are not in a good place right now. It's a simple line and a damning truth, especially when you are the Government trying desperately to underplay the significance of it all.

It was a brave sort of statement for Orr to make, given it's him who was a significant part of the spending that got us where we are. But he is 100% right to make the comment given, like most central banks, they’ve worked out interest rates need to rise and inflation is real trouble, but they can't do it alone.

Orr has looked at Robertson's predilection for spending, sees the billions more in borrowed money set aside for the budget, and quite rightly is pointing out that the largesse has to stop, a few belts have to be tightened, and you don’t tame inflation by spending yet more money.

Robertson is sensitive to this, and you can tell because his response gets slightly petulant. He bit back by asking, rhetorically, just what was it we wanted cut? Because it would need to be something like the wage subsidy. Did we want the wage subsidy cut? Is that what we want?

No, Grant. What he avoids by asking that big broad-brush kind of question is, could he have taken some of the wage subsidy and subjected it to tighter scrutiny? Answer, yes.

Were the minimum wage increases all necessary? Did fishing boats need cameras and schools all need lunches from the Covid fund? Did the many, many marae need refurbishing from the Covid fund?

In other words, if you looked at all your spending over all the areas and ran a line through things that you could call lavish, wasteful, or ideologically driven, were there many hundreds of millions of dollars' worth of savings to be had?

In the answer being yes is the political embarrassment of what Orr is suggesting.

$1.9 billion on mental health where outcomes can't seem to be found, hundreds of millions in a new health bureaucracy that’s saved, as far as I know not one life yet. There is a lot of spending in areas where there is not a lot of return.

Hence the Orr comments, hence the inflation and hence Robertson being caught out.

Here is his real problem, inflation hasn’t finished rising and because of that the political damage is only just beginning.

Mike Hosking is a New Zealand television and radio broadcaster. He currently hosts The Mike Hosking Breakfast show on NewstalkZB on weekday mornings.


Anonymous said...

i have no idea where this 6-7% inflation number is coming from...

we use the basic store-brand laundry detergent from the warehouse - price went up from 2$ to 3$ within a week. that's 50%.
we buy the store-brand whole milk 3L - within a year, price has crept up from $5.07 to $5.84. that's 15%.
our store-brand steam iron went kaput after 2 years and i thought i'll pick it up for $10 that i noted 2 months ago. it is now $14. that's 40%.
the store-brand bread we bought for $1.20 has jumped to $1.40. that's 17%.
basic 5 pk ramen noodles went up from $1.60 to $1.80. that's 13%.
a bag of plain rice has gone up from $7 to $8.80. that's 26%

most of these changes happened in less than a year, so the annualised inflation rate is far higher!

i'll blindly walk into a shop that can promise that i won't be paying more than 7% over the last year prices.

Anonymous said...

If Robertson doesn't know what needs to be cut then obviously he is out of his depth. Everyone else has a good idea