Thursday, April 20, 2023

Point of Order: Cyclone Gabrielle cops the blame as Robertson comments on latest CPI figures....

.....while his colleagues announce more spending

The inflation story from the Beehive has changed. Whereas global price pressures were being blamed a year ago, the culprit now is Cyclone Gabrielle.

The consumers price index increased 6.7 per cent in the 12 months to March 2023, according to figures released by Stats NZ today. That’s an improvement on the 7.2 per cent increase in the 12 months to December 2022.

But inflation is still at levels not seen since the 1990s, Stats NZ consumer prices senior manager Nicola Growden said.

The headline on the press statement from Finance Minister Grant Robertson enthused that this was a better result than expected, but Cyclone Gabrielle had kept prices “elevated”.

The statement is among a batch of fresh statements posted on the Beehive website over the past 24 hours or so. These statements show the inflation rate and cost-of-living pressures are not inhibiting the Government’s urge to spend.

Among the new announcements, the Government is providing –

  • A $19 million funding boost “to teach behavioural skills to more of our young children”. Parents presumably are failing to do this to the Government’s satisfaction;
  • A NZ$35m million “contribution” to support the University of the South Pacific’s long-term planning, innovation and stability.
And let’s not overlook Grant Robertson’s readiness as Minister of Sport to dip into the Government’s coffers for the price of hosting the 2034 Commonwealth Games. No, we aren’t committed to this expenditure. Robertson is simply welcoming interest by the New Zealand Olympic Committee in hosting those Games.

“It’s early days for this process, and at this stage all that has been agreed is an indication of interest from New Zealand. Further work needs to be done to understand New Zealand’s position before considering whether to make a formal bid for the 2034 games, but I am excited at the prospect and potential for us to host it here,” Grant Robertson said.

You will find the statement here –

The Government is partnering with 15 more businesses to stop burning fossil fuels, resulting in the equivalent of taking 14,200 cars off the road, Minister of Energy and Resources Megan Woods has announced.

The Government is investing in our littlest learners by making sure they start off their lives with the skills they need to help them succeed in their schooling and adult lives, Under-Secretary for Education Jo Luxton said today.

Inflation has come in lower than all market expectations but the Government is still focussed on bringing it down further and helping kiwis with the cost of living.

The Government is prioritising maths and literacy learning by introducing new assessments from next year, while shifting the timeframes of other changes to NCEA and the national curriculum.

The Government is welcoming interest by the New Zealand Olympic Committee in hosting the 2034 Commonwealth Games.

Today Aotearoa New Zealand and the University of the South Pacific (USP) underlined the need for a shared Pacific future, announcing a new ten-year partnership to support the long-term success of a critical regional institution.

Foreign Affairs Minister Nanaia Mahuta will travel to Samoa today, for bilateral meetings in Apia with the Government of Samoa.

In his statement on the inflation statistics, Grant Robertson said the Consumer Price Index was lower than expected at 1.2 per cent in the March quarter, leaving the annual inflation rate at 6.7 per cent despite recent extreme weather events.

He noted that this was the lowest quarterly increase since March 2021 and the annual rate is below Australia, the United Kingdom and the OECD average of 8.8 per cent.

The Reserve Bank had forecast 7.3 per cent and only one of the major banks predicted inflation would be below 7 per cent.

“The Government is committed to bringing down the cost of living and supporting New Zealanders through these difficult times,” Grant Robertson said.

But will the Government’s commitment to shrink the CPI come in the form of more spending on benefits, pensions and other welfare initiatives – or in exercising fiscal discipline?

It should be noted that Robertson further said:

“We’re taking a range of actions to ease the pressure on families. We’ve lifted the incomes of over 1.4 million New Zealanders, including seniors, families, workers and students, In order to help budgets stretch further, we’ve extended the fuel tax cuts and half price public transport and made childcare more affordable to more families. The Winter Energy Payment will provide cost of living relief for electricity bills from the start of May.”

On the other hand, although he said the cost of living is the main challenge right now in the economy and will be a major focus in May’s budget, he noted:

“Our policy reprioritisation review has netted $1 billion in savings so we can do more to support New Zealanders at this challenging time.

“The Government is also playing its part to bring down inflation by reducing spending to more normal levels and reduce overall demand in the economy. The latest figures show central government consumption fell 2.8 percent in the December quarter and 1 percent in the previous quarter.”

Robertson brought the cyclone into considerations, saying:

“While lower than expected, today’s result is still elevated by the impact of flooding and cyclone events on food prices, with prices increasing 8.6 percent for vegetables. The prices of second-hand cars and insurance were also elevated. The effects of the cyclone will flow through into the June quarter results as well.”

A year ago, when the latest CPI figures were released, his statement was headlined

CPI figures highlight global economic challenges

Further increases in consumer prices are a reminder of the current global economic challenges and the need for responsible fiscal policy in New Zealand, Grant Robertson said today.

At that time the Consumer Price Index showed a 1.8 per cent increase in prices over the March quarter, taking the annual inflation rate to 6.9 per cent.

“These are challenging times for the global economy with significant increases in food and fuel prices hitting all nations. Inflation is at a 40-year-high of 8.5 percent in the United States and a 30-year high of 7 percent in the United Kingdom. Chinese ports have been shut for long periods, adding to supply chain disruptions. New Zealand cannot be immune to these challenges and the government can’t control the price of food or petrol,” Grant Robertson said.

That statement, too, acknowledged many families were feeling the squeeze.

“The pressure from these high prices are real. We are well positioned to respond to this challenge. Unemployment at a record low, exports are up and the economy is growing and helping keep a lid on debt, which is well below those of the countries we compare ourselves with.

“This strong base means we have eased the pressure on New Zealanders. We’ve taken immediate action on fuel prices by cutting fuel excise by 25 cents a litre saving up to $17 a refill and halving public transport fares. We’ve provided significant support to families, seniors and students and the Winter Energy Payment kicks in from 1 May.

“We are also focused on how we can get to the root causes of some price increases. We are committed to taking action to boost competition in the New Zealand grocery market to ensure Kiwis get a fair price. We are also moving to reduce our dependence on oil by decarbonising our transport fleet, through initiatives like the Clean Car Discount.”

But there were no silver bullets for dealing with a situation like this, Robertson said.

The Reserve Bank had the job of managing inflation in our system and they were using their tools to try to bring it back into the target range of 1-3 percent over the medium term.

Most economists at that time were forecasting inflation peaking in the second quarter of the year.

He alluded to the contribution to inflation shrinking that he could make with fiscal policy, reiterating that the Government was continuing to keep “a careful, balanced approach” to future spending.

There were always more calls for spending than money to be able to meet the requests.

So the Government was keeping its focus on meeting the core needs in health, education, housing, and investing in the skills, infrastructure and industries needed to grow higher paying jobs.

Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton


robert Arthur said...

At the outset of Covid, instead of letting Robertson flood the country with money, Jacinda should have put on her long(er) face and explained that the standard of living cannot advance ever only upward. Natural disasters occur and all must wear the pain, including welfare beneficiaries. Not just a few unfortunate business', and in the fallout, recent home acquirers. With everything indexed to inflation and to everything else a very unfair and cruel recession has to be engineered to avoid Venezuelan/Argentinian inflation and the ruin of many responsible frugal persons. Much the same applies following the cyclone damage.
I wonder if Robertson has read any of JK Galbraith who was charged with limiting US inflation during WW2.

K said...

Sadly I noted a massive earthmoving company based in Akld with hundreds of machines assets going to a liquidation auction very recently.
One would think there was enough work on the East Coast to keep them going for years.

Unknown said...

A Memo to K (who said...) it is a nice thought, BUT there is a piece of Govt Legislation that has got in the way- The RMA - which I am sure you know the required considerations, implications, actions & consequences of this Act!

So those machines will sit there, some will be sold, the others - who knows.