The inflation figures are out. It's gone up by one percentage point and there's now a four in front of it. A large part of that cost is petrol, which we can do nothing about. Diesel is up 7.1%.
But even excluding tradable inflation, which we can't influence, non-tradable inflation is still above the Reserve Bank's arbitrary target band. It came in at 2.9%. That's up from 2.4% a year ago.
There's stuff in there that really gets our goat, like the 12% rise in electricity prices. Rates are up 8.8%. That's the non-tradable stuff. We can influence that but we're not. It's all going up.
But all this increases the pressure on the Reserve Bank to raise interest rates to squash these price rises.
The problem I have with that is that the nascent recovery we're starting to see gets squashed as well, forcing us into a longer period of downturn and stagnation.
And that's because this simplistic inflation target does not take into account all the complex wheels that spin in an economy. It's this brutal, simplistic measure that served us so well when it was first introduced 30 years ago but is now seeing us boom and bust, lurching up and down on a rollercoaster that, you have to say, is no good for long-term economic planning.
There is a strong argument for a new way of calculating our economic position rather than relying on a single inflation figure. But it's going to take a very smart person to figure that out.
So until then, the fairground ride that is our macroeconomic setting will continue.
Andrew Dickens is a broadcaster with Newstalk ZB. - where this article was sourced.
6 comments:
Age Concern Auckland says older people are facing impossible choices as the surging cost of living crisis continues to bite.
Annual inflation had risen to 4.1 percent, the highest level in more than two years. Power prices were up 12 percent annually and rates increased by 8.8 percent.
People voted for a three headed right wing abomination. And this is what they get as a result. I hear the landlords are doing better though!
If the government is going to proudly practise tax purity, making more from each litre of petrol through GST, then it's part of the problem. And it must wear a fair chunk of the blame.
Again, the cost of freight rises through diesel costs and the government cashes in with increasing GST revenue but offers no relief. All very pure. Having been in Australia recently, the contrast is stark. NZ is harsh and flat, Australia not.
But for reasons unknown, the tax system cannot respond to this kind of situation to mitigate external shocks. Its frozen in cement. Rather the country shifts back toward recession, again, cost of living goes through the roof and inflation surges upward on a sick economy and Nicola Willis goes into her explanation mode, as she regularly does, to explain why it's not her fault.
Nationals lack of imagination, in abundance, is a good part of the reason we are where we are. Would Labour etc do any better. No. But listening to Willis blaming everyone else is not cutting it.
Again, National aren't polling in the mid to late 20's for no reason!
Maybe governments and councils could trim their spending. Oh wait, vanity projects and votes are far more important than the economy.
Anon at 7.22 what evidence do you have that landlords are doing better?
Andrew’s points are valid and well supported by his contributors. The thing we learn from history is that we don’t learn from history. The UK residents are being torched by escalating electricity costs as they pursue net zero madness and NZ mindlessly follows. There was much fanfare when this Govt suggested capping council rates, a process that could have been achieved instantly but obviously not in Hobbitville.
Under TOP’s land tax policy landlords will cop a $9,000 tax charge (using average NZ house prices) on every reports they own. That should punish the greedy capitalist b@$#@%ds. Will it also drive rent increases? Best not talk about that.
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