You’re reading that as “Inflation will be 5.9% thanks [solely] to the GST hike.” I read it as “Inflation will be [as high as] 5.9% thanks to the GST hike.”

I was assuming that other sources of inflation (other than GST, and notwithstanding Paul’s technical point about what part of price increases is or is not ‘inflation’) would be less than the 4.4% average return and so, while they would diminish the return on savings they would not wipe out that return and put it in the black.

The GST hike, I think the argument goes, pushes that return into the red. So, thanks to the GST hike, we are projected by Treasury to have an ‘inflation’ rate – because of the budget – that will diminish the value of savings. If other sources of inflation amount to more than 4.4% then, of course, savings would have gone into the red without a GST hike – though any hike would have made that shift into the red worse.

genu-wine question: are you using both oars up this creek of yours..?

BTW: collar..? me..? why not start over.

To the blighted souls herein this commentariat I was seeking actual use of the figures, not blind reassertion of others dictat… like what GST-included price would result in an increase of 6 cents on it at the new rate… answer: $100. Now proceed from this to tell me how a projected 5.9 percent overall price increase in our economy will result.. will it, for instance, arise solely from the gst hike..?

If not, why not, so we can all get things straight.. and not find ourselves(the blogger above) a channel to \’toldya so\’ blah so obliging the price hikers now licking their lips at growth that likely fewer people will afford.

Will it lower the purchasing power of savings? Yes.

Outside of ECON 101 classes ‘inflation’ just means price increases. Sad, but true – and that’s perfectly justified. Academic disciplines don’t have a ‘mortgage’ (sorry) on ordinary English language terms.

Think of this: If a company advertised it’s price reductions (i.e, a sale) by saying ‘We’re deflating our prices by 10%!!!’ would you be inclined to take them to the Commerce Commission (or wherever such ‘breaches’ are taken) on the grounds of ‘misleading advertising’?

I also distinctly remember (and I’m old enough to) Roger Douglas, on television sitting in front of a graph of quarterly, or whatever, inflation records some months after GST had been introduced and pointing out that the inflation from the GST was only a ‘blip’ and it had now passed through the system (to paraphrase in digestive terms). To his credit, he didn’t try to wiggle out of it by saying it wasn’t inflation (which, technically, it wasn’t), just that it was temporary.

Of course, nothing is ever black and white. I suspect that the post-GST price then becomes the benchmark for some (unscrupulous) traders to have one over on their customers by putting their ‘inflation-adjusted’ prices up, yearly, on the post- rather than pre-GST component of the retail price (competition is never perfect, after all). If I’m correct, then wouldn’t GST actually contribute to ongoing inflation? But maybe I’m wrong.

The CPI is based on a given selection of items so the way to beat it or fall sucker to it is to choose what you buy … that assumes you are that worried about it.

What a GST hike does, as you point out, is provide an inescapable AND instantaneous devaluing of the exchange value of savings. So, in the short term, it’s worse than the equivalent level of inflation. It’s a bigger body blow to savers than we all thought – thanks for clearing that up.

All very simple really.

It’s pretty sad that the depth of your contribution is a pedantic point that is meaningless.

A simple point, the GST hike isn’t inflation. The GST increase will increase the price level but will do so instantaneously which, by definition, isn’t inflation.