Inflation credit and blame

Written By: - Date published: 12:50 pm, April 18th, 2011 - 11 comments
Categories: cost of living, economy, energy, national - Tags: ,

Back in October last year the Nats, in a sea of bad news on the economy, latched on to the low inflation rate as something that they could claim “credit” for:

Govt claims credit for six-year inflation low

The Government is claiming credit for low price rises, saying people have more money in their pockets on the back on low inflation and increasing wages.

Data from Statistics New Zealand (SNZ) released today showed the annual inflation rate is the lowest it has been since March 2004 – at 1.5 per cent.

Low inflation? We were in the depths of a recession, no one was spending. Increasing wages? Just a statistical trick, when lots of low waged lose their jobs the “average” (mean) wage goes up. The excellent Kieth Ng at Public Address tore the Nats a new one over both of these ridiculous claims.

Still and all, the Nats did try to claim credit for low inflation, so I have no doubt that they will be just as quick to step up and accept the blame for increasing inflation now. In fact, inflation is projected to hit its highest point in 20 years:

Economists forecast inflation rise to 5.5pc

Soaring fuel prices and the lingering impact of the GST hike are likely to send inflation to the highest level in more than two decades this year, hitting households hard.

Rises in the cost of food and school and university fees have also been identified as contributing to pushing up the cost of living and inflation rates.

This morning, Statistics New Zealand will publish the consumer price index for the first three months of the year, which is expected to show that prices rose on average 4.6 per cent in the year to March 30.

The movement in prices was having a substantial impact on consumers, with rises “heavily weighted towards the goods and services that we can’t really avoid” such as fuel and food, said Steven Toplis, head of research at Bank of New Zealand. …

Economists expect annual inflation to rise as high as 5.5 per cent in the year to June 30, the highest since 1990, a year after the Reserve Bank of New Zealand made controlling inflation the main focus when deciding the official cash rate.

So when can we expect a press release from the Nats accepting blame for the high inflation rate? Don’t hold your breath. But here’s what Key did have to say:

Prime Minister John Key said oil prices internationally were concerning but beyond the control of the Government. “That is putting pressure on inflation and of course that feeds through to every product we buy,” he told TVNZ’s Breakfast this morning. He said the Government’s tax package had helped as would reduction in government spending.

Ummm – no John. Your tax package didn’t help at all. The increase in GST is responsible for about half of the current inflation rate. That’s about the stupidest thing you could have said really. And as to the price of oil — what is your government’s plan to cope with that situation? Building more highways isn’t going to help. The cost of oil is going to keep going up and up. So what is your plan?

11 comments on “Inflation credit and blame ”

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  1. Andy-Roo 1
    18 April 2011 at 1:02 pm

    Same as always, smile, wave and blame Helen Clark if someone asks a hard question.
     
    If you can insinuate that the questioner is ill informed or stupid as well, then that’s a plus.
     
    That should take care of the main problem, which is of course the potential PR issues.
     
    All of that other stuff can be left to some future government to sort out, right?

  2. Shane Gallagher 2
    18 April 2011 at 1:05 pm

    The plan is to keep giving money to the rich and stuff everyone else. 

    That’s about it. Key smiles and waves and keeps everyone distracted while the whole country gets privatised.

  3. Lanthanide 3
    18 April 2011 at 1:38 pm

    Note that the inflation rate of 4.5% was moderated by the price of international air fares dropping.
     
    So yes, the food in the supermarket that you buy every week might have gone up, but because international airfares, which most people don’t even buy once a year, have decreased, the CPI figure is dragged down to only 4.5%!

    • PeteG 3.1
      18 April 2011 at 2:34 pm

      Alcohol and tobacco were also significant factors in the increase, they rose by 9.4%. They are discretionary, reducing expenditure on those for some people would offset prices that increased.

      • Campbell Larsen 3.1.1
        18 April 2011 at 2:50 pm

        ….And public insight and understanding of serious issues was increased 0% by PeteG’s typically misleading comments that resemble those of a wannabe Nat PR spin weasel

        • PeteG 3.1.1.1
          18 April 2011 at 2:58 pm

          Little different to Lanth singleing out air fares – except people who don’t drink and/or smoke will not have had quite as much inflation pressure on their budgets as those who do.

          Inflation effects are more complex than an across the board incerase for everyone. While inflation has risen more than usual interest rates are much lower than they have been, offsetting inflation increass for many people.

          Except…I don’t recall my credit car rates dropping the same as my mortgage (if at all) – not an issue for me as I always pay it off but an issue for many people.

          • Campbell Larsen 3.1.1.1.1
            18 April 2011 at 3:27 pm

            Quite different actually, Lanth was not implying as you were that it was peoples choice to experience or not the effects of inflation depending on their lifestyles, a typical bene-bashing sentiment – along with echoes of shonkeys ‘poor choices’ im-out-of-touch-rhetoric, that’s why I called you out on it.
            Note the article itself says ‘The movement in prices was having a substantial impact on consumers, with rises “heavily weighted towards the goods and services that we can’t really avoid” such as fuel and food, said Steven Toplis, head of research at Bank of New Zealand. …’
            The inclusion or not of airfares is a side issue – if it has been included in previous years/ studies then it needs to be there again so as to provide a reasonable comparison. I presume her point is – should it be there at all if it doesnt reflect the spending habits of the average consumer?
            The stats speak for themselves, we dont need them to be any worse to understand the the National Govt is failing the people of NZ

    • Herodotus 3.2
      18 April 2011 at 2:45 pm

      La why has reported inflation over the last decade been around 3% ?? Because of tradables (and our exchange rate) overseas imports T.V.s etc. The non tradables (Those we cannot escape) were always higher than reported inflation/CPI data. We were being stuffed by Lab as well. Just the same with our  GDP data, about 1/3 – 1/2 of our increased GDP was because of the initial short term benefits we the NZ economy gets from net immigration. Back this out and the boom times were not that great. Inmagine if the NZ $ did what it should have done over the last 6 mths??? Inflation of the 90’s!!!
      Be it Nat or Lab under the current economy pretext they both ooperate under. NZ cost of living will always increase at a greater rate than wages/benefits. So bit by bit we cannot live to the stds expected and the govt (Who ever they may be) will reduce govt services.

  4. Zaphod Beeblebrox 4
    18 April 2011 at 2:56 pm

    Sell off the SOE’s and privatize ACC- that will sove the problem. lol…

    • Herodotus 4.1
      18 April 2011 at 3:38 pm

      Until ACC gets into trouble, then like other examples from the past… we repurchase this from a failed private coy. Perhaps we should have acquired a finance coy from Timaru and a Mutual Insurance coy, we paid enough for them !!!!
      There are somethings that should remain “nationalised”. Perhaps another is Power generation coys comes to mind !!! 😉

  5. Jim Nald 5
    18 April 2011 at 3:33 pm

    Congratulations to National’s tax cuts for the elite and GST increase at the expense of the working poor.
     
    When you hear next hear Key’s policies, it pays to think that he is talking to his own select group and not to the NZ people collectively.