Some facts on Wages, Inflation and GDP

• Ben Clark
• 13 years ago
• Categories: john key, making shit up, wages
• Tags: GDP, inflation, treasury predictions

Further to today’s Keeping The Buggers Honest, John Key made a number of claims at the same press conference yesterday that do not bear scrutiny.

He claimed that while there had been substantial wage growth under Labour, it had been eroded by high inflation.  National would deliver, according to their Treasury predictions, significantly higher wages that weren’t eaten by inflation.  When reporters asked how much wage growth, he wouldn’t reveal, but agreed that 4-5%pa was an educated guess.

Now I knew that his spiel wasn’t right, and was pretty rich coming from someone whose most recent statistics say: 4.5% inflation (higher than at any time under Helen Clark), 6.1% food price inflation, 1.9% average wage growth and 6.6% unemployment.  So I headed to the statistics website.

Looking at each of those claims:

1. Wage growth under Labour meant that the median income rose by 69% during their term in office, while over those 9 years the CPI (inflation) grew 28%.  ie, Wages grew nearly 2.5 times faster than inflation.
2. Inflation was not high under Labour – that 28% CPI increase means an average rise of 2.8% pa.
3. If we’re looking at 4-5% being National’s strong wage growth – 69% over over 9 years means an average of 6% per year under Labour.
4. If we look at National’s record? So far there’s been a 6.9% CPI increase under their watch, and a 1.3% drop in the median income.  That’s right, the median income earner in New Zealand is 8.2% worse off under National’s “Brighter Future.”
5. Treasury predictions haven’t been great.  According to them we’re meant to be having high wage growth now, not the 1.9% average wage growth we have.  We were also meant to have GDP growth in 2008/9/10 of 1.5%, 2.3% and 3.2%. Instead we got -1.1%, -0.4% and -0.1%. (Bernard Hickey’s article is excellent)

At the same press conference John Key also said that a lot of people will be worse off due to the Working for Families changes, but a lot of people will be better off:

There are a number of changes and I’m not going to detail them today, but one impact is of course the CPI [consumer price index] adjustment that comes. But people are better off in cash terms.

That’s right – people are better off in cash terms because they’ll get an inflation adjustment…  Because the number will be bigger, even though it will only buy the same amount.  There’s some spin for you.

Of course it’s not a food price inflation adjustment, so it’ll buy less food…

* Average Wage Growth = the increase in the average wages of all those earning salary/wages – but not other income. Median Income = what the middle income earner in New Zealand is getting – including pensioners and beneficiaries and those earning income from shares etc (doesn’t include those with no income).  In the last year Average Wages are up 1.9% and Median Income is down 1.7%.