Lowest inflation in six years good for families

The lowest annual inflation rate in more than six years confirms that cost of living increases have generally been low and real wages are gradually increasing, Finance Minister Bill English says.

News today that annual inflation was just 1.5 per cent in the year to September also confirms that Phil Goff is plainly wrong when it suggests New Zealanders were better off under Labour.

“The facts speak for themselves,” Mr English says. “When Labour left office, the economy was deep in recession, annual inflation was 5.1 per cent – with no compensation for anyone – and real after-tax wages were falling.

“By contrast, annual inflation for the year to September stood at only 1.5 per cent. This is the lowest annual figure since 1.5 per cent inflation in the year to March 2004 and the last time it was lower was in the year to December 1999.

“Not only are price increases significantly lower across the board under National, but real and after-tax wages have increased. [see attached table]

“The tax package this month will leave the vast majority of New Zealanders better off, with incentives to save and get ahead under their own steam.

“Beneficiaries, superannuitants and Working for Families recipients have received immediate compensation for the GST increase and workers across all income groups have received a tax cut. Nearly three quarters of income earners now have a top tax rate of 17.5 per cent or less.

“All Labour can do is reconfirm that it stands for tax increases, higher debt and looser controls over inflation. That’s a desperate recipe for leaving hard-working Kiwis worse off,” Mr English says.

Price and wage changes over comparable periods

Labour National
Sep 2006 to Sep 2008 Sep 2008 to Sep 2010
Overall inflation (Consumers Price Index) 7% 3%
Overall food prices (Food Price Index) 15% 5%
Food prices
Bread and cereals 18% 4%
Milk 23% 7%
Cheese 50% -3%
Eggs 19% -6%
Vegetables 21% -6%
Fruit 8% 7%
Beef 18% -1%
Poultry 44% -2%
Non-food prices
Petrol 22% -14%
Electricity 13% 8%
Gas 22% 5%
Housing rents 6% 3%
Wages Dec 2006 to Sep 2008
(7 quarters) Sep 2008 to Jun 2010
(7 quarters)
Nominal pre-tax wages 7% 7%
Real pre-tax wages 0% 5%
Real after-tax wages -1% 9%

Source: Statistics New Zealand
• Food prices from the Food Price Index
• Non-food prices from the Consumer Price Index
• Wages from the Quarterly Employment Survey, Average Weekly Ordinary Time Earnings

Note that the Sep 2010 quarter QES has not yet been released, so wage comparisons are for the last seven quarters rather than the last eight.

ENDS

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