Strong Inflation Data Shows Continuing Need To Protect Low And Middle Income Families

Consumer Price Inflation today hit an annual rate of 7.2%, defying market predictions that it would fall as a consequence of global oil prices.

CTU Economist Craig Renney said “low- and middle-income families will be facing some tough choices as a consequence of this ongoing inflation. Government should be focussing on helping to protect these families during these challenging times”.

Annual Inflation was driven by transport (12%), fruit and vegetables (14%), and home ownership (17%). Core inflation, meaning inflation which most consumers can’t avoid continued to rise. Groceries rose 8%. Petrol prices rose 19%. Rates rose 7.3%. It appears as if internationally based inflation is bleeding into domestic inflation more. Two-thirds of all items saw prices rise, which suggests that inflation is now more broadly based than has been the case in the past.

Craig Renney said “this data is likely to mean that the Reserve Bank will further increase interest rates above their current forecasts. This increases the likelihood of future job losses, and means that households will be paying more in their mortgages. Together with a darkening position on the global economy, it indicates more economic turbulence for the New Zealand economy ahead.

“We should be planning now for how we respond to that challenge. If more workers are going to lose their jobs then we should protect their incomes as best we can. Demand for public services spikes during tough times, so cutting the public sector aggravates problems. If low paid workers are feeling inflation bite hardest, then giving tax cuts to the wealthy won’t help. Instead, we should be investing in programmes that reduce our inflation pressures, as they will pay dividends both now and in the future."

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