Data released by Stats NZ today showed inflation slowed to an annual rate of 2.2%, reflecting lower petrol prices and a weaker economy, said NZCTU Economist Craig Renney.
“The data shows that petrol prices fell 8% annually, and vegetable prices fell 18% annually. These reflect both softer global demand and a return to normal harvests after Cyclone Gabrielle. Prices for discretionary spending items such as furniture, electronics, or second-hand vehicles fell. This suggests weak demand and low consumer confidence, which is exactly what you would expect when unemployment is rising,” said Renney.
“Inflation and rising costs that can’t be avoided by households kept rising much faster than the headline rate. Electricity costs are up 7.4% a year. Rates bills rose 12% last year. Pharmaceutical products rose 17% with the reintroduction of prescription fees. Housing insurance was up 20% from last year.
“Rents were the biggest contributor to annual inflation, up 4.5%. It’s clear that the landlord tax cuts aren’t working to reduce rents. Low-income households, struggling after real terms cuts to the minimum wage this year, will still be feeling the pinch of these increases.
“One of the biggest drivers of the fall in inflation was the reduction in early childhood costs associated with the new family boost payment. Without that change quarterly inflation would have risen from 0.6% in September to 0.9%. Yet we know that more than half of all eligible households aren’t claiming that support – meaning that fall is unlikely to be translating into families’ pockets for many. Petrol pricing was supported by the one-off removal of the Auckland Fuel Tax, and with rising oil prices globally that fall is unlikely to be sustained.
“Inflation is falling right now, but low-income workers might not be feeling the benefit as inflation they can’t escape keeps rising. Lower inflation is good news if it doesn’t come at a cost of much higher unemployment, which every forecast tells us will be happening.
“With inflation now being back in the target band, the Government has no reason to not invest in making sure that unemployment doesn’t happen. Anything else is a choice,” said Renney.