CTU Economic Bulletin

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    July 2011

    We often say that low income families are hit harder by rises in the prices of necessities than high income families. That is very topical with the big rises in food prices in the last year – 7.5 percent from June 2010 to June 2011 – and petrol up 20.1 percent between the two June quarters. Why should they be hit differently? Because for low income people, a bigger proportion of their spending goes on necessities, and they spend a greater proportion of their income. People with higher incomes have more income over which they have greater choice. That could include saving, and spending on luxury items such as travel, dining out, and additional or more expensive cars and houses. How much different are these patterns of expenditure and what difference do they make?

  • June 2011

    Despite rumours the government had quietly dropped its 2008 election promise of closing the income gap with Australia by 2025, it has recently compared wages in New Zealand and Australia again. It is now resorting to an after-tax comparison to try to show some progress. But cutting taxes doesn’t increase the size of the economy. And its comparisons conveniently forget to go beyond income taxes to take into account benefits like Working for Families. Neither does it tell us what might have been lost in government services to pay for the tax cuts. Until we are given that bigger picture it is a hollow and deceptive argument. But what we are paid by our employers does matter. What are the facts?

  • May 2011

    The 2011 Budget was a victory of story-line over needs. The story was that the New Zealand government has a debt problem that according to the Minister of Finance’s Budget speech “leaves the Government vulnerable and less able to meet future shocks. Its double-A plus credit rating is on negative outlook with two rating agencies.” We must therefore “eliminate the deficit faster and target a lower level of public debt... Finance costs would otherwise rise unacceptably...” It was therefore a Budget of a thousand cuts, as we anticipated.

  • April 2011

    The government’s 19 May Budget is a fateful one. It could push New Zealand back into deeper recession and unemployment, or it could give us a chance to pull out of three years of stagnation.