Don't Overreact to Inflation, Warns CTU

The inflation level is a sign of the growing economy and the Reserve Bank should not overreact and drive down economic growth along with the benefits it can bring, Council of Trade Unions economist Peter Conway said today.
The new inflation rate of 2.4 per cent, released by Statistics New Zealand, had been widely anticipated, Peter Conway said.

"The level is not a cause for major concern as inflation remains within the Reserve Bank's one percent to three percent range."

Wage rises were not to blame for pushing up inflation, he said.

"The labour market has been tight for over three years and predictions of wage
inflation have not eventuated," Peter Conway said. "House prices went up 20 per cent last year, but private sector wages only increased by around two per cent."

Higher wages should logically flow from persistent labour shortages but this had not happened, partly because of the absence of genuine collective bargaining in huge parts of the labour market, he said.

Unions will factor in todays inflation figure to wage negotiations, he said. "However, wage claims are always based on a wide range of factors including
industry trends, recruitment and retention, what was paid last time, ability
to pay, productivity and equity issues."