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Inflation at 7.3% shows needs for continued support for low- and middle-income households

Image of NZCTU Economist Craig Renney

Continued support for low- and middle-income New Zealanders is essential, with inflation hitting 7.3%, say the New Zealand Council of Trade Unions.

“That means further support for the minimum wage, supporting employers to pay the Living Wage, and continuing to invest in essential public services that reduce inflation in the long-run,” said NZCTU Economist Craig Renney.

 “It also means making sure that New Zealanders get a pay increase this year, something that did not happen for more than third of workers last year.”

“What this data confirms is that an unfocussed tax cut aimed at the very highest income earners would do nothing to address inflation.

 “That would do nothing to change the cost of living for those with the lowest incomes and would likely stoke additional inflationary pressures by further increasing demand.”

“These would likely be paid for with cuts to exactly the kinds of public services we need – health, housing, and education. Now is not the time to further place the cost of living on those who have the least ability to pay. “

Recent data confirms inflation was driven by core expenses for households. Petrol prices are up 32.5% annually. Rent is up 4.3% annually – the fastest annual increase on record. Food increased by 6.5%, with the price of grocery foods rising 7.1%. If we exclude food, household energy, and vehicle fuels inflation rose by a lower 6.1%.

“These are costs that can’t be avoided and so will eat into the budgets of those with the least ability to pay.”

Some voices have called for spending cuts to reduce domestic inflation. Non-tradeable inflation, which some call domestic inflation, rose by 6.3% annually. if you exclude the cost of new building of that falls to 4.3%. This falls to 4.1% if all housing costs are removed. Tradeable inflation, which some call international inflation, rose 8.7%.

“Inflation is still largely being driven from overseas, not being driven by domestic factors here,” said Renney.