Tuesday, July 16, 2013

Dismal economics

New statistics on the economy show that ordinary New Zealanders, particularly those who are struggling, are becoming worse off. Naturally, that’s not the spin we’re getting.

Today Statistics New Zealand reported that in the three months ending June 30, the consumer price index rose at .2%, largely because higher prices for electricity and newly built houses (that segment of the economy saw prices rise 1.1%). Also, the costs of manufactured goods was up 1%, mostly due to increases in insurance prices.

The main factor preventing even higher rises was a decrease in in what they call “the transport group” (down 1.2%). That includes the costs of petrol and cars. Since June 30, prices for petrol have skyrocketed, hitting new record highs (today, petrol is selling for about $2.27 per litre, which is around US$6.72 per US gallon). This price rise means that the cost of living is up significantly from the end of last quarter.

Those are the basic facts: The cost of living is up, but the increase was smaller than expected. That’s not what the newsmedia are reporting.

The New Zealand Herald headlined their story “Inflation drops to lowest since 1999”, a line taken by other media outlets. Their story begins,
“New Zealand inflation fell to just below expectations in the second quarter, as cheap imported petrol helped counter rising housing related prices, pushing the annual rate to a 14-year low.”
That lede makes it sound as if things are better for ordinary New Zealanders when, in fact, prices are still going up, just not as quickly. There’s nothing new in this, of course, and it’s the spin that the National/Act government will also put on the figures. But it’s basically telling people, “pay no attention to how things are now, they used to be worse!” Yeah, well, weasel words do nothing to actually help people who are struggling.

Last week, Statistics New Zealand reported that food prices were up 2.1% in June, compared with 1.4% in each of the previous Junes. Fruit and vegetables were up a staggering 13%, compared with a 9% increase last year. So far, the “Food Price Index” is up .6% for the year.

Unemployment remains stubbornly high. The unemployment rate in the March quarter (the most recent available) was 6.2%. While that was down from the previous quarter, it’s still high. All of which means that unemployed people are competing for the few jobs there are while also paying higher prices.

This matters particularly because this week the National/Act government’s latest round of welfare rule changes took effect. I’m convinced that they’ll make things worse for struggling New Zealand families, and will contribute to the growing gap between rich and poor. In fact, their “reforms” to date have already affected such families negatively, as even the NZ Herald has highlighted.

There’s more bad news for poorer New Zealanders: New rules from the Reserve Bank will cut the number of low-deposit home loans available. This will dramatically affect first-time homebuyers who face rapidly rising house prices and also struggle to reach the 20% deposit. Some 70% of first time homebuyers buy their home with less than a 20% deposit, according to Bankers' Association chief executive Kirk Hope.

All of these threats to struggling families is without even getting into law changes the National/Act government has pushed through that, especially when combined with forcing beneficiaries into seeking jobs, will have the combined effect of driving down wages for average New Zealanders. Apparently National’s Bill English was serious about turning New Zealand into a low-wage economy.

Economics is often called “the dismal science”, and economic statistics like these show part of the reason why that is. But numbers only tell part of the story for struggling New Zealand families. The National Party promised New Zealand “a brighter future” but have failed to deliver for mainstream New Zealanders.

We need to restore the future, making it truly bright, not dismal, and the only way to do that is to vote to change the government. The problem is, we have more than a year to go before we get that chance.

In the meantime, we need to hold the line at the local government level. Here in Auckland, for example, the National Party’s supporters are planning to exploit the expected record low voter turnout in our local elections later this year to take control of Auckland Council and local boards, thereby stopping any progress in the city. The local elections will be our first opportunity to stand up to the National/Act government, to turn our backs on their policies based on wealth and privilege, and to start to restore ordinary people to the centre of government’s focus.

We have the power to change the equation, to put ordinary people first. Will we rise to the challenge?


rogerogreen said...

So it's the dismal 'dismal science' - first thing I thought of when I saw the title.

Arthur (AmeriNZ) said...

I thought about going into the history of the phrase, but decided against it. I've come to realise that sometimes just because I think something is interesting isn't necessarily a good reason to put in a post.