Inflation jumps, cost of living is up but what does this all mean for whanau?
With all that is going on around the health response to COVID19 and push to get vaccinated we need to keep our eye on what is also happening in the economy. One of the biggest markers around economic health and wellbeing is inflation. First of all many whanau would not necessarily know what inflation is and why its so important to understand. Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.
In simple terms – prices are on the up and so too is the cost of how we live our lives. Today the annual inflation rate in Aotearoa has leaped up 4.9% and according to the data that’s the highest it’s been in a decade. Price rises themselves went up by 2.2% when compared to the previous June quarter which also means that the largest quarterly jump since 1987.
Some of the problems that are causing inflation to rise are obvious such as the challenges with our supply chain, freight, and logistics. Essentially, we are importing less of what we used to, and exporting has become a challenge. It takes longer for goods and services to be delivered to the domestic market from overseas and this in turn puts upwards pressure on the cost of goods. But we have a larger problem and that is the rise in the cost of housing.
The housing market in Aotearoa is not just heating up its out of control with no real indicator that prices will flatten or taper down. No amount of Government policy making to date or market forces have seen a shift on the cost of housing. As a country we are also nearing what is called full employment – with less reliance because of border restrictions on overseas or migrant labour, New Zealand is nearing what is known as full capacity – that’s not because every New Zealander who is of age work readiness is working but because those that are mostly available to work are already working in one form or another.
Full employment is an economic situation in which all available labor resources are being used in the most efficient way possible. ... In practical terms, economists can define various levels of full employment that are associated with low but non-zero rates of unemployment.
Inflation is worth keeping an eye on for no other reason than it impacts all of us – increased cost of living sees more pressure on whanau who are already doing it tough. Especially those in Auckland.
One of the ways we can start knocking inflation back under control is through a plan into 2022 of boosting our production and economic activity – but that will also rely on the world, more generally, being able to sort out the massive backlog in the global supply chain; with cargo shops backing up around the world, sea and air freight delays – even domestic delivery times more than triple pre pandemic levels it’s a challenge we all face and Aotearoa is one of many countries needing to push back against the story.
Matthew Tukaki is Chair of the National Maori Authority