Inflation goes up 2.5% despite Government’s amputation of public spending and OCR cuts
Previous inflation drops and OCR cuts have been held up by this Government as proof that their austerity program is working.
Well, inflation went up 2.5% despite Government’s amputation of public spending and OCR cuts because much of the inflation rise under Labour was driven by Covid shutting down global supply chains!
Inflation data confirms real terms minimum wage cut – NZCTU
The NZCTU Te Kauae Kaimahi is concerned for low-income workers given new data released by Stats NZ that shows inflation was 2.5% for the year to March 2025, rising from 2.2% in December last year.
“The prices of things that people can’t avoid are rising – meaning inflation is rising faster for those on low incomes,” said NZCTU Economist Craig Renney.
“Inflation was driven by increases in rents (up 3.7%), rates (up 12%), household energy (up 7.2%) and insurances (up 8%). Grocery prices were also higher, rising 4.3%.
“Earlier this year, the minimum wage rose by 1.5% – a full 1% less than actual inflation. This is the second year the Government has increased the minimum wage by less than inflation, which means that a full-time minimum wage worker is now cumulatively $2,438 worse off in real terms. Minimum wage workers are missing out on $28.36 a week because of the Government’s decisions.
“The Government is considering removing the Living Wage guarantee for government contractors who are caterers, cleaners, and security guards. This data shows why that protection is so important – working people can’t rely on this Government to protect them through the Minimum Wage.
“With 46% of workers receiving a pay rise less than inflation last year, it also shows that many working people are still doing it tough. Unemployment is still rising, with tens of thousands of more people on Jobseekers Support. It is clearly not workers who are benefitting from the very little economic growth is being delivered.
“This data is another piece of evidence about who is winning and losing in the economy. The poorest working people are facing higher costs they can’t avoid – but with less money to pay.
“Workers need a change in direction and a government that will actively address low pay, unemployment, and poverty – it’s time for a different approach,” said Renney.
…Bernard Hickey is brutal in his assessment of the economy…
The economic recovery is stalling
The economy is not doing what it was supposed to when PM Christopher Luxon said in January it was ‘going for growth.’
That’s clear in the BusinessNZ BNZ PSI survey results1 for March published yesterday, which showed a second month of contraction in the services sector, the biggest part of the economy. The companion PMI survey of manufacturers in March was published on Friday and showed only a tepid expansion, at a slower rate than the previous month.
There was also a surprise 0.8% fall2 in retail sales via electronic cards in March. (See charts of the day below.)
REINZ reported this morning that house sales fell a seasonally adjusted 0.3% to 7,640 in March from February nationwide, while sales volumes in Auckland fell a seasonally-adjusted 12.7% to 2.362. Seasonally adjusted prices fell 0.3% in March from February, Infometrics estimated, with prices were lower than a year ago for the eighth consecutive month.
…and scathing of the Government’s response…
A pro-cyclical fiscal tightening
Meanwhile, the Government is pushing on with its ever-tighter fiscal policy in the face of recessionary headwinds globally and locally, effectively enacting a pro-cyclical (ie worsening a recession) policy in conflict with the Reserve Bank, which has been conservative in its initial decision under a makeshift Governor.
RNZ reported from leaked documents yesterday the Government was considering shutting a $118 million per year education training programme that is well liked by schools and was set up with great fanfare in 2014 by the previous Government. Finance Minister Nicola Willis signalled last week the Government would double down on spending cuts to achieve a budget surplus by 2027/28.
That was in the face of Treasury has advice that Trump’s tariffs will slow global GDP growth and increase inflation, making it harder to achieve that surplus and therefore forcing even bigger cuts within Willis’ $2.4 billion per year operating allowances, most of which have already been spent in the 2025/26 year.
…the level of Public Service cuts looming in the next Budget were enough for Reserve Bank Governor Adrian Orr and a swathe of public servants to resign, but the enormity of what Free Market NZ Initiative acolyte Nicola Willis wants to do hasn’t been leaked to the public yet.
The truth is the Economy is stalling just as National amputate public spending and Treasury is warning the Government…
Revealed: Tight Budgets force ‘reductions to public services’ – Treasury
Treasury officials have warned the Government that “significant reforms” or “reductions to public services” will be needed in the not-too-distant future if it sticks to its current, restricted spending track.
The Herald can reveal that even with this relatively tight spending, the Government will not post a surplus under the traditional Obegal measure until 2031, which will mark the longest period of Government deficits since the 1979-1994 deficits (which were measured quite differently).
Treasury officials also warned that the Government had planned so much capital investment – spending on items like schools, hospitals and roads – that it might have to cut spending earmarked for public services so it can fund the significant ongoing maintenance of those investments.
…and the IMF are begging us to tax more…
Tax reforms needed to bolster economic growth – IMF report
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- International Monetary Fund report urges action on finances, growth, housing
- Annual report expects NZ economy to grow 1.4 percent this year, 2.7 percent in 2026
- Structural reforms needed to tackle deficits, urges tax reforms
- Time to start serious talk on long term superannuation costs
…the impact of what National need to cut to afford their tax cuts and landlord loopholes isn’t clear to the public yet.
Once it is, all hell will break loose.
The Daily Blog warned you last month and as early as February that there was the possibility of a snap election because of the size of the Government’s cuts.
That reality is finally trickling out to the mainstream media…
Why Peters has stepped up his undermining of Luxon
Greens tighten candidate selection process and preparing for snap election
‘We are ready to go’: Labour talks up potential for snap election
…folks, you can read it here first, or wait for the mainstream media to read it here first and then report on it a month later.
As The Daily Blog argued LAST MONTH, the deep budget cuts in Nicola Willis’ next Budget are so extreme they are panicking NZ First.
There are back channels occurring between NZF and Labour as a faction inside Labour start to panic that the extreme nature of the Māori Party would make including them in any future Government dangerous and a vote killer for Labour.
The triggers for a snap election are all around the budget and the transition of Deputy between Winston and Seymour.
Increasingly having independent opinion in a mainstream media environment which mostly echo one another has become more important than ever, so if you value having an independent voice – please donate here.
If TPM become part of any govt then that is the very last barrier removed to our becoming a new Fiji (3rd world with gated resorts full of rich tourists) minus the weather.
Asked an auckland bakery owner, how’s business? Her answer, not good no one’s got any money.
Well, it depends where you are, And who you are. A few weeks ago happened to be in a bar/bistro in a swanky part of the city, Thurs early evening, all the seating gone, packed to the brim. Sure, by 8pm had emptied out but it sure surprised me (since I rarely go to bar/bistros).
The bakery near us has a line of customers waiting most days between 9.30 and 10.30 and the nearby sushi shop had 16 customers waiting at 12 . The supermarket is full of ready made meals costing 3 or 4 times it wold cost to make .Te problem these days most people waste money then complain they have none. I know some are doing it tough but that will never change.
“most people” is a massive generalisation!
The richest countries have the highest government spending. Burkina Faso here we come.
Labour say that they are ready should a snap election be called. They will struggle without any policy.
There seems to be a number of right wingers who laud Singapores performance while being seemingly oblivious to their percentage of government debt to GDP. Or maybe it doesn’t suit their bs argument. This notion that if the government doesn’t borrow our future is somehow cheaper is just delusional. You’ll pay more for the foreign owned infrastructure because it is tied to investment funds demanding higher returns. Sorry I am being slightly disingenuous as this current government will borrow. Just for their mates/donors, however. not to actually build infrastructure .
Don’t knock it – it’s a good country to be rich in!
While I like the idea of a snap election, I suspect that far too many of those who can be bothered voting will not give a flying fuck about how those less fortunate may or may not survive.
National…great money managers…yeah right!
Nationals landlord tax breaks have resulted in the latest 3.7 % rent increase. How’s that trickle down theory working Luxoff, you know, when you said renters would be better off?
Of course, the cost of goods and services are creeping up. Year by year. Especially services. Utilities, tradesman. The CPI needs a a revamp. If so inflation would be considerably higher I think. Truth is the spending power of the average household is continually being eroded, although that doesn’t stop the muppets from buying more and more discounted stuff from retailers.
Ruth Richardson did this before.
It made rich people richer and poor people poorer. This is the only sense in which it grew the economy.
Yesterday I read a speech by Bernie Sanders in which he clearly outline how the U.S. Republicans successfully persuade people to vote against their own interests.
A political party tells voters the truth ‘Our policies will make billionaires richer, we will reduce social services that make your lives more comfortable, we will make you work harder for less reward.’
Would the majority of voters support such a party? Of course not.
So the tactic is to divide people with propaganda.
” Black people are being favoured over white people’.
‘Migrants are taking your job away from you.’
‘ People on benefits are draining money out of the economy.’
‘ Criminals are not punished’.
‘ We are surrounded by hostile nations.’
‘ Freedom of speech is poisoning the minds of our children.’
The end result is that voters support political parties with the best rhetoric – not those that will best serve the public as a whole.
Of course this is the United States. This could never happen here!
RESTORE SOCIALIST AOTEAROA! DEATH TO CAPITALISM!
Inflation is caused by one market participant trying to use their market power to take a larger share of the national or global wealth that is collectively produced across the whole market. Conservatives always assume that this is due to workers demanding higher wages, leading to higher prices, leading to more demands for higher wages – a wage-price spiral. It can be this, but not invariably so. So, their response to inflation is to increase unemployment by cutting government services so there is downward pressure on wages as public servants move to the private sector. Their assumption is always that cutting government spending will solve inflation – from which arises the myth that ‘excessive’ government spending is always the cause of inflation. This is where we are stuck with Nicola Willis – she will keep cutting and cutting the government and shrinking the economy in a confused bid to lower inflation and stimulate growth.
Inflation is not always originated by a wage-price spiral, sometimes it is other powerful market players – such as OPEC oil price rises in the 1970s. A wage-price spiral then followed in the wake of these oil price rises – and this is the only bit that seems to get remembered. The inflation we have seen in the last few years has come from various sources – duopolist supermarkets deciding to increase the return to their shareholders, landlords using a housing shortage to increase rents and grow their housing portfolios, global producers and shipping companies using the labour-supply squeeze during a pandemic to exploit the frustrated demand for goods through higher prices (a standard business practice called ‘demand-based pricing’). This inflation has nothing to do with government spending – in short Labour didn’t cause inflation and National hasn’t solved it. The Covid supply-chain issue has washed out of its own accord, but some other causes remain and are keeping inflation sticky.
The bakery near us has a line of customers waiting most days between 9.30 and 10.30 and the nearby sushi shop had 16 customers waiting at 12 . The supermarket is full of ready made meals costing 3 or 4 times it wold cost to make .Te problem these days most people waste money then complain they have none. I know some are doing it tough but that will never change.
Willis is borrowing $25 million per week and spending more than Grant Robertson ever did ,the current inflation is home grown unlike in 2022 /2023 when it was imported .Unemployment is growing along with underemployment .Businesses are closing at record rates and are not paying the tax they owe .Like the USA she is trying to take over the reserve bank so she can release all the cash thats in reserve and have zero interest rates because she knows she is in deep shit .
everyone knows the socialists run govt. better. capitalists should stay in their lane and stay away from our taxes.
This is the result of the quest for endless growth .How is growth measured ?is it in dollar terms or number of things produced .?It seems to be mainly dollar terms so we are continually live the lie that we have been growing when in fact it is merley that inflation has been rising so people think that we have growth.Take the house ponzi ,my house was built in 1953 for maybe a couple of grand ,and now might sell for 400k which is seen as growth in the house market .That is false growth as it is just inflation and no extra houses have been created for that money over that time which would have been real physical growth not just paper growth .
How very tory of this pitiful excuse of a “government”… Everyone on a benefit in NZ got around $2.50-3.00 “payrise”, whic was chosen as it was a lower number than wage rises, which was just over 3%..
Now we see inflation back on the rise, as it was when the “government” chose to tack the insult to every NZer who isn’t independantly wealthy, to the rate on the day they announced the rises..
Do we now have any excuses beyond bloody minded stupidity not to know beyond any doubt, that we have, in our arrogance, ignorance, and unearned hubris, installed the enemies of our society into a position to finish off any real and meaningful development of what is in truth, the youngest human society on the planet???
We are being presented with a unique opportunity to build on this reality, and become a beacon of humanity to the world… Indeed, the first Labour govt started the process, and then we turned back to the fascists, and celebrated as they set about sabotaging our futures….
And we are still to immature to admit our stupidity… Oh well, let the name calling and slurs recommence…