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In itself, the pandemic did not cause inflation, but the corresponding supply chain problems certainly contributed. Remember the Ever Given, the ship that got stuck in the Suez Canal for 6 days, wedged across the waterway like a giant log one year ago? This is generally seen as the start of supply chain issues, although factory closures due to lockdowns had been causing problems for some time. Yes, supply chain issues contribute to inflation, but these problems have mostly begun to resolve themselves as the world opens up again to business as usual.
So it is interesting to see Grant Robertson try to blame supply issues for inflation when these problems have mostly been resolved. Inflation really began to hit New Zealand in late 2021 when most supply chains were flowing again. Now, as we expect further price hikes, he is blaming the war in Ukraine, which is expected to fuel wheat price hikes and problems with the supply of oil.
This government is never responsible for anything, is it? No, we are just a dot on the ocean, swirling around at the mercy of whatever tide takes us. Or so the government tries to imply.
The truth is not quite so simple, however. New Zealand only takes small amounts of Russian oil and not much Russian or Ukrainian wheat. Anyway, the full effects of the war in Ukraine are yet to be felt. While other wheat and oil suppliers will no doubt try to fill the gaps created by the embargo on Russian trade, we are not there yet. There is as much flour on the supermarket shelves as there ever was.
Yet Robertson admits that households are already facing significant weekly cost increases due to inflation and can expect a further rise of 2.5% due to the war in Ukraine. Inflation is already at a 30 year high of 6%. Are we really heading towards 8% or higher? If so, we could be facing social unrest, as families on low incomes will simply not be able to afford to eat.
Jacinda tried very hard to play the matter down, refusing to call inflation a ‘crisis’, until the polls told her otherwise. Her lack of understanding of economic matters is breathtaking, but everything is pointing the wrong way. We have the second highest rate of inflation in the developed world. Interest rates are increasing which is particularly hard on first-time buyers who have had to borrow eyewatering amounts of money just to secure an average house.
For those less fortunate, rents are also out of control, as demand for housing severely outstrips supply. The cost of that roof over your head, particularly for younger people or those on low incomes, soaks up the majority of their earnings. Now add food price hikes, fuel cost increases, and you have the ‘wicked perfect storm’ for social unrest.
If people cannot afford to eat, they will storm the Bastille, proverbially speaking.
Locally, in a town where housing costs are among the cheapest in the country, we are seeing elderly people using foodbanks for the first time ever. Most older people would never want to do that but living on a meagre pension is not all that it is cracked up to be. And too few pensioners have anything else to fall back on. What is the alternative? Starvation?
Jacinda has tried to say that wages are outstripping inflation, but once again, she just demonstrates what an economic dolt she is. Wages are on the rise, sure, but in general, they are way behind the cost of living increases. Take the rise in the minimum wage for example. Yes, the increase is about 6%, but it comes when people are already paying more for fuel and food. Now, with inflation expected to go to 8% or higher, they will be even further behind.
This is Jacinda’s ‘let them eat cake’ moment, and she should be much more aware of the realities of life for many Kiwis than she obviously is. After all, is Labour not supposed to be the party of the working man?
“It won’t escape anybody in this room that 2022 is, and is going to be, a challenging and difficult year for the New Zealand economy but actually also for the global economy,” Robertson said.
“We went into 2022 knowing that inflation would be an issue because global supply chains have been clogged up for some considerable length of time. That was beginning to turn a corner.”
With a hint of sarcasm, Robertson added: “And then because we didn’t think we’d had enough drama – a pandemic, a terrorist attack, a volcanic eruption – we thought we’d throw a war in as well just to make sure that we were kept on our toes.”
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So now we have Brenton Tarrant, White Island, the Ever Given, the pandemic and Vladimir Putin to blame… and let us not forget the previous government, that is still being blamed for anything that goes wrong over 4 years on. In fact, this government has an excellent track record of blaming anyone except themselves.
Trouble is, I do not see how Robertson can fail to take responsibility for the fact that an Otago woman ordered groceries online from Australia and saved 35% compared to the same cost locally. Neither Brenton Tarrant nor John Key can possibly be to blame for that.
Inflation is a worldwide issue. We got through the GFC by not printing money, even though Russel Norman, an aspiring minister of finance at the time, thought it was a good idea. Since then, we have paid for the pandemic and lots of other not-so-nice-to-haves with printed money. The Reserve Bank governor should never have agreed to it, but happily got the printing press out. Quantitative easing always, always results in inflation. It floods the economy with more money, makes assets more attainable, lets the government spend like there is no tomorrow… and here we are. Not all countries were quite so slap-happy with the printing press, but it is too late now.
We will shortly be in for some significant rates rises, as councils try to justify their overspending by claiming more funds are needed for large projects. The government will increase benefits, but those on welfare will struggle even more than before. But it is the middle income earners who will, as usual, be most affected. They cannot go to MSD and ask for food parcels. All human dignity is being stripped away by this government, forcing people into begging for luxuries such as food.
And in the meantime, Ardern works on rewriting our history, develops her co-governance model and welcomes refugees from Manus Island. Inflation? Nah. That’s someone else’s fault.
