A nice table

October 18th, 2010 at 12:54 pm by David Farrar

The day after Phil Goff announces he is campaigning on the cost of living, Stats NZ announces the lowest annual rate since March 2004.

Bill English has done this handy table comparing the last two years, to the previous two years. needs to do more stuff like this:

Price and wage changes over comparable periods

National
Sep 2006 to Sep 2008 Sep 2008 to Sep 2010
Overall inflation (Consumers Price Index) 7% 3%
Overall (Food Price Index) 15% 5%
Food prices
Bread and cereals 18% 4%
Milk 23% 7%
Cheese 50% -3%
Eggs 19% -6%
Vegetables 21% -6%
Fruit 8% 7%
Beef 18% -1%
Poultry 44% -2%
Non-food prices
Petrol 22% -14%
Electricity 13% 8%
Gas 22% 5%
Housing rents 6% 3%
Wages Dec 2006 to Sep 2008

(7 quarters)

Sep 2008 to Jun 2010

(7 quarters)

Nominal pre-tax wages 7% 7%
Real pre-tax wages 0% 5%
Real after-tax wages -1% 9%

Incredible that food prices went up 15% over the last two years of Labour’s term. Now this is not their fault, but it shows how meaningless their no GST policy on fruit and veges is – the price movements from season to season are far greater than the GST. For example vegetables went up 21% in Labour’s last two years and have dropped 6% since Sep 2008.

And most damning, a NZer on the average wage had a 1% drop in their real after tax wages from Dec 2006 to Sep 2008, while under the most recent seven quarters that worker would be 9% better off. And that is before the 1 October tax changes which will make then even better than 9%.

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38 Responses to “A nice table”

  1. bhudson (4,740 comments) says:

    DPF,

    Now that makes great reading! (Until you remember the pain from 06 – 08 and realise the pain is still there in most cases – this govt is doing an admirable job in preventing it getting worse, but Labour set us on a road to ruin that will take much longer to fully repair yet.)

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  2. bchapman (649 comments) says:

    So inflation is not a problem, despite record low interest rates. Shows we have a demand problem (ie people are insecure in their jobs). Why do you so obsess about our government deficit then?

    [DPF: Because every dollar of extra debt is an extra 8c or so of annual interest payments which is 8c less for spending on schools and hospitals]

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  3. Murray (8,847 comments) says:

    As Tim curry said “Bad timing”.

    If Labour was that worried about furit and veg prices why did they sit there and let them go up by nearly 50% in their term?

    Apparently they only want to do things like this when they’re in opposition and need our votes.

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  4. burt (8,312 comments) says:

    Oh the pain of fiscal drag…. lefties just don’t understand that when wages are being effected by inflation and tax thresholds stay static that people are going backward…. but hey there are few people who accuse lefties of being bright.

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  5. bhudson (4,740 comments) says:

    bchapman,

    Reworded for clairty: “Why do you obsess about spending more than you are earning?”
    Now that is an interesting take on economics. Do you also think that the answer to a lack of money is simply to print more?

    A very positive effect of the recession has been to refocus people on saving (or paying off debt to be more accurate.) That is a good outcome for them and for the country. To claim it is people being insecure in their jobs is just a spiteful reaction to good news (which is, of course, only allowed under a progressive, enlightened govt.)

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  6. Jimbob (641 comments) says:

    Bernanke is desperately trying to create inflation in the US, he is losing the battle. The only method he has left is what people call “quantitative easing”, buying US treasuries. He has done it once and failed, he is back again. Yes it will fail again. People do not want to borrow any more money, the debt mountain is as big as it is going to get, so more debt will not solve the problem. It has taken seventy odd years to get to this stage, so it probably will not be solved in a couple of years by cutting interest rates to zero and supplying loads of worthless credit no one wants. So deflatiopn must be a strong probability, hence it is coming to a country near you. Good luck Bill, nice tables, I am sorry will not solve the problems coming your way.

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  7. PaulL (6,044 comments) says:

    I wonder why the 7 quarters for wages, 8 quarters for everything else. Experience with politicians tells me that change in baseline is hiding something, although I suppose it could be simply that 8 quarters of data weren’t available yet under National.

    [DPF: Yes – they say that in the PR linked to]

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  8. YesWeDid (1,050 comments) says:

    The table ‘misses’ off growth and unemployment figures.

    Kind of easy to have low inflation when the economy is in the toilet.

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  9. Pete George (23,682 comments) says:

    Was petrol really over $2 a litre two years ago?

    The improved saving/debt repayment is interesting, it is being blamed for a sluggish recovery, but it must be best for the country in anything other than the short term, and best for most individuals too (but tough if you are having trouble getting employment or are a struggling retail business).

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  10. markachu (1 comment) says:

    My issue with these figures is that during the periods the data is based on, we went from 3 to 2 supermarket chains and have seen a strong duopoly develop within our market. So, of course the prices went up during this period and policy may have been a factor in part of the numbers – but it’s hard to put these down to anything more than the unfortunate market situation that has developed in our country. It’s only going to get worse until we get a 3rd player back in the market. It’s very similar to the Telecom/Voda duopoly that existed and no one will disagree that Kiwi’s have been unfairly “nickled and dimed” by those players over the years.

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  11. PaulL (6,044 comments) says:

    Pete, there is an optimum saving/debt ratio, it isn’t necessarily true that higher savings is better. The Chinese have too high a savings rate – for a rapidly growing economy with massive capital demands, it makes no sense that much of their money is invested in loans to the US government. The Chinese economy needs capital much more than the US economy needs consumption. It is a politically driven allocation.

    Similarly for NZ – I suspect we could do with a bit more savings (something closer to Australian rates), but not too high -> that would imply we weren’t investing enough in productivity improvement.

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  12. lofty (1,317 comments) says:

    I will be interested to see if the MSM publish this.

    I fear that it will make it too easy for the general populace to see that the Nats are actually not the bogey men of NZ politics, and that there is a plan in place to improve the lot of the “average” NZ’r.

    What say you Mr Armstrong?

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  13. mavxp (492 comments) says:

    As Pete above says, people are saving and not borrowing (like they used to) in the current economic climate.

    So there is less demand and retailers are forced to lower their prices to attract sales. No surprises really. Housing prices are also factored into inflation figures (so I’m told), and hence the rise in price in the lead up to the recession and deflation post recession affect these numbers. So too does the demand for oil which affects the price of everything.

    You can’t attribute any of these figures to the political parties in power. Sure Labour could have legislated to reduce the bubble in the housing and debt markets which would have reduced the fall when the global crunch came. But other than that I dont think there is anything here really.

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  14. Mark (1,489 comments) says:

    It is a largely meaningless table but an amusing political swipe

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  15. bhudson (4,740 comments) says:

    Pete,

    Yes, petrol had got up to $2 two years ago. Fortunately it was also very high elsewhere in the world (particularly in the US) and as a result demand dropped quite dramatically. That led to a very rapid reduction in price to stimulate demand. Which worked and is (partly) the reason we are back up there today.

    Unfortunately this time around we are back up there on our own (or at least other larger nations don’t have it as bad as us) and we are a little too small to create a massive reduction in price on our own. The extra tax hasn’t helped matters, but even if you take that 7c off, the price is still very high.

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  16. PaulL (6,044 comments) says:

    maxvp: the inflation side is partly driven by govt – the govt was overspending and overstimulating the economy, both the Reserve Bank and Treasury advised the Labour govt multiple times that would drive up inflation, and increased interest rates so as to offset that. In short, growth in govt directly led to high interest rates and shrinkage in non-govt.

    On the income side, the Labour govt increased taxes – through bracket creep and explicit introduction of new taxes.

    It is definitely true that some of this is just down to timing – the National govt haven’t changed that much in the 2 years they’ve been in power. But those things they have changed have been in the direction this table suggests. And Labour were never shy of claiming credit for economic strength during the boom, no reason National wouldn’t do the same now.

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  17. bchapman (649 comments) says:

    People are scared of losing their jobs and are not spending. That is sending more retailers and service firms broke and a vicious deflationary cycle ( a la Japan c1998) is ensuring. Government revenues are falling. How is that good for anybody?

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  18. PaulL (6,044 comments) says:

    bchapman: if the previous economy was sustainable, then the logical answer is to pump prime to get confidence back, and get back on a growth trajectory. But if the previous economy was a bubble economy that was never sustainable, there is no level of pump priming that will return us to that path. That is the problem the Japanese had – no level of pump priming would drive the Tokyo property market back to where it had been before. Their underlying problem was an economy that was geared (politically and economically) to the construction sector, and they didn’t need that construction any more once they’d built all the roads, bridges and trains they wanted.

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  19. bhudson (4,740 comments) says:

    bchapman,

    “That is sending more retailers and service firms broke…”

    It would seem the good news is here (courtesy of our good Left mates at Stuff):

    http://www.stuff.co.nz/business/industries/4244254/Services-sector-expands

    We are “returning to growth” they say… I’m sure the current govt will accept your thanks for their fine management performance with our economy through these tough times

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  20. Murray (8,847 comments) says:

    Socialists, people who use perception to argue that the facts are wrong and their theory is right while flying in the face of all evidence.

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  21. BeaB (2,144 comments) says:

    What a shocker! And now they are back on their tax and spend, big government trip. Take our money from us and spend it the way they want to.

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  22. dime (10,100 comments) says:

    Hard to blame Labour for food. The recession killed a lot of the demand from overseas which saved us.

    Expect food to start going up again next year.

    A 9% wage increase isnt bad though! If we can just keep the left out of govt until 2090 we should be fine.

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  23. bchapman (649 comments) says:

    PaulL- Don’t fundamentally disagree about the bubble economy of the noughties- it was geared to property investment and borrowing- but I’m not sure what that had to do with govt spending though. As you may recall Brash and Key wanted tax cuts Cullen wanted to squirrel the money away for a rainy day arguing that tax cuts would make inflation worse (with higher interest rates which would damage the tradable sector).
    Like you I don’t see why we should merely lash out and build hard infrastructure for the sake of it (we have plenty of roads already), but there are plenty of areas that need investment like higher educaion and R and D which will help productivity in the long term. Spend some now- save a lot more in the long run. Especially as deflation rather than inflation is the problem at the moment.

    bhudson- hope you are right, time will tell. If it turns out the amount and type of govt spending at present is effective, I will be first to congratulate English- results up now however have not been encouraging.

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  24. PaulL (6,044 comments) says:

    bchapman: spending on govt services nearly doubled during Labour’s term. Remove inflation you still have around 50% increase – are we getting 50% more services? Growth in the govt sector crowds out growth in the private, particularly growth at this level and when it provides little in the way of value. This crowding out overheats the economy, the Reserve Bank increase interest rates. The govt doesn’t pay interest, so that doesn’t impact them – just the private sector and the householder.

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  25. Bevan (3,924 comments) says:

    Hard to blame Labour for food.

    True, but considering Labour/Goff are now saying that food prices are too high and something must be done about it – a valid question is: Why didn’t you do something about it when you were in power? Especially considering the largest increases occurred during Labour’s three terms in office!

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  26. dime (10,100 comments) says:

    Can anyone but me see a time where the govt says to farmers – you must sell x amount of produce locally and x amount of dollars?

    We may produce a shit load of food, but its gonna keep going up n up.

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  27. gravedodger (1,569 comments) says:

    Cullen squirreling away over taxation be buggered, he spent every last cent he could by the time we kicked his sorry arse out of the behive and all we got for his economic miracle was an inflated public service hoovering up money and producing nothing and just in case he hadn’t made it bad enough for the incoming administration at the 11th hour he paid 3 time the value of Tolls clapped out train set to its Australian owners.
    I look forward to those figures being put through the mincer at Red Alert and the Standard.

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  28. GJ (329 comments) says:

    Poor old Labour, what are they going to campaign on now?
    The chart certainly takes a lot of the wind out of the sails they were trying to hoist!

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  29. voice of reason (490 comments) says:

    Petrol – less 14% ? Bullshit
    – End Sept 2008 91 petrol was 1.96
    – Dropped thru Nov & Dec to reach lowest of 1.33 since then it trended up
    – End Sept 2010 91 petrol was 1.82

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  30. Inky_the_Red (761 comments) says:

    Comparing 7 quarters is not always useful. There could be seasonal pattern especially in food (or even the timing power prices)

    In saying that it shows (as expected) correlation between inflation and lower economy growth and/or higher unemployment. I am not sure why English thinks lower economic growth is a good thing. I’m sure he thinks higher unemployment is good so salary and wage earners don’t ask for pay increases.

    Wage increases are no good for those without a job

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  31. Thrash Cardiom (298 comments) says:

    I wonder why Bill didn’t include lamb in his list. I reckon its risen somewhere between 30% and 50% in the last couple of years.

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  32. Inky_the_Red (761 comments) says:

    A question on the real wages after tax.

    Does it include the October tax cut? Has it then factoring the GST increase and other inflation for the December quarter?

    [DPF: No. That will be included in the next quarter]

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  33. bhudson (4,740 comments) says:

    Inky,

    bill.english@national.org.nz

    Let us all know what you find out

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  34. Steve (4,587 comments) says:

    “For example vegetables went up 21% in Labour’s last two years and have dropped 6% since Sep 2008″

    Right, that’s why I refused to pay $4.98 for a cauliflower at the supermarket last Sat. Went to the local market instead. Foodtown can shove it

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  35. Mark (1,489 comments) says:

    “voice of reason (155) Says:

    October 18th, 2010 at 4:39 pm
    Petrol – less 14% ? Bullshit
    – End Sept 2008 91 petrol was 1.96
    – Dropped thru Nov & Dec to reach lowest of 1.33 since then it trended up
    – End Sept 2010 91 petrol was 1.82″

    What do you expect it is Bill English doing the maths and we all understand that Bill’s maths is a little elastic

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  36. V (749 comments) says:

    I dislike these kind of specious political points scoring pseudo-economic comparisons.
    The reason inflation is more subdued now is because in the 06-08 period was a period of rampant credit expansion, whereas in the 08-now period credit growth has slowed massively due to the global financial crisis.

    In short additional credit dollars compete with existing money and thus you get inflation as all that money chases goods and services. Slow the credit growth and you get less inflation. When companies default and fail to repay loans, that ‘money’ simply disappears.
    Very little to do with Labour v National – you are comparing two different credit environments.

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  37. Keith Ng (22 comments) says:

    1) Inflation is lower because we’re in a recession. The fiscal impulse is higher than it was any time in the past decade, because of the tax cuts. This voids any claim the government has to the low inflation.

    2) Pre-tax real household income has fallen (see my post). It’s ludicrous to claim that we did better in a recession than in a boom. English used the average wage earner figure from the QES, which went up during a recession because heaps of low-income workers got fired.

    3) Of the tax difference captured in English’s table, 70% came from Labour’s 2008 tax cut, and 30% came from National’s 2009 tax cut. If you like, I can show you the workings.

    This is some outrageous bullshit.

    http://publicaddress.net/6912

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