National on inflation: Don't blame overseas, the answers are at home

Thursday, 21 April 2022

ANZ chief economist Sharon Zollner says efforts to curb inflation will be painful for some Kiwis but are necessary (interviewed on April 19)

Deputy leader of the National Party and Opposition finance spokesperson Nicola Willis offers her party’s plan for action.

OPINION: The Finance Minister should stop pretending that inflation is a mysterious visitor from overseas, that he has no control over, and instead present a clear plan to help fight it.

Today’s official data proves what most of us already know – prices are rising faster than they have in a generation.

Groceries, rent, petrol, it’s all getting more expensive. Inflation has a grip on our economy and it's threatening the living standards of every New Zealander.

If you feel like you’re slipping further behind at the end of each pay cycle that’s because you probably are, with economists predicting typical household costs will rise $150 a week this year, while wages lag behind.

* Annual inflation blows out to a 31-year high of 6.9%

National deputy leader and finance spokesperson Nicola Willis says the causes of and solutions to inflation lie at home.

* Inflation has not peaked yet, Finance Minister says

Many are now struggling to get ahead, with a squeezed middle of households battling higher costs without any Government help.

How do we get prices back under control?

Many banking customers have had trouble accessing internet banking services.

The Reserve Bank has started its necessary work of tightening money supply with higher interest rates, recently hiking rates more in one go than they have in 22 years.

This is painful medicine, as any first-home buyer, heavily mortgaged family, or small business owner who has borrowed against the house will testify.

The Government must now do its bit to support these efforts with careful economic management.

It’s simply not credible for the Finance Minister to distance himself by blaming our inflation woes solely on global causes.

Let’s remember, well before Putin invaded Ukraine, New Zealand inflation levels had already hit a 30-year high of 5.9% in 2021. That’s higher than Australia, Singapore, Japan and many other countries experienced over the same period.

Finance Minister Grant Robertson with last year’s Budget. He needs to rein in the spending this year if inflation is to be tamed, argues his Opposition counterpart, Nicola Willis.

Today, our inflation is still well ahead of Australia, with the domestic “non-tradeable” portion now at 6%, the highest since records began.

Part of that is rent costs, up $50 a week in the past year alone, as landlords pass on the cost of extra Government taxes.

The Government needs to quit the denial and front-up with a plan to help.

One: Stop adding costs to business that end up being passed-on to the rest of us, as we’ve seen with new taxes on rental properties. Halt plans for proposals such as a jobs tax and new union-mandated industry-wide employment agreements.

Two: Remove bottlenecks in the economy that are constraining productive growth. Begin by fixing immigration settings that are causing some highly skilled workers to pack their bags and preventing others from coming at all.

Three: Take a more disciplined approach to Government spending. This year, Government spending will be around $128 billion, around $52b more than the Government spent in 2017. More than ever, ministers have a solemn responsibility to get maximum bang for every buck, ensuring that money is delivering more services and better outcomes and not just pumping up prices across the economy.

Four: Re-visit plans to go on the biggest Budget spend-up in history. The Finance Minister has foreshadowed a record-breaking amount of new operational spending in an overheated economy. Carefully assess each proposal to ensure it won’t add fuel to the inflation fire.

Five: Prioritise income relief for workers. Inflation has pushed people into higher tax brackets, piling billions more into the Government coffers, when Kiwis need that cash more than ever. The Government should follow National’s plan to inflation-adjust tax brackets, so that taxpayers can hold onto a bit more of what they earn, with $1600 more a year for a household on an average income.

Skyrocketing inflation is now New Zealand’s public enemy number one. A thief in everybody’s pocket.

The Government can’t leave it to the Reserve Bank to tackle alone. It must make a clear commitment to help fight it.

Stuff has commissioned a similar article from Minister of Finance Grant Robertson.