Thursday, February 29, 2024

Cost of living bites

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Botany MP and National Party leader Christopher Luxon says many Kiwis will be struggling as the cost of goods continues to rise. Times file photo Wayne Martin
  • By Christopher Luxon, Leader of the Opposition and MP for Botany

It has been a week of bad news for Kiwis as the cost-of-living crisis begins to bite harder, with inflation hitting a 32-year high and signs interest rates will have to rise even further.

Inflation data released this week by Statistics New Zealand showed that prices rose 7.3 per cent in the last year – the fastest rate since 1990, when MC Hammer’s ‘U Can’t Touch This’ was the best-selling song of the year.

Just minutes after the figures were released, ANZ, New Zealand’s largest bank, warned the Reserve Bank would have to raise interest rates much further than previously thought to try to get spiralling prices under control.

It is worrying to see inflation hit such a high number. Part of it is because of international factors – but a lot of it isn’t.

Labour keeps blaming international events, like the war in Ukraine, but refuses to take responsibility for their policy failures at home. Domestic – or non-tradable – inflation, over which the Government has more influence, is at its highest level since it was first officially recorded in 2000.

What’s worse is that Treasury, the Government’s lead economic and financial adviser, explicitly told Finance Minister Grant Robertson earlier this year that “a large portion of New Zealand’s inflation at present is being driven by strong domestic demand” and that his high levels of spending are making the situation worse.

Instead of listening to this advice, he ignored it. Now Kiwis are paying the price – literally.

Labour’s economic mismanagement has made the cost-of-living crisis worse and now it is hitting anyone with a mortgage and making it harder for Kiwis to get onto the property ladder.

Part of the Reserve Bank’s job is to try and manage inflation to keep prices stable. But with inflation so out of control under Labour, the bank has been forced to increase interest rates at the fastest rate in decades. This means anyone due to re-fix their mortgage in the coming months will get hammered by rapidly rising borrowing costs.

Since Labour came into office, a family with an 80 per cent mortgage on a median-priced home has seen their interest repayments rise by $350 a week. This will make the Kiwi dream seem more out of reach for many.

Further adding to the stress for families, food price data showed grocery prices increased on average by 7.6 per cent compared to a year ago. Things like milk now costs 10.4 per cent more than last year, yoghurt 14.4 per cent more and potato crisps are up 11 per cent.

Rising inflation, and especially rising food prices, shows what any Kiwi family can confirm: that rising prices are smashing household budgets.

National has been calling on Labour to present a plan to fight inflation for months.

Spending more and announcing temporary measures won’t cut it.

A real plan would focus on strengthening productivity including fixing failed immigration settings and avoid pushing added pressure on business.

Labour should adopt National’s five-point plan to fight inflation and strengthen our economy – return the Reserve Bank to a single focus on price stability, reduce costs on business, remove bottlenecks in the economy, restore discipline to government spending and prioritise tax relief for workers.

If Kiwis are sitting around the kitchen table going through their finances and tightening their spending, then the Government should be doing the same.

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