17 July 2012

Low price increases welcome, but good wage increases still needed

Many families will still be struggling to keep up with the cost of living despite the record low annual CPI inflation of 1.0 percent for the year to June. Many workers have faced low wage increases in the past three years, and the low inflation should provide an opportunity for wages and salaries to catch up some of the lost ground as long as decent pay increases come through, says CTU Economist Bill Rosenberg.

“For many working families wages are still too low. In real terms, wages are lower than they were in 2009. The average hourly ordinary time wage in March 2012 was lower than it was in March 2009 in real terms – that is, after taking inflation into account. The Labour Cost Index is at its lowest in real terms since 1996, though slightly above its all time low, in June 2011.”

“There is no indication that wages are causing inflation.”

“Non-tradable inflation is being driven by housing and electricity prices – adding to difficulties for low and middle income households – and government charges.”

“The government should be focusing on effective regulation of the electricity sector rather than adding to the problems by partially privatising electricity companies. It should be looking at relieving areas of housing shortages and high rents such as in Christchurch and Auckland,” Rosenberg said.

“Putting money in working people’s pockets would also provide a stimulus to the stagnating economy,” Rosenberg said.

ENDS

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