Previous inflation drops and OCR cuts have been held up by this Government as proof that their austerity program is working.
Well, inflation went up 2.5% despite Government’s amputation of public spending and OCR cuts because much of the inflation rise under Labour was driven by Covid shutting down global supply chains!
Inflation data confirms real terms minimum wage cut – NZCTU
The NZCTU Te Kauae Kaimahi is concerned for low-income workers given new data released by Stats NZ that shows inflation was 2.5% for the year to March 2025, rising from 2.2% in December last year.
“The prices of things that people can’t avoid are rising – meaning inflation is rising faster for those on low incomes,” said NZCTU Economist Craig Renney.
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“Inflation was driven by increases in rents (up 3.7%), rates (up 12%), household energy (up 7.2%) and insurances (up 8%). Grocery prices were also higher, rising 4.3%.
“Earlier this year, the minimum wage rose by 1.5% – a full 1% less than actual inflation. This is the second year the Government has increased the minimum wage by less than inflation, which means that a full-time minimum wage worker is now cumulatively $2,438 worse off in real terms. Minimum wage workers are missing out on $28.36 a week because of the Government’s decisions.
“The Government is considering removing the Living Wage guarantee for government contractors who are caterers, cleaners, and security guards. This data shows why that protection is so important – working people can’t rely on this Government to protect them through the Minimum Wage.
“With 46% of workers receiving a pay rise less than inflation last year, it also shows that many working people are still doing it tough. Unemployment is still rising, with tens of thousands of more people on Jobseekers Support. It is clearly not workers who are benefitting from the very little economic growth is being delivered.
“This data is another piece of evidence about who is winning and losing in the economy. The poorest working people are facing higher costs they can’t avoid – but with less money to pay.
“Workers need a change in direction and a government that will actively address low pay, unemployment, and poverty – it’s time for a different approach,” said Renney.
…Bernard Hickey is brutal in his assessment of the economy…
The economic recovery is stalling
The economy is not doing what it was supposed to when PM Christopher Luxon said in January it was ‘going for growth.’
That’s clear in the BusinessNZ BNZ PSI survey results1 for March published yesterday, which showed a second month of contraction in the services sector, the biggest part of the economy. The companion PMI survey of manufacturers in March was published on Friday and showed only a tepid expansion, at a slower rate than the previous month.
There was also a surprise 0.8% fall2 in retail sales via electronic cards in March. (See charts of the day below.)
REINZ reported this morning that house sales fell a seasonally adjusted 0.3% to 7,640 in March from February nationwide, while sales volumes in Auckland fell a seasonally-adjusted 12.7% to 2.362. Seasonally adjusted prices fell 0.3% in March from February, Infometrics estimated, with prices were lower than a year ago for the eighth consecutive month.
…and scathing of the Government’s response…
A pro-cyclical fiscal tightening
Meanwhile, the Government is pushing on with its ever-tighter fiscal policy in the face of recessionary headwinds globally and locally, effectively enacting a pro-cyclical (ie worsening a recession) policy in conflict with the Reserve Bank, which has been conservative in its initial decision under a makeshift Governor.
RNZ reported from leaked documents yesterday the Government was considering shutting a $118 million per year education training programme that is well liked by schools and was set up with great fanfare in 2014 by the previous Government. Finance Minister Nicola Willis signalled last week the Government would double down on spending cuts to achieve a budget surplus by 2027/28.
That was in the face of Treasury has advice that Trump’s tariffs will slow global GDP growth and increase inflation, making it harder to achieve that surplus and therefore forcing even bigger cuts within Willis’ $2.4 billion per year operating allowances, most of which have already been spent in the 2025/26 year.
…the level of Public Service cuts looming in the next Budget were enough for Reserve Bank Governor Adrian Orr and a swathe of public servants to resign, but the enormity of what Free Market NZ Initiative acolyte Nicola Willis wants to do hasn’t been leaked to the public yet.
The truth is the Economy is stalling just as National amputate public spending and Treasury is warning the Government…
Revealed: Tight Budgets force ‘reductions to public services’ – Treasury
Treasury officials have warned the Government that “significant reforms” or “reductions to public services” will be needed in the not-too-distant future if it sticks to its current, restricted spending track.
The Herald can reveal that even with this relatively tight spending, the Government will not post a surplus under the traditional Obegal measure until 2031, which will mark the longest period of Government deficits since the 1979-1994 deficits (which were measured quite differently).
Treasury officials also warned that the Government had planned so much capital investment – spending on items like schools, hospitals and roads – that it might have to cut spending earmarked for public services so it can fund the significant ongoing maintenance of those investments.
…and the IMF are begging us to tax more…
Tax reforms needed to bolster economic growth – IMF report
- International Monetary Fund report urges action on finances, growth, housing
- Annual report expects NZ economy to grow 1.4 percent this year, 2.7 percent in 2026
- Structural reforms needed to tackle deficits, urges tax reforms
- Time to start serious talk on long term superannuation costs
…the impact of what National need to cut to afford their tax cuts and landlord loopholes isn’t clear to the public yet.
Once it is, all hell will break loose.
The Daily Blogwarned you last month and as early as February that there was the possibility of a snap election because of the size of the Government’s cuts.
That reality is finally trickling out to the mainstream media…
Why Peters has stepped up his undermining of Luxon
Greens tighten candidate selection process and preparing for snap election
‘We are ready to go’: Labour talks up potential for snap election
…folks, you can read it here first, or wait for the mainstream media to read it here first and then report on it a month later.
As The Daily Blog argued LAST MONTH, the deep budget cuts in Nicola Willis’ next Budget are so extreme they are panicking NZ First.
There are back channels occurring between NZF and Labour as a faction inside Labour start to panic that the extreme nature of the Māori Party would make including them in any future Government dangerous and a vote killer for Labour.
The triggers for a snap election are all around the budget and the transition of Deputy between Winston and Seymour.
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