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Tuesday, 21 January 2014

Consumer Prices

In this month's North & South mag there's an article on "the high cost of just about everything", taking aim at the Consumer Price Index (CPI).

Basically, although the headline inflation rate has been pretty good (i.e. the cost of living overall isn't going up), most New Zealanders feel as if they're worse off because the price of everyday goods (food and housing) are going up sharply.

On the other hand, the price of goods that consumers tend not to buy everyday (mobile phones, flat-screen TVs and cars) has been deflating. Not many of us buy these things daily though, so we tend not to notice that the price is going down (or as the article points out, that we're getting more for our money).

Meanwhile, in the last quarter of 2013 inflation was at 0.1%. David Farrar has a further look at what makes up this figure:
I prefer to look at the long-term series. Here are some comparisons of average annual price increases over the last five years (Dec 08 to Dec 13) compared to the previous five years (Dec 03 to Dec 08).
  • Electricity 3.9% compared to 7.8%
  • Household Energy 3.6% compared to 10.0%
  • Food 1.7% compared to 3.4%
  • Fruit & Vegetables 0.6% compared to 6.4%
  • Rental Housing 1.9% compared to 3.6%
  • Home Ownership 2.9% compared to 8.0%
Labour are very good at claiming they will lower , and housing costs – but their track record speaks for itself.
The household energy figure is most interesting - it goes to show the government owning 100% of the energy SOEs doesn't lead to lower power prices.