Thursday, December 17, 2020

Is a return to the bad old days of high inflation on the cards?

 Government will lift the minimum wage to $20 an hour on April 1, 2021:

“This minimum wage increase will lift the incomes of around 175,500 New Zealanders – which means $44 more each week before tax for Kiwis working 40 hours a week on the minimum wage.”

Down the track it will lift the incomes of many more now that beneficiary rates  are linked to wage inflation.

 “Signalling the minimum wage increases over three years has helped give businesses much needed certainty. Next year I will outline what changes we are intending to make in the coming years to give businesses time to plan ahead,” Wood said.

It makes life harder for businesses and there is no increased certainty about supply of labour if benefit payment rates are competing. Earlier Henry Cooke calculated, "...benefits will go up between $27 and $46 a week by April 2023 - between $10 and $17 a week higher than they would under the old formula."

To maintain relativity employers will be pressured to raise the wages of those above the minimum wage and are likely to pass their increased costs along to customers and nobody will be any the better for it.

It's going to be difficult for the Reserve Bank to keep a lid on inflation.

1 comment:

pdm said...

Is there anyone of influence in the current government who would have any idea of what causes inflation - or recession for that matter.

Ideologues all.