Prime Minister Chris Hipkins has put the “bread and butter” issue of inflation at the top of his government’s agenda for Aotearoa New Zealand, saying today’s figures confirm that is the right approach.

Opposition leader Christopher Luxon continues to cast the government as having done nothing about the cost of living, but Hipkins argues the government’s actions are making a difference.

Annual inflation numbers for the quarter out from Stats NZ today were unchanged at 7.2 percent, roughly in line with expectations.

There are signs inflation may have peaked, and some supermarkets are expecting drops in fruit and vegetable prices in coming weeks, but rate rises and recession are still expected.

Economists say there is unlikely to be much respite from rising costs this year.

Speaking in his first media briefing as prime minister after chairing Cabinet, Hipkins said the work on reprioritising policy to tackle the issue had “started in earnest”.

“We will be reining in some of our plans, putting them on a slower track, giving us more room to move and greater capacity to focus on the immediate priority issues facing New Zealand, particularly the cost-of-living pressures that have been caused by the global economic situation.”

Not unusual
He said the inflation numbers from today were not unusual in comparison to other global economies — but the government would continue to work to reduce it.

“Our overall rate of inflation: 7.2 percent here in New Zealand, 7.8 percent in Australia, 10.5 percent in the United Kingdom, the OECD average is 10.3 percent, the European Union is 11.1 percent,” he said.

“The Treasury is forecasting real government consumption will fall by about 8.2 percent over the next couple of years which they say indicates that fiscal policy is supporting monetary policy in dampening inflationary pressures — but there’s more to do and the fight must and will continue.

“New Zealand is not immune to those international pressures and they will continue to have an impact on our rate of inflation.”

Luxon was earlier visiting a budgeting service in Papakura, Auckland, and led his comments to reporters afterwards with a familiar litany of criticism, saying those using the service were the same people using foodbanks up and down the country.

“Again a third quarter of inflation sitting at 7.2 percent or thereabouts. It just speaks to a government that is causing huge pain and suffering for people because it has no plan and it’s not tackling the underlying issues of inflation,” he said.

“That then leads to higher levels of interest rates. Higher levels of interest rates ultimately then lead us through to a recession and a recession then leads us into unemployment. I see a government that has had no plan to tackle the underlying causes of inflation, and nothing they have done over the last nine months has made a single difference here.”

He was not buying Hipkins’ language about reprioritisation and renewed focus on the economy.

‘It’s just words’
“He can say whatever he wants, it’s just words. The reality is this is a government with Grant Robertson as a Finance Minister over the whole period of this government.

“Nothing’s changed, so the reality is he can say whatever he wants but I find it incredibly cynical that here we are six months, seven months out from an election and all of a sudden we’re miraculously gonna focus on the economy. Give me a break.”

Luxon listed National’s “five-point inflation-fighting plan” as their own solution to the problem:

• Not adding costs to businesses which will be passed on to consumers through higher prices
• Open up immigration settings to grow the productive economy
• Control government spending “incredibly well and tightly as we expect people to do in their household budgets”
• Inflation-adjusted tax thresholds
• Refocus the Reserve Bank solely on inflation

Hipkins argued the government had been doing its part to address the underlying causes, including at the petrol pump and the supermarket, and it was having an impact.

He listed fuel tax cuts, and changes to benefit rates as examples where the government had stepped in, and said while it was too early to see the results of changes to immigration from a month ago, he had heard positive feedback from businesses.

More changes
He said the government would not stop there and would continue to make changes — and May’s budget was not set in stone.

“There is an opportunity for us to make sure that the Budget reflects the priorities that I’ve set out,” he said, while drawing a line between carrying out the policy promises of this term of government — and campaigning for the next.

“In terms of our tax policy for the next election New Zealanders will know it well in advance of the election. I’m not going to announce a tax policy on day one.”

He signalled he would not forget other priorities — highlighting climate change as well as education, health and housing — but all of them were linked to cost-of-living pressures, he said.

“If you look at the inflationary figures today the cost of building a new house is one of the things that’s contributing to that.

“We’ve seen significant population growth and we haven’t built the right number of houses to keep up with that, that’s never going to turn around overnight but we’re making good progress.”

Luxon targeted the closure of the Marsden Point Oil Refinery as one area the government had not thought through the consequences of, however, with shortages of CO2 and Bitumen impacting some sectors of the economy.

Strategic assets
“There are some strategic assets that actually are important to New Zealand and actually in the context of more global uncertainty you want to make sure you’ve got resilience and you’ve got the backup to the backup to the backup.

“I’m used to running risk management scenarios . . . I get it, we want to move out of fossil fuels, but actually at the moment we’ve knocked off our gas sector and now we’re importing what, three times as much Indonesian coal as any year in a National government?”

“The ambition’s easy to state but actually if you don’t think through the detail of it you end up with these consequences that cause us a different set of problems.”

Hipkins certainly has a big job ahead of him in wrangling an inflation juggernaut powered in large part by similar rises in costs overseas.

While he refused to make any commitments on his first day in the job, he was confident New Zealand would soon see the effects.

“New Zealanders will certainly see over the coming weeks and months the evidence of the fact that we’ve made it our number one priority.”

This article is republished under a community partnership agreement with RNZ.

Article by AsiaPacificReport.nz

Incoming Prime Minister Chris Hipkins of Aotearoa New Zealand has signalled tackling the “inflation pandemic” will be a top priority for his cabinet’s slimmed-down work programme.

Hipkins and new Deputy Prime Minister Carmel Sepuloni — the first with a Pasifika heritage — will take the reins on Wednesday, following Jacinda Ardern’s sudden announcement last week she was quitting after a challenging five years in the top role.

It was perhaps the cleanest transfer of power in the Labour Party’s recent history, and a far cry from the post-Helen Clark, pre-Ardern years of infighting and headline-grabbing leadership tussles.

“Jacinda Ardern and I are both absolutely committed to providing strong and stable leadership to New Zealand,” Hipkins told RNZ’s Morning Report today.

“I think that’s what they’ve seen from the Labour government over the past five-and-a-half years, and that’s what they’re going to continue to see.”

While in 2020 Ardern led the party to the most comprehensive victory of any in the MMP era and still leads polls for the most-preferred prime minister, those same polls suggest Labour is on track to lose the election later this year.

With polls also showing the cost of living and inflation are far more important to voters than the likes of Three Waters reform and merging state-owned media entities, Hipkins said it was time to “run the ruler” over the government’s work programme.

Need to focus
“We need to focus in on some of those bread-and-butter issues that New Zealanders are certainly focused on at the moment, including issues like the cost of living, the effects of the ongoing global inflation pandemic that we’re experiencing at the moment.

“We just have to make sure that we’re putting our resources into the things that are going to make the biggest difference and that are the most important.”

Asked if tackling inflation could come in the form of “tax relief” or toning down the Labour government’s rapid increases to the minimum wage, Hipkins said he would not make up policy “on the fly”, but would be careful to make “sure that the policy settings that the government has aren’t going to make the inflationary problem worse”.

But he hinted those on the lowest incomes wouldn’t be a target for reining in inflation, which — as he noted with the phrase “inflation pandemic” — is a global problem.

“People on the lowest incomes often feel the pinch from higher inflation more than most because they don’t have a lot of extra disposable income to meet those additional costs.”

As for public servants, many he said were in pay discussions at present so he could not comment.

Another global issue New Zealand has not been immune to is the worker shortage. Hipkins said he would not “simply rely on immigration as being the only answer” to that particular problem.

“They want more skilled workers, but they also want to know that their sons and daughters, and their classmates and so on, are also going to find productive, gainful employment… I don’t think it’s and either-or…

“We’ve got thousands of young New Zealanders at the moment who aren’t doing anything. We’re going to have to have a bigger focus on making sure we activate that potential labour force, which at the moment isn’t there.”

‘Take a breath’
Asked if the Ardern-led government had moved too fast on social issues, Hipkins said while “worthy and valuable, we can’t always progress them all at the same time” and it was time to “take a breath”.

But he would not say which programmes might be scaled back or scrapped, having yet to meet with his new Cabinet.

Opponents of the Three Waters reforms however are likely to be disappointed – Hipkins saying that will still go ahead.

“Some of the rates increases people could see without further reform in this are could be … thousands of dollars a year extra on their rates if we don’t do something to address this issue. I’m not going to walk away from that.

“But I will run the ruler over what we’re currently proposing to make sure that we’re focused in on the right issues.”

A few articles published over the weekend suggested Hipkins’ political views were to the right of Ardern. On having that put to him, Hipkins said labels like that “don’t mean a lot”.

“I’m a Labour politician. I believe in the role of government to support New Zealanders, to make sure that they have opportunity . . .

“I absolutely believe in the values the Labour Party was founded on, which is that we are here for people who are working hard to get ahead and create a better life for themselves and their families.”

This article is republished under a community partnership agreement with RNZ. 

Article by AsiaPacificReport.nz