Working class and the poor most impacted by inflation

In an opinion piece in the Herald Bryce Edwards looks at rising inflation and the huge transfer of wealth to the rich under this Labour government. Some excerpts below detail the growing poverty gap.

Business profitability is currently very high – banking profits were up 48 per cent last year, the big four power companies’ profits were up nearly 60 per cent in the last six months and the supermarket duopoly is still making super-profits. In many ways, the corporate sector have never had it so good.

The gulf between those who are financially very successful and those who are being punished by the current system is growing. Soaring food and energy prices are leaving growing numbers of people choosing between eating and staying warm. One bank has estimated that the average household will need to spend an extra $150 per week, money that won’t come from increased incomes. Hence food banks are in greater demand than ever before, with reports that middle income earners are being forced to use them as well as the poor.

It’s still the working class and the poor who are most impacted by inflation – who have to spend a greater proportion of their income on the basic commodities that have increased the most. According to the Reserve Bank, transport costs have gone up over 16 per cent over the past two years, and housing costs an incredible 48 per cent since 2019. While the minimum wage has increased by 12 per cent in the last two years, average wages have increased less than 9 per cent. Clearly most lower income earners are falling behind and, with no sign of inflation falling in the next few years, those New Zealanders will become further impoverished.

The Prime Minister’s key goals on housing, inequality and poverty are going to be very hard to progress, and yet Labour’s own traditional constituency will be the ones hurt by government policies both here and abroad. The party therefore faces a real challenge to retain those voters.

Even the Minister of Finance seems trapped by his own new-found conservatism. The Grant Robertson of old used to campaign to reduce the cost of living by removing GST off fresh food, and bring in a tax-free first $5000 of income. He even argued that GST of 15 per cent – which was increased by Bill English from 12.5 per cent – was too high. So why isn’t Robertson ready to relook at such policy settings now?

Instead of such innovations in the economic sphere, this Labour Government seems to want to invest their political capital on fighting for reforms in co-governance, and implementing other social reforms that might well be necessary, but do not address the fundamental material needs of their traditional constituency.

Perhaps this is simply because it’s easier to implement a new school curriculum than it is to reform housing rules or to build new state houses. Regardless, it leads to a feeling that the Labour Government does not see combating the declining standards of living as a priority.

Robertson and his colleagues do make noises about having increased the minimum wage and benefit rates, but these small increases have almost all been eroded by inflation.

Read the full article here.