Economic Bulletin

August 2008

Comment

There is now widespread recognition that wages need to rise in New Zealand. The CTU has identified a number of measures that are needed to lift wages on a sustainable basis. These include: increasing the minimum wage to two-thirds of the average wage; amending employment law to strengthen collective bargaining particularly in relation to promoting industry and multi-employer base documents; greater support (including institutional forms) for union capacity to deliver improved wages for workers; the implementation of good employer and responsible contractor policies in the State sector, and an ongoing programme to deliver for women equal pay for work of equal value. We also support higher wages through more investment in skills, plant, machinery and technology alongside improved workplace practices to boost productivity.

These measures will help address the structural issues that underpin embedded low wages. In the short run however the pressure on the pay packet has been made worse by high food and petrol prices.

July 2008

Comment

Economists are never that keen on comparing previous forecasts with what has actually happened. This is understandable. Usually the defence against the accusation that economics is a dismal science is that it is not always that dismal - but we also know it is not always that scientific either. This year we have seen plenty of revisions to prior forecasts. In June 2007, the Reserve Bank was picking that annual consumer price inflation would average 2.6 percent for the second half of 2008. Now they say that inflation for the September 2008 quarter will be around 5 percent. Last year the consensus forecasts for March 2009 were for annual GDP growth of 2.4 percent and annual CPI of 2.6 percent. By June this year, the forecasts for March 2009 had changed to 1.0 percent GDP growth and 3.9 percent lift in annual CPI.

June 2008

Comment

Times are hard. It is likely that when the June quarter economic growth figures come out on 26th September, it will confirm that the economy has been in a technical recession through the first half of 2008. We are halfway there with the news that the economy contracted by 0.3 percent in the March quarter. The Bank of New Zealand has warned that the length of the adjustment process threatens to be longer than the 1998 downturn.

May 2008

Comment

Budget 2008 showed that relatively modest tax cuts nevertheless use up a large amount of money. The annual average cost of the tax cuts is $2.7 billion. John Key had been quoted prior to the Budget as saying that National would have bigger tax cuts. Last October I commented in this Bulletin that for the National Party it seemed that no matter what the question is - the answer is always tax cuts. That stance seemed to wilt somewhat within hours of last week's budget. But - a bidding war on tax cuts is still possible - and carries some real risks.

April 2008

Either read on or print a downloadable version here (MS Word 240k)  

Comment

Food prices are hitting households – and also the headlines. In the 30 years to 2005, world food prices fell by around three-quarters in inflation-adjusted terms. Since then they have risen by 75 percent, with much of the increase in the past year. The U.N. Food and Agriculture Organisation's (FAO) Food Price Index, measuring the market prices of cereals, dairy produce, meat, sugar and oils, was 57 percent higher in March 2008 than a year earlier.

March 2008

Either read on or download a printable version here (MS Word 249k) 

Comment

The free trade agreement with China is due to be signed next week. The CTU has consistently raised concerns about these negotiations over the last 3 years and has made comprehensive submissions, met with MFAT officials on many occasions, and signalled our key issues in discussions with Ministers. As the negotiations neared a conclusion we focussed mainly on three areas: the phase down of tariffs on clothing, textile, footwear and carpets as well as whiteware; the memorandum on labour issues, and; temporary migration.

February 2008

Either read on or download a printable version here (MS Word 240k)

Comment

There is now an accumulation of economic indicators pointing to slower economic growth. Despite relatively low levels of unemployment, the prospect of higher dairy returns, improving terms of trade and the likelihood of a solid Budget in May, in general it has to be acknowledged that the key economic issue is not inflation – but ensuring that slower growth does not tip over into a recession.