Notice the pay packet doesn’t go quite as far as it did, say, six months months ago?
And if this be the case, is it just because the price of petrol has surged skywards?
Back in March the national price of petrol was around $2.08 a litre for 91 octane. Now it’s about $2.40 a litre, probably more in Auckland where the regional fuel tax of 11.5c litre was applied in July.
It’s not surprising the cost of petrol has moved up sharply. Statistics NZ reported that in the June 2018 quarter, higher prices for imported crude oil increased the costs paid by the petroleum and coal product manufacturing industry (up 11.3 %).
The effect of the falling NZ dollar against the greenback has compounded the impact. And the prospect the US Federal Reserve will raise the core interest rate at its next meeting this month suggests the US dollar will continue to strengthen.
It’s therefore likely the NZ dollar’s slide from US72.9 cents last March to US65.15c this week will not end there.
But it’s not just the cost of filling up the family car with petrol that is squeezing pay packets.
In the June quarter the costs of petrol bought by businesses was up 5.5% while diesel costs were up 9.8%. These higher costs for fuel flowed to other industries.
For example, input prices for the road transport industry rose 2% in the June 2018 quarter, mainly due to higher petrol and diesel prices. The impact quickly filters through to distribution costs for manufacturers and wholesalers.
Even if you are living in a place distant from Auckland, but shop for goods from there, you’ll feel the impact of the regional fuel tax.
The fall in the NZ dollar is good news for NZ exporters, of course. But it’s not so good for importers.
Goods on the water now from overseas suppliers will be costing more by the time they reach the shops. That, too, will contribute to the shrinkage of the spending power of the weekly take-home pay packet.
New Zealanders these days like to eat out a lot: but eateries – most of which have found their wages bills rising because of increases in the minimum wage – will have to push up their prices as their suppliers seek to cover their rising costs.
All this underlines a point that former Finance Minister Steven Joyce was making the other day – that microeconomic policy (arguably) has a bigger effect in New Zealand than in larger countries.
“We are a small country far away from the rest of the world. Our businesses are smaller and margins here are much tighter than in the US or Europe, so policy changes that get shrugged off in bigger countries really hurt our nation of small businesses. Our government is currently rearranging, often negatively, not one or two but nearly every aspect of microeconomic policy.
“Employment law, resource law, company taxes, innovation settings, immigration settings, the infrastructure plan, it’s all being thrown up in the air at once, and not surprisingly kiwi firms are taking fright”.