We can be cheered by low unemployment rather than be vexed by rising CPI – but the data need a closer look

Taxpayers are dishing out $633,000 to help a venture described as “a long-running penguin rehab facility which has been hard hit by the tourism downturn” and $2.8 million to restore native forest habitats in the Catlins.

The Jobs for Nature funding for Otago’s Penguin Place and The Hokonui Rūnanga Catlins Biodiversity Project was announced yesterday by Conservation Minister Kiri Allan.

Some readers might wonder about the prudence of this sort of spending but Finance Minister Grant Robertson assured Newstalk ZB’s Mike Hosking that government spending is not contributing a significant amount to inflation.

“We continue to be careful with our spending but the reality is if you were to cut health spending that doesn’t change the price of petrol. We have got to be pretty careful of not cutting our nose to spite our face.

“Obviously we are prudent with what we do but there are a lot of things we do need to be investing into in New Zealand. We have got to keep doing those.”

The penguins should be grateful their wellbeing is regarded as an essential investment.

The interview with Robertson followed news from Statistics New Zealand that inflation had hit 5.9 per cent in 2021, the highest level in 31 years.

Robertson said two areas – transport and housing costs – contributed to around 71 per cent of that increase.

“We have seen a 30 per cent increase in the price of oil over the course of the last year and within the housing element of it there is building supplies which are obviously driven in large part by international issues.

“There are some issues obviously around the fact that we have a housing deficit – we are doing our level best to catch up on that, we are building a lot of houses, we have got a lot of consents coming through but this is a global phenomenon and you will see right around the world countries with highly elevated rates of inflation.”

Robertson also acknowledged this is hitting people hard in the pocket.

“I don’t want to underestimate that. It is really challenging for people but an awful lot of it relates to Covid supply chain and things that unfortunately will work their way through the system this year.”

But earlier yesterday, Robertson was focused on the latest Crown financial statements for the five months to the end of November.  He said (not for the first time) they continue to reflect a resilient economy that has performed better than expected and puts the country in a strong position to respond to Omicron

The Operating Balance before Gains and Losses (OBEGAL) deficit at $8.4 billion was $1.2 billion better than forecast in the Half-year Economic and Fiscal Update (HYEFU).

Tax revenue was $0.3 billion above forecast at $41.1 billion, due to better-than-expected corporate tax, while core Crown expenses stood at $52.8 billion, $0.4 billion below the HYEFU forecast.

Net core Crown debt stood at 34.5 percent of GDP, $0.6 billion less than forecast.

Robertson likes to impress on us that this country is faring better than others:

“New Zealand is in a stronger fiscal position compared with other developed nations and our accounts continue to outperform forecasts. This gives us the fiscal headroom to continue our balanced approach to meet the costs of Omicron while continuing to deal with long standing challenges such as climate change, housing and child wellbeing.”

This assuring stuff would have come too late for the consumers whose mood and attitudes were measured in a new confidence survey.

RNZ today reported the mood of consumers has been deflated somewhat by surging inflation and the threat of a widespread outbreak of the Omicron variant.

The ANZ-Roy Morgan Consumer Confidence index for January is marginally lower at 97.7 from 98.3 in December, with fewer people feeling better off financially at present and only slightly more cheery about their prospects over the coming year.

“Households’ budgets are under cost of living pressure, with CPI inflation running around 6 percent] particularly punitive for those who operate with very small buffers between incomes and outgoings, and who spend a large proportion of their income on necessities,” ANZ chief economist Sharon Zollner said.

The labour market was strong and job prospects excellent, but most workers would still be out of pocket as wage growth lagged the rise in prices, she said.

Pessimism still dominated the near-term outlook, and there was reduced appetite for buying a big ticket item such as a new appliance or car, with a net 4 percent saying it was not a good time to buy.

We have some idea of what investors think about the outlook, too. 

They were soured by two lots of news – the CPI figures from Stats NZ and the US Federal Reserve signalling plans to lift the benchmark interest rate as soon as March to counter escalating inflation.

The benchmark S&P/NZX 50 Index dropped 1.1 per cent, or 135.329 points, to 12,050.32 on Thursday, its lowest close since October 2020.

And the good news (besides the economy demonstrating its resilience to Robertson’s satisfaction)?

Before Christmas, Statistics New Zealand reported the official unemployment rate at the end of the September quarter of 3.4%, the lowest equal rate on record.

But Roger Partridge, chairman of the New Zealand Initiative, says when something seems too good to be true, it usually is.  He writes:

After an arduous year, the low unemployment numbers received plenty of media coverage. Good news was in short supply in 2021. But, aside from a column by Mike Yardley in Stuff this week, the dramatic rise in the number of working-age Kiwis receiving Jobseeker support has attracted rather less attention.       

At the end of the September quarter, 112,056 “work-ready” New Zealanders were on Jobseeker support. This was close to twice the number five years earlier in September 2016, just before Robertson picked up the Finance reins. At that time, the official unemployment rate stood at 5%.   

Why has the unemployment rate fallen to record lows under Robertson’s watch, but the number of work-ready Kiwis receiving the dole nearly doubled?   

Yardley suggests the answer lies in how Statistics New Zealand measures unemployment. Those not looking for work do not count as unemployed (even if they are receiving an unemployment benefit).   

That can really matter when labour markets are weak and discouraged workers are dropping out of the labour force. But that is not what is happening now. We have had a strong labour market and increasing benefit numbers.

Partridge asks:  Why, then, is Work and Income New Zealand not ensuring those receiving an unemployment benefit are looking for work?

The likely answer, he suggests.  is the Government’s 2018 direction to WINZ to ease up on sanctions faced by Jobseeker recipients not actively seeking employment. In the first year following the policy change, the number of sanctions imposed plunged to 8,500 from 14,500 the previous year.

Labour’s intentions in easing sanctions were undoubtedly benevolent, Partridge acknowledges.

Yet the human costs to those who drift into long-term unemployment by remaining on Jobseeker support are too serious to ignore. The well-being benefits of work are undisputed.   

The Government might like to pretend unemployment is at record lows. However, when the increased number of working-age Kiwis receiving the Jobseeker benefit is taken into account, the unemployment rate is closer to 6% than 3.4%.

Instead of relying on a statistical mirage, Partridge argues, the Government must reduce the number of working-age Kiwis on Jobseeker support.

The right policy settings would  benefit workplaces suffering from labour shortages, taxpayers bearing the burden of rising welfare costs and, most importantly, the beneficiaries themselves.

Latest from the Beehive

Speech

Tupu Tai graduation-It’s time to step up

Kia orana, talofa lava, Noa’ia e mauri, malo e lelei, taloha ni, fakaalofa lahi atu, ni sa bula vinaka, talofa, kia ora, tena koutou katoa.

Building and shaping a city: Future-proofing Auckland transport infrastructure

The Government is bringing Auckland’s transport infrastructure into the future by moving forward with an additional Waitematā Harbour crossing, progressing light rail from Auckland’s CBD to the airport, and creating a linked-up rapid transport network as part of a 30-year plan.

Penguin rehab and native forest restoration get helping hand

A long-running penguin rehab facility which has been hard hit by the tourism downturn, and work to restore native forest habitats in the Catlins are being supported through Jobs for Nature funding.

Resilient economy reflected in Crown accounts

The Government’s financial accounts continue to reflect a resilient economy that has performed better than expected and puts the country in a strong position to respond to Omicron.

One thought on “We can be cheered by low unemployment rather than be vexed by rising CPI – but the data need a closer look

  1. Realistically we, as a country, are insolvent. While taxpayers are funding lazy useless layabouts to repose in motels, smoking dope and boozing under under the pretence of jobseeking we are in real fiscal trouble. Employers have had to pay wages above the worth of many employees, absorb socialist/union-driven costs such as more sick leave, plus an annual day off for some maori myth. We have fruit going to rot on the ground, vegetables unpicked, and down the road there are fit able bodied lads doing nothing. This is sure not New Zealand the way we want it!

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.