The Reseve Bank has held the OCR unchanged at 2.5%. In the quarterly Monetary Policy Statement that accompanies each OCR announcement (see URL below), Governor Bollard has said (amongst many things): inflation predictions are around 2%, (however, there has been no modelling done for the proposed increase in GST and the cut in the top marginal tax rates for the 8% of Kiwis earning over $70K); GDP growth expected to be around 1% per quarter, or 4% per ann; and employment expected to drop by around one percentage point a year. This begs a couple of questions / points:
1. if economy is expected to grow at 4% per year, then surely Minister English can now afford to give state sector employees a decent pay increase this year – remember he said last year possible wage freezes for up to 5 years.
2. if inflation is expected to be around 2% per year (without having yet modelled the impact of GST increases or tax cuts for the top 8%) then this implies a further reduction in the purchasing power for those 70% of extra-ordinary hard working kiwis earning $40k or less.
3. Surely, with inflation forecast at 2%, and GDP growth forecast at 4% per year, the minimum wage has to increase more than the paltry 25c / hr given by the government last year. Mr English? Mr Key?
Come on now Mr English and Mr Key – you have signalled what you are going to do for the 8% of kiwis earning over $70k/ann – now tell us what you are going to do for the other 92% – apart from increasing costs through increasing GST…
