Inflation is theft

18/04/2016

Low inflation is boosting household spending power:

Low inflation is helping New Zealand households get ahead, with wages on average continuing to rise faster than the cost of living, Finance Minister Bill English says.

Inflation was only 0.4 per cent for the year to March 2016, according to figures released by Statistics New Zealand today. Inflation for the March quarter was 0.2 per cent. 

Much of quarterly increase was driven by cigarettes and tobacco, which rose 9.4 per cent following increase in excise duty in January. Food prices were up 1.2 per cent in the quarter, but were down 0.4 per cent over the whole year.

Lower oil prices contributed to the low cost of living increase. Petrol prices fell 7.7 per cent in the first three months of 2016, following a 5.7 per cent fall the previous quarter.

“We are in the unusual situation of having solid economic growth, more jobs and rising wages at the same time as very low interest rates and inflation,” Mr English says. “This is helping New Zealand families get ahead.

“Households with mortgages have the double benefit of low cost of living rises and lower mortgage servicing costs, which will be particularly welcome in regions with increasing house prices.

“Since the start of 2012 the average annual wage has increased by more than 10 per cent to $57,800, considerably faster than inflation which has been only 3.1 per cent.”

An additional 175,000 jobs have been created over the last three years, with a further 173,000 expected by 2020.

“Overall, New Zealand is doing well and New Zealanders are reaping the benefit of a growing economy.”

When Don Brash was governor of the Reserve Bank he called inflation theft and it is, eroding the real value of money and investments.

Now, wage-rises outpacing inflation combined with low interest rates are giving households more spending power.

When people seek government help it usually requires more spending.

The government’s concentration on keeping a tight rein on its finances doesn’t usually get much credit but it is one way it can influence inflation and in doing so it protects and enhances the value of what people earn, invest and save.


OCR down .25 basis points

11/06/2015

Reserve Bank Governor Graeme Wheeler has announced a small drop in the Official Cash Rate:

The Reserve Bank today reduced the Official Cash Rate (OCR) by 25 basis points to 3.25 percent.

Growth in the global economy remains moderate. Data on economic activity in the US, China and Australia has been mixed, although there has been some improvement in the euro area and Japan. Volatility in financial markets has increased.

The New Zealand economy is growing at an annual rate around three percent, supported by low interest rates, high net migration and construction activity, and the decline in fuel prices. However, the fall in export commodity prices that began in mid-2014 is proving more pronounced. The weaker prospects for dairy prices and the recent rises in petrol prices will slow income and demand growth and increase the risk that the return of inflation to the mid-point would be delayed.

Inflation has been low due to falling import prices and the strong growth in the economy’s supply potential. Wage inflation and inflation expectations have been subdued.

With the fall in commodity prices and the expected weakening in demand, the exchange rate has declined from its recent peak in April, but remains overvalued. A further significant downward adjustment is justified. In light of the forecast deterioration in the current account balance, such an exchange rate adjustment is needed to put New Zealand’s net external position on a more sustainable path.

House prices in Auckland continue to increase rapidly, and increased supply is needed to address this. The proposed LVR measures and the Government’s tax initiatives planned for 1 October 2015 should ease the impact of investor activity.

A reduction in the OCR is appropriate given low inflationary pressures and the expected weakening in demand, and to ensure that medium term inflation converges towards the middle of the target range.

We expect further easing may be appropriate. This will depend on the emerging data.

It’s good to see policies to address the supply side of the Auckland housing problem being acknowledged so that the rest of us aren’t paying in higher interest rates.


Good news x 2

20/04/2015

Annual inflation is close to zero:

Cheap petrol has driven down the cost of living in the first three months of the year, pushing the annual inflation rate to a 15-year low.

The Consumers Price Index, a measure of inflation, declined by 0.3 per cent in the March quarter, Statistics New Zealand figures show. . .

Inflation erodes the real value of investments, the only good inflation is low inflation.

And another piece of good news Team New Zealand won’t receive any more public funding:

. . . Prime Minister John Key told TV ONE’s Breakfast this morning “I think it means the end of the road for any more government funding”.

“Realistically for us to get value there needed to be exposure for the America’s Cup team, there will be some obviously in Bermuda, but we think in our assessments it’s significantly reduced if the event is not hosted, in some way, in New Zealand.”

He said it would be “very difficult” to get the public to favour more tax payer dollars being sunk into Team New Zealand. . . .

More than  difficult, it would be  all but impossible to convince people that funding what most regard as a rich man’s sport and a team which appears to be dysfunctional would be good news of public funds.


Inflation targeting works

01/12/2014

The Reserve Bank’s focus on inflation is working:

Inflation targeting has delivered price stability without reducing long-term growth, and remains the appropriate focus for monetary policy, Reserve Bank Governor Graeme Wheeler said today. . .

“Price stability has brought many benefits. It enables people to plan and contract with greater certainty for longer periods. It reduces the inflation risk premium in interest rates and the need for speculative inflation hedges, and it reduces the insidious toll that inflation exacts on the more vulnerable and less financially sophisticated,” Mr Wheeler said.

The opposition’s calls for a less rigorous approach to controlling inflation is foolish.

Inflation is theft, it erodes the real value of savings and that hits the poorest hardest.

“In the 20 years before the Act, annual real GDP growth averaged 2.2 percent while annual inflation was volatile around an average of 11.4 percent. Since 1990, real GDP growth and annual inflation have averaged 2.6 and 2.3 percent respectively, and there has been a marked decline in inflation variability.”

Mr Wheeler said the Reserve Bank is a ‘flexible inflation targeter’.

“We seek to anchor inflation expectations close to the price stability objective while retaining discretion to respond to inflation and output shocks in a flexible manner.”

This flexible, medium-term approach to policy was drawn on at the outset of the Global Financial Crisis when the Bank lowered the Official Cash Rate by almost 6 percentage points in 2008-2009, even though headline inflation was initially well above target. This policy stance was able to cushion the impact of the crisis.

In order to do its job effectively, Monetary Policy needs to be supported by prudent fiscal policy and sound structural adjustment policies. Monetary policy can affect the demand for housing and help ease imbalances in the housing market while supply is increased. But it cannot free up more land constrained by zoning regulations, address procedural and pricing issues around planning consents, offset tax policies in the housing sector, or raise productivity in the construction sector. . .

The tax and spend policies proffered by opposition parties before the election would have been inflationary and pushed up interest rates.

Housing prices reflect supply and demand. The best way to address that is to increase the supply where it’s not meeting demand. Local government has a big part of play in doing that by sensible zoning and simple and timely consent processes.

The full speech is here.


Saving at last

28/11/2014

New Zealand finally has a positive savings trend:

New Zealand households have together saved more than they spent over the past five consecutive years – the first time this has happened since 1989-94, Finance Minister Bill English says.

The latest revised annual National Accounts (Income and Expenditure) compiled by Statistics New Zealand show aggregate household savings – which includes the impact of debt repayment – totalled $2.8 billion in the year ended March 2014.

This represents a positive savings rate of 2.1 per cent of household disposable income.

The revised figures show that before 2009 – the year after the National Government was first elected – the household savings rate had been negative in all but one year since 1995.

“This news is the latest in a series of results that show households are getting ahead and that the economy is steadily rebalancing towards higher savings and away from borrowing and consumption,” Mr English says.

“Combined with average hourly earnings growing more than twice as fast as inflation, a sustained period of historically low interest rates, falling unemployment and good economic growth, the household savings data adds to a picture of New Zealanders making sensible decisions to strengthen their own balance sheets.

“The Government, which has also kept tight control over its own spending during the same period, has made changes that have encouraged New Zealanders away from debt-funded consumption in favour of a more sustainable and secure position.

“Households have been nudged towards this by a combination of factors including the 2010 tax package which lowered taxes on income and savings and increased tax on consumption and property speculators.

“The Government has also pursued initiatives that have made investments more attractive, including the government share offer programme which  helped stimulate New Zealand’s capital markets. At the same time, we’ve tidied up the finance company sector to help protect depositors, and made KiwiSaver more affordable.  

“Many low-income households are still finding things tough . However, the overall picture supports a rebalancing of the economy away from the debt-fuelled consumer binge that occurred under the previous Labour government, to a growing culture of saving and investing.

“While this helps households get ahead, low inflation and restrained consumption contributes to government revenue being lower than it otherwise would be, again reinforcing the challenge of getting back to surplus.”

The reason we’re dependent on overseas borrowing is because we’ve been spending more than we saved ourselves.

At last we’re saving more than we spend.

The irony of that is lower spending means less GST and so makes it harder for the government to return to surplus.

While that will provide ammunition for the opposition the problem of that is political rather than economic.

Our economy is back on track to surplus and whether we get there this year or next, the economy is growing in a sustainable way without inflationary pressure.

 

Under National’s economic plan, New Zealand households have posted positive savings rates for five consecutive years – the first time this has happened since the early 1990s. #Working4NZ http://ntnl.org.nz/1veJ8oq


Left’s jiggery pokery won’t work

17/03/2014

I find it difficult to understand the headless chookery that’s going on about the very small increase in the official cash rate from a historically low level.

People with income from interest-bearing investments will be pleased and while the rest of us who are paying more for loans might not like it, we knew it was coming.

It was well signalled and anyone with the slightest bit of financial acumen would have known the odds of a rise were far greater than a fall or keeping the rate at its historic low of 2.5%.

In spite of this the opposition and some commentators are playing at Chicken Little, acting like the sky is falling and inevitably calling on the government to do something.

Well, the government is doing something.

Finance Minister Bill English told TVNZ’s Q+A programme that the Government is doing all it can to help households affected by interest rate rises:

“There isn’t some kind of magic solution her like jiggery-pokery with the Reserve Bank Act, or pretending prices are lower than they are, which is what the Greens and Labour are promising. It’s about the kind of diligent hard work we’ve all been doing, not just this government but households and businesses, becoming more productive, more careful with our spending, getting debt down, a bit less consumption, and good control of inflation. So we have the opportunity here for a sustained economic recovery, and if we work on keeping our costs down, increasing our productivity, we could have four or five years where there are more jobs and higher incomes, and that’s what helps households get on top of increases in interest rates.”

The government’s careful management and strict control on its spending are two reasons interest rates have been so low for so long.

The need to keep on that path is just as great now the economy is growing because a government splashing cash around would fuel inflation which in turn would put pressure on interest rates.

He said this week’s OCR increase is due to the relative strength of our economy

“The small increase in interest rates that was announced the other day is an indication of the relative strength of our economy. There’s a lot of economies around the world would like to see some signs that interest rates were reflecting the fact that the economy’s growing. The other job we have is to support households and businesses by doing everything a government can to reduce pressure on what are inevitably rising interest rates and we’re pretty clear about that where we can influence that pressure, it’s around the housing market where we spent two or three years working on improving supply to the housing market. It’s around the labour market where we’re doing our best to align our training systems and migration with the skills that are needed in a tight labour market. . . 

If there was a magic solution every country in the world would have employed it.

There isn’t – there’s the jiggery pokery the opposition are threatening us with which won’t work, or the careful management and restrained spending which the National-led government is doing that is working.


Inflation hurts

13/03/2014

Question of the day:

It was prompted by Labour’s threat to meddle with the Reserve Bank.

Inflation effectively cuts wages by reducing buying power and it erodes the value of savings.

Some Labour MPs were in government in the 1980s when inflation was nearly ten times higher than it is now and interest rates were in the mid to high 20s.

Have they forgotten, have they no influence on their caucus or do they just not care?


What would they do differently?

13/03/2014

Labour is threatening to tinker with the Reserve Bank Act to keep interest rates down.

They are conveniently forgetting that interest rates have been at an historic low for three years and interest rates were far higher when they were last in government.

The OCR increased by 5.00 in November 1999, went up and got to 6.50 in May 2000, stayed there until March 2001, went down to 6.25 and continued to drop until it got to 4.75 in November that year.

It was all up from there reaching 5.75 in August 2002 before going down again and getting to 5 in July 2003.

The reserve Bank increased it to 5.25 in January 2004 and it climbed from there, reaching 8.25 in July 2007 and staying there until it went down to 8 and was at 6.5 by October 2008.

National won the election in November and the OCR went down from then, getting to 2.5 in April 2009, increasing to 2.75 in June 2009 and 3 in July. It stayed there until March 2011 when it went down to 2.50 where it’s stayed until today.

OCR 2007-2009

Several factors have influenced the low rate, including the global financial crisis.

The government had no influence over that but it has had influence over its own spending which is another big influence on the OCR because of its impact on inflation.

National has been very prudent with its spending and intends to continue that as the economy grows.

Labour and its potential coalition partners appear to have no familiarity of the concept of fiscal prudence and should they get into government, their high-tax, high-spending policies would fuel inflation and drive up interest rates.

Labour couldn’t keep interest rates down last time it was in government.

What would it do differently if it was in power again?

It’s not going to rein in its own spending and tinkering with the Reserve Bank Act would do more harm than good.

It would lead to higher inflation which would do far more harm than the small increase in interest rates we got this morning.

Hat tip for chart: Keeping Stock.


How would Labour keep interest rates down?

10/03/2014

Labour leader David Cunliffe is threatening to tinker with the Reserve Bank Act:

. . .Mr Cunliffe said he believed in an independent central bank but Labour would make changes to the Reserve Bank Act that would lead to lower interest rates.

“On average, over time, it is our very clear view that interest rates would be lower. On average house mortgages would be lower under our monetary policy.”

“There would be additional tools that the Reserve Bank could use – macro-prudential and other tools – that would help stabilise high interest rates. . . .

What are those tools and how would they work?

Two of the biggest influences on interest rates are inflation and government spending.

Policies Labour’s announced so far would fuel inflation and require more government spending.

Rather than tinkering with the RBA, Labour would be better to rethink its policies and develop ones which would dampen inflation and curtail spending.

It’s probable that the official cash rate, and consequently interest rates, will rise soon. But they will still be well below the 11% we were having to pay when Labour lost office in 2008.

Are they going to spell out how they’d do much better next time they’re in government, or will it be a matter of wait-and-see for details which is all they’re offering with their power policy?

Photo: Labour’s been challenged for more details about its far left power policy with the Greens. The answer – ‘wait ’til after the election’. Is that okay with you? http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=11214563


What’s he offering?

04/03/2014

Liam Dann asks a very good question:

What is David Cunliffe offering? A dramatic experiment with a winning formula? A worrying fix for something that isn’t broken?

He’s referring to Labour’s determination to follow Green Party policy to meddle with the Reserve Bank.

Labour’s embrace of Green Party policy to reform the Reserve Bank Act is a big stumbling block for the party if it wants mainstream acceptance from the business community.

It surely gains the party few fresh votes from the wide pool of mainstream voters who find monetary policy debate arcane.

Yet it makes Labour almost impossible to endorse for many of the nation’s most powerful and influential business leaders.

The monetary policy reformists are full of ideas about the magic a broader definition of the Reserve Bank Act might achieve. But they ignore the extent to which having one target – inflation – has worked. And just how fundamental controlling inflation is to creating a stable economy on which growth can be built.

Why, when the Act has just seen us through such an enormous global downturn so efficiently, would you change it. In the hope it might bring the dollar down?

Well, if you damage the economy the dollar will certainly fall. But it seems a brutal path to take.

And why, if you were going to make changes, would you loosen the shackles during the growth phase of the economic cycle – just when inflation starts to become a serious risk.

We should be grateful we don’t have to make radical changes to our economy. We’ve come through the downturn well, and while National can take some credit for steering the ship, so too can the last Labour Government for the healthy growth it oversaw.

Radical change is for those nations that have run out of options. Let’s leave it to the Greeks.

National has generally trod a cautious path, some would say too cautious. But it’s getting results.

The economy is growing, and other economic indicators like business confidence, investment intentions and employment are positive.

All of this would be at risk if inflation is let loose with the inevitable steep increase in interest rates that would follow.

In 2008, when Labour was last in power interest rates were about 11%.

Now they’re about half that and while they’re expected to rise providing inflation is kept under control, they shouldn’t get back to double figures.

But if a Labour/Green government starts meddling with the RBA, inflation will surge and interest rates will  too with the high cost that imposes on business and households.

If people are concerned about the affordability of houses and farms now, how much worse will it be when interest rates are twice the current rate, or higher?

That’s what Cunliffe is offering.


Lowest inflation rate this century

17/07/2013

The consumers price index (CPI) increased just 0.7 percent from the June 2012 quarter to the June 2013 quarter, Statistics New Zealand said.

“This annual increase is the lowest since 1999, and the fourth annual increase in a row below 1 percent,” prices manager Chris Pike said.

The lowest inflation rate this century is something for which we should be grateful.

And those wanting the government and/or the reserve bank to “do something” about the high value of the New Zealand dollar should note that part of the reason for low inflation is that the higher dollar makes imports less expensive.

Inflation is theft. It steals the real value of wages and savings and hits the poorest hardest.

It’s less than 30 years since inflation was near 20% and interest rates were even higher.

Turning that around wasn’t without cost but some on the left have short memories.

Their tax and spend policies could easily start taking us back there.
Low inflation and low mortgage rates give families a chance to get ahead.  www.stats.govt.nz/browse_for_stats/economic_indicators/CPI_inflation/ConsumersPriceIndex_MRJun13qtr.aspx


Low inflation makes us better off

28/06/2013

When wages go up faster than inflation, people have more to spend and can save for a rainy day. I think this is an important result for families. What do you think?

High inflation devalues the real value of what we earn.

When wages increase more than inflation, we’re all better off.

Money goes further giving us more choices among which is the ability to save.


Two choices

15/03/2013

Voters next year have two choices.

A National-led government that understands the importance of low inflation:

. . . These forecasts of low inflation are good for New Zealand households, particularly those on lower or fixed incomes. In addition, average floating home mortgage interest rates are now around half what they were 5 years ago in 2008. For a family with a $200,000 mortgage, that is saving them around $200 a week.

Or the alternative:

Hon STEVEN JOYCE: Well, there are a number of alternative policies that would put substantial benefits of current low inflation and low interest rates at risk, and that would, of course, cost New Zealand households dearly—for example, trying to artificially and substantially devalue the exchange rate or going soft on inflation; or, for example, opposing the Government’s share offer programme and instead borrowing billions of dollars more to pay for priority assets like schools and hospitals; or, for example, just pulling out the photocopier and printing more money. All of those things would send interest rates and inflation through the roof, directly affecting New Zealand households and families. They are, of course, the cornerstones of the Labour-Green opposition—

Oh yes, the Green Party still wants to print money:

Norman 14032013

So NZ is borrowing other countries (sic) freshly printed money and paying them interest for the privilege. So why don’t we print some of our own?


A little bit of inflation

17/02/2013

For the Green Party and others who think printing money is a good idea and a little bit of inflation doesn’t matter:

La realidad! ... Cada vez va perdiendo mas valor.


Low inflation, lower interest rates, big savings

29/12/2012

Parties on the left are no longer concerned about inflation.

They must have forgotten the costs of high inflation which include high interest rates and a loss of the real value of savings.

They also overlook the benefits of low inflation.

One of those is lower interest rates which translate to big savings for anyone with a mortgage.

It does also mean lower interest rates for investors.

They are still better off than they’d be with high interest rates and high inflation which erodes the real value of savings.

However, lower interest rates could be one reason the share market has done so well this year.

shares


Higher inflation helps nobody

20/12/2012

Quote of the day:

. . . Low inflation does not cure all ills. But higher inflation helps nobody (except property speculators). It doesn’t even stimulate employment as we used to believe, except briefly by temporarily cutting real wages.

And while printing money or drastically easing monetary policy might get the exchange rate down, we know from bitter experience that this provides only temporary relief for exporters as higher inflation quickly offsets the benefits of a lower exchange rate.

For decades we could compete on international markets with the New Zealand dollar at US$1.12. Now we can’t because too often we listened to those who argued for just a bit more inflation. . . Don Brash.

A bit more inflation is like a bit more pregnancy. It keeps growing, then it produces a baby and the baby keeps growing too.


Parker and Peters singing same silly song

20/09/2012

New Zealand First leader Winston Peters used Question Time yesterday to take patsy questions about his Reserve Bank Amendment Bill from one of his MPs.

He then filibustered to keep the Bill alive.

He’s singing the same silly song as Labour’s David Parker who also thinks the Reserve Bank has failed.

. . . The RBNZ had failed to stop the credit boom of the mid-2000s, despite raising benchmark interest rates to a high point of 8.25 percent before the global financial crisis in 2008. . . .

Is this the same David Parker who was not only an MP but a Minister in the government in the mid-2000s?

That’s the government which contributed to high interest rates with high public spending and policies which fostered debt-fuelled consumption.

Both Peters and Parker want a lower exchange rate.

Both are wrong in thinking mucking about with the bank’s role in targeting inflation will achieve that without creating a whole lot of other problems.

The Visible Hand in Economics explains a persistently high real exchange rate isn’t the fault of monetary policy and the RBNZ:

 A persistently high real exchange rate tells us something structural is going on in our economy – it could be a sign of a government sector that is “too large”, poor domestic competition, a excessively low savings rate relative to investment opportunities in a country, or some mix of similar issues.  As a result, this has to do with competition policy, tax policy, government transfers, and the allocation of government services – but nothing to do with the Reserve Bank keeping price growth at 2%pa.  Remember, it isn’t just an issue of too much credit being offered but too much being borrowed by people domestically who wish to investment and consume.

Remember the exchange rate is a price – it is a “signal” of real imbalances rather than the cause.  Remember, it hasn’t been the “consumption” of cars, TV’s, and baseballs that has been excessiveit has been our “investment” in housing stock prior to the crisis.  Remember that working for families was a large transfer to the middle classes – which helped to smooth income inequality, but also would have pushed up house prices and could have lifted the real exchange rate by increasing demand for non-tradables … in fact the more effective the programme has been, the larger this impact would have been.

The high $NZ – $US exchange rate does erode returns for exports but neither Peters nor Parker have the right prescription for helping that.


Inflation is theft

18/09/2012

Are the people who think inflation doesn’t matter too young to remember what it was like in the 80s or have they forgotten that inflation is theft?


Low inflation, low interest rates

18/07/2012

The CPI rose only .3% in the June quarter and the annual increase was only 1%.

That is very good news for households:

Hon BILL ENGLISH (Minister of Finance): Statistics New Zealand today reported that inflation rose 0.3 percent in the June quarter, annual inflation fell to 1 percent, its lowest level since 1999, and the CPI is increasing at its slowest rate in more than 12 years. At the same time floating mortgage rates, at around 5.75 percent, are at their lowest level in 45 years. This is saving a family with a $200,000 mortgage about $200 a week compared with what they were paying 4 years ago. These factors are helping New Zealand families save more, pay down debt, and get ahead.

. . . Hon Dr Nick Smith: What other factors are helping New Zealanders get ahead?

Hon BILL ENGLISH: Although inflation has been falling, the economy has continued growing moderately. This is reflected in real after-tax wages, which have increased by about 11 percent since September 2008. The components of this are that gross wages have increased 12 percent, after-tax gross wages have increased 20 percent, and inflation has been a bit over 8 percent, which leaves the 11 percent increase. This is a vast improvement on the situation in the 9 years to September 2008, when New Zealand’s real after-tax wages increased by only 4.4 percent in total.

Hon Dr Nick Smith: How does the current level of inflation, at a 13-year low, compare with what the Government inherited when it came into office in 2008?

Hon BILL ENGLISH: When the Government came into office in November 2008, annual inflation was running at 5.1 percent, rather than 1 percent, as it is today. That is because power prices had risen by 72 percent in 8 years, petrol prices were around 10 percent higher than they are now, and floating mortgage rates were at decade highs of almost 11 percent. The lower inflation we are now experiencing, combined with steady increases in after-tax wages, mean most Kiwi families are better off now than they were in 2008, and that is why they are able to reduce their debt and increase their savings.

In the late 1980s we were paying more than 25% for seasonal finance. That sounds like a wonderful incentive for savers but raging inflation took too much of the value from savings.

Low inflation and low interest rates are a much better combination for businesses and for savers.

 

 

 


Wages beat inflation

07/02/2012

Good employment news from Statistics New Zealand:

Salary and wage rates, which include overtime, increased 2.0 percent in the year to the December 2011 quarter, Statistics New Zealand said today. This rise follows a 2.0 percent increase in the year to the September 2011 quarter.

After the 2008/09 recession, annual wage rate growth in the labour cost index (LCI) dropped to a low of 1.5 percent in the year to the March 2010 quarter. Since then, the proportion of surveyed pay rates showing annual rises has grown – from 43 percent in the year to the March 2010 quarter to 56 percent in the year to the March 2011 quarter. This remained relatively stable during 2011 – including 57 percent in the year to the December 2011 quarter.

Salary and wage rates for the private sector increased 2.0 percent in the year to the December 2011 quarter. Annual growth remained steady throughout 2011. Public sector rates increased 1.8 percent in the year to the December 2011 quarter. This increase includes a 2.3 percent rise in the local government sector, the highest annual increase since a 2.5 percent rise in the year to the December 2009 quarter.

The Quarterly Employment Survey (QES), also released today, showed a rise in employment and total paid hours. For the December 2011 quarter, the seasonally adjusted number of full-time equivalent employees rose 0.6 percent, while seasonally adjusted filled jobs rose 0.5 percent. Seasonally adjusted total weekly paid hours rose 0.6 percent for the same period.

Average hourly earnings for ordinary time (ie excluding overtime) rose 2.8 percent for the December 2011 year, after rising 3.2 percent for the September 2011 year.

These aren’t big increases but given the uncertain global financial outlook it is encouraging.

Mat Nolan at the Visible Hand in Economics points out that the wage increase was higher than inflation and – who’s surprised? – people who made a fuss about wages growing more slowly than prices aren’t, or at least haven’t yet, celebrated  the positive reversal.


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