wealth inequality

In New Zealand, rising inflation, inequality intensify social crisis

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Behind New Zealand’s outbreak of the COVID-19 Omicron variant, a slew of new economic figures points to the escalating assault on the social position of the working class by the Labour-Green Party government of Jacinda Ardern.

Reserve Bank of New Zealand [Image: Google Streetview]

Statistics NZ (Stats NZ) material posted late last month shows that, as elsewhere around the globe, inflation is rising more sharply than previously predicted. Official inflation at the end of 2021 jumped to 5.9 percent, its highest level since June 1990—up from 4.9 percent in the September quarter.

Inflation is rising globally due to fiscal and monetary policies put in place by central banks, led by the US Federal Reserve, which have pumped trillions of dollars to prop up big business and fill the pockets of speculators. The impact is now being exacerbated by supply chain crises restricting the production and distribution of many essential goods.

ASB bank economist Mark Smith told Stuff that inflation would rise above 6 percent in the current quarter, and it no longer looks “transitory.” The NZ Reserve Bank earlier forecast a 5.7 percent rise going into this year, and according to Smith clearly had “more work to do” to try to bring it under control.

Annual inflation is nearly triple the Reserve Bank’s target midpoint for price stability (between 1 and 3 percent), prompting expectations that it will continue ratcheting up interest rates. Infometrics forecasts the Official Cash Rate (OCR), currently 0.75 percent, will rise by 50 basis points at the bank’s February 23 review. The ANZ Bank expects the OCR to be lifted to 3 percent by early next year, its highest since 2015.

The rises will have a devastating effect on homeowners trying to service high mortgages. In December the national average asking price for a property jumped by a quarter year-on-year to reach a new high of $NZ956,150. According to a recent OECD report, house prices have increased more relative to fundamentals—household income and rents—than in most OECD countries. The share of the population under “intense rental stress” is the worst in the OECD.

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