False figures disguise size of inflation war
Lies, damned lies and statistics is one of the mottos of a cynic.
I strive against cynicism, but I'm losing the fight over the official inflation figures because I don't know anybody who believes that inflation in the 12 months to the end of September was just 1.4 per cent.
Rates, power, food, petrol, house prices, house building costs, house insurance, medical insurance ... all of it has been spiralling up faster than that, in some cases far faster, and households all over are being squeezed by it.
How can this be?
My conclusion is because the Consumers Price Index (CPI) is not inflation as you or I experience it, and I wish everyone would stop talking as though it were.
Households are in a constant war with prices rises.
Businesses are trying to squeeze as much out of each household as they can, and the constant citing of "inflation" as measured by CPI is giving them - including local councils - the cover to do it.
The household economic survey has just come out showing household expenditure up by 9.1 per cent in the three years to the end of June. CPI was up 7 per cent over that period.
In case nobody noticed, households have been trying to tighten their belts. This has not been a period where households have opened their wallets to live it up. Households spent more on petrol, housing and utilities, and food.
Not the luxuries of life then. Perhaps 9.1 per cent is a closer reflection of inflation for households. I'm not sure.
So, how do you fight inflation?
There are various methods households use. Some seek pay increases by being good at what they do, or working longer hours (though these have been hard to come by lately).
Some change their habits by buying cheaper things, cutting down on the fruit and veges for example, and buying more bread, or start growing their own veges.
Some can give up certain higher cost activities, like smoking, drinking, eating out, or curtail them. They have shorter showers. They keep the heating off. Houses can become more crowded.
Some bulk buy when things are on special.
Some defer spending, sometimes evident in the state of cars or of houses falling into disrepair.
Some shop around for lower prices, buying meat from the Mad Butcher instead of the supermarket, for example.
All these responses are legitimate, though most involve some level of privation.
Businesses respond to these kinds of changes in consumer behaviour. They hike their fixed power charges so households pay more just to have the service, whether or not they use it. The sizes of packets fall, but the prices don't fall as much.
The supermarkets bewilder you with specials to the point that it is hard to believe there is such a thing as an everyday price. (I have come to believe that the special price is the price, and something which doesn't have a special label on it is being overpriced in order to be able to slap a special label on it the following week.)
As I said, it's a war, and each household is fighting on multiple fronts at any one time.
I'd just like a measure of household inflation that I feel shows the measure of the fight they are in.
Inflation is your enemy
Frugality becomes wealth
- Rob Stock is a journalist with the Fairfax business bureau and money editor of Sunday Star-Times