Inflation data adds to Labour's woes

Labour will be happy that this week's truly horrible inflation data came out during the Parliamentary recess.

After all, the highest inflation in 13 years and the biggest quarterly increase in food prices since June 1990 isn't something either Prime Minister Helen Clark or Finance Minister Michael Cullen particularly wishes to be quizzed on.

It's amazing how quickly things have turned. It seems like only yesterday that ministers were asking each other patsy questions in the House so they could in turn stand and brag about record low unemployment, growth rates higher than Australia's, or some other positive fiscal indicator.

It never ceases to surprise me how quick any government is to claim the credit when things are going well, and how fast it is to distance itself when things are not.

Take Cullen's prepared lines yesterday: "It is important to remember that our economic challenges are not of New Zealand's making. The global increase in the prices of petrol and food are outside New Zealand's control.'' 

Labour will be happy that this week's truly horrible inflation data came out during the Parliamentary recess.

After all, the highest inflation in 13 years and the biggest quarterly increase in food prices since June 1990 isn't something either Prime Minister Helen Clark or Finance Minister Michael Cullen particularly wishes to be quizzed on.

It's amazing how quickly things have turned. It seems like only yesterday that ministers were asking each other patsy questions in the House so they could in turn stand and brag about record low unemployment, growth rates higher than Australia's, or some other positive fiscal indicator.

It never ceases to surprise me how quick any government is to claim the credit when things are going well, and how fast it is to distance itself when things are not.

Take Cullen's prepared lines yesterday: "It is important to remember that our economic challenges are not of New Zealand's making. The global increase in the prices of petrol and food are outside New Zealand's control.'' 

Now whether you agree with Cullen or not depends, I guess, on whether you subscribe to the free trade market economy we operate in. But assuming he's right, it's still ironic. Can you imagine Cullen saying, after delivering one of his whopping surpluses of yesteryear: "It is important to remember that our economic good fortune is not of New Zealand's making. The global rises in commodity prices are outside New Zealand's control.''

Um. Don't think so.

However, Cullen can distance himself all he likes from the causes of inflation running at 4% and heading for 5%. He can blame all the Middle East unrest and growth of developing nations he likes for the fact that petrol is up a whopping 25% in the last year. He can moo about the rise in the value of dairy prices that has seen milk up 22% in a year and cheese 62% until the cows come home.

The fact is it's happened on his watch and voters, rightly or wrongly, expect him to do something about it. Cullen recognised this yesterday, referring to the October 1 tax cuts package which, he said, "will provide some relief'' Actually, as Cullen knows only too well, it will deliver very little.

The cruel reality of inflation is that the value of his $16 a week for the average wage-earner is eroding by the day. By the time October 1 rolls around, the increase in the price of petrol alone since the Budget would have accounted for half of the extra Cullen has promised. Fresh increases in the price of milk, bread, cheese, and fruit and vegetables will take care of the rest.

The Finance Minister will be hoping desperately that the Reserve Bank comes to his aid and cuts interest rates, preferably as soon as next week. But Alan Bollard seems an unlikely white knight for Labour at the moment. The CPI data might even spook the bank into holding off rate cuts altogether.  

In the short term, Labour and every other political party is powerless to do much about the international headwinds buffeting little ol' NZ. Longer term, obviously, either Labour or National could try to set the country in a different direction, if they were brave enough.  

There is, however, the matter of what happens to us in the meantime.

We could always have a debate about it, if the Opposition would engage. Yet all I know of National's plans for the economy is that it will reduce taxes, "cut red tape'', spend more on infrastructure, reduce government spending "so that interest rates track downwards'' and improve education standards.

There's almost enough apple pie in those statements to feed a starving family of five for a week. But the polls show voters are still happy with this level of detail from National, for the meantime anyway.

So what has Labour got up its sleeve? Has it completely forgotten its socialist roots? How about a return to subsidised milk, as proposed by the Green Party? A daily bread allowance? Cut-price petrol and power? Laughable, right? Well, in recent history, yes, but we used to have them all. Many nations - including OECD countries such as France - still do.

There's little doubt Labour will be punished in the polls for the way Kiwis are now hurting, and I'm not saying it shouldn't be. But it would be nice to know the alternative.