Ok, is is just me, or is there one word that I have not heard in relation to the OCR being cut to a record low?
That would be the word “Inflation” which is the only thing that is supposed to be taken into account. Apparently, that can be ignored when Dr Bollard feels like it.
Bring back Brash.
Save the Humans has a good post on inflation – the silent killer.
It’s interesting that Labour is the party that’s let it get away. Because with inflation, prices go up and that affects the workers more. They can’t adsorb it as much as those on higher incomes. They have to go to their employers, and ask more often for larger pay raises that they may not get, especially if the employer can’t find a way to pay for pay increases
So inflation puts power in the hands of employers in a sense. But it’s too subtle for many to understand, so an important issue just gets ignored, and in the meantime the battle is lost, meaning that even greater pain is in store for the guy who’s prepared to do what it takes to get it back under control.
That would be the National party one assumes.
He quotes Anti-dismal, and I have to agree too.
I find this [inflation getting out of control] all very depressing. In the country that’s done more than any other to work to insulate its central bank from political pressures and to ensure bank independence, we’ve proven that a sufficiently determined government can completely erode that independence by appropriate eroding of the bright-line rules that characterized previous policy targets agreements, appointment of a dovish Governor, and sufficient winks and nudges about that there will be no consequence whatsoever to the Governor’s ignoring of the target band.
Update: This post is wrong – it’s been pointed out that the figures already include inflation!
This post is very important, so please read it carefully.
The other day, The Standard posted this chart, it’s one they’ve used before.
Now, I’d heard tales of how dissenters are quickly banned on the standard, so I thought I’d see if they hated my style as much as Adolf’s. Here’s what I said on the thread. In hindsight, perhaps a bit abrasive but completely honest.
And I still can’t understand why they persist with such an average chart. But clearly I don’t think like a Labour supporter. Perhaps their real slogan behind the scenes is “Labour: We’re just as good as National”. But the inflation thing is important and we come back to that.\
Now, I suspected that I’d be banned, but that was not to be. However, neither was my other expectation of an explanation for promoting averageness forthcoming.
Rodger Nome was the one who replied, but not to my points.
scubone:
You need to back up your ranting with “facts” and/or “rationale” if you want to convince anyone here. It isn’t kiwiblog you know.
Now, I knew that inflation had eroded Labour’s gains, but I’d never quantified it. So I though, why not.
Here’s what I found and commented back.
Ok, here’s my rationale. I’ve pulled down the figures you used here, plus the inflation data from the reserve bank.
From Q2′92 till Labour took over I make inflation at 1.85%, Labour’s average is 2.63%.
National grew the economy 32%, Labour 28% over that time – so about the same. That’s my point: Labour’s growth is the same, so that’s nothing to boast over
But when I take off inflation each quarter and accumulate that I get 23% real growth for National and 5% for Labour.
Is that the facts you wanted?
Like I said, Labour went up the same hill, but used a heck of a lot more gas to get there.
I might explain this in a bit more detail over at halfdone.
(Just realised: National got that growth in shorter time, so Labour’s 5% is actually much worse)
As they say in school, show your working. Here it is. You can decide for yourself if I’m making this up.
GDP figures from here. Inflation from here. They are both quarterly figures.
(Click the pic to see in full size.)
Data is organised into columns A, B and G. I converted the inflation figure to % in column D.
I calculated the “Growth” column by simply taking the old figure from the new. I calculated the “Inflation” (Column E) column by multiplying B x D and divided by 4 since it’s a quarterly percent figure.
Finally, I calculated teh “Inflation Adj” column by taking the previous figure from the column adding the growth (E) and taking off the inflation (F) – simple eh!
This resulted in this chart.
Now you can see what I’m talking about. While the economic growth is fantastic and upward moving, the cumulative effects of inflation have potential to cut everything out of that.
And Labour has not controlled inflation like National did.
National’s inflation was 1.85% Labour’s was 2.63%
But more telling is a glance down the column. National ran a consistent 2%, finishing off with a nice low 1% for 1999, but Labour’s figures are solid 3%’s with a few 4% numbers scattered through. The first of these occurred in 2000.
It was the decisions taken then – to tollerate some inflation – which have brought us to where we are today – little better than when Labour took over. Both National and Labour achieved simmiliar rates of growth, but Labour build theirs at a much higher cost. That shows badly on the chart.
(If you think it’s unfair that I’ve put the end of National’s line at the end of a steep climb, remember that almost all variations on that chart were inflation – and National was running at 1%, that’s why it was going up. )
Yes, times are bad all around the world. The Standard makes great hay from that.
But the key point is this. We may have grown over the Labour years, but we failed to grow in real terms. (DPF has done a post on wages, and found the same thing that I’ve done here).
When hard times arrived, and they are here now, the gains that were made have dissapeared and we are now worse off than before. People hurt now, not because their wages have failed to grow, but because those wages do not buy what they used to a few years ago. The fact is that right now, factors such as international oil and food prices* are what is driving our inflation, but because Labour didn’t consider inflation a priority earlier, when we could control it, there’s no leeway to let the reigns loose now.
Worse, the failure to keep inflation under control has meant that it is now much harder to control, leading to higher interest rates for much longer. I outlined that in this post some time ago.
Governments learned the hard way the cost of inflation. But just because a lesson is learned, doesn’t mean that you can ignore the lesson and not expect to be taught again. We’re now having a refresher right now, so please, enjoy.
*In fact, National also faced a crisis not of our making – the Asian crisis. You can see clearly on the chart where steady growth was interrupted. However the underlying strength of the real economic growth meant that the effect was relatively minor.
What do you see?
I see an economy in ruins, inherited from Labour no less, which took a long time to turn around*.
I see a good, solid recovery with low inflation.
Then Labour takes power, and after an initial stumble things take off. That’s in large part because they took their eye off the inflation ball.
What that means is that that graph can go as high as you please, but the effects of it are neutralised by our current high inflation and interest rates. Wages are only growing slowly in real terms, and what’s left is swallowed up by high interest rates.
Finally,I see another attempt by the left to convince themselves that they’ve done a much better job than National, that not screwing up makes them better than the very hard fix-up job that National was left with, that all that corruption was worth it so they could stay in power just one more term so they could “help” people.
There’s only one category for this post.
*Let’s be fair though: they inherited their own mess from the National administration before that. But do remember, Helen was the no 2 during the 80’s Labour goverment – what does that say about their attempts to paint Key as the same as the 90’s? He wasn’t’ even in the country.
Robert Mugabe was once one of Africa’s best leaders.
Zimbabwe wasn’t totally up to western standards, but by African standards was pretty good.
He was elected many times fairly.
Then he started manipulating to stay in power. One thing built on another…
Right now Zimbabwe is a complete mess. Hyper-inflation (bread is was last I checked $230 a loaf after lopping multiple (6 I think) zeros off the currency) is rife. No one can get petrol, not even the police.
People have been dumped in the middle of nowhere.
Farms that used to be the breadbasket of the continent are lying idle. People are starving.
Now he can’t resign because if he doesn’t do it right, he’ll be locked up for life.
All because a politician started manipulating things to stay in power a bit longer.
Helen, do you really want this to be you?
You fellows are a bizarre lot.
That graph is absolutely nothing to boast over – it shows Labour not screwing up at best.
At worst, add the inflation to it and you find (to use a car analogy) that Labour’s used far more gas to get up the same hill.
You guys are loosing the public – keep up the good work!