Newsroom Pro's 8 things at 8 am

South Auckland street. Photo: Lynn Grieveson

In today's email we detail the impact of the latest household living cost figures on various sectors of the population.

1. Inflation worse for the poor

Solid economic growth with low inflation is seen as the main way to lift living standards and is certainly the Government's main strategy. But that depends on the benefits of that growth with low inflation being spread reasonably evenly, and for inflation to affect everyone evenly.

The minimum wage and New Zealand Superannuation have been rising faster than inflation and in line with average wages over the last decade, but other benefits and hourly wages at the low end have not grown as fast as costs in recent years. Fast-rising rents and tobacco taxes have had hit the poorest particularly hard.

The indexation of benefits (other than New Zealand Superannuation) to Consumer Price Index inflation has further widened the real income gap between the richest and the poorest.

A new Statistics New Zealand series on how different income groups are affected differently by inflation shows beneficiaries and those on the lowest income groups have seen the prices of the things they buy rise faster than the costs of things bought by those on higher incomes over the last year.

The Household Living Cost Price Indicies showed inflation in the March quarter from the same quarter a year ago was 1.9 percent for all households, but was 2.2 percent for beneficiary households and 2.1 percent for the lowest income quintile. It was 2.3 percent for the lowest spending quintile of households. The highest income quintile and the highest spending quintile saw annual inflation of 1.8 percent and 1.6 percent.

The difference was driven by rising rents and cigarette taxes for the poorest households, while falling international air fares and mortgage rates helped dampen the effects of inflation for the highest income and spending households.

Labour and the Greens focused on the figures yesterday.

"The housing crisis continues to effect living standards and the data is clear that rising rents are hitting people in the pocket," said Green Co-Leader James Shaw.

"The supposed bounty of Bill English’s economy isn’t being shared fairly. People at the top are doing well but a huge number of families are struggling and wages aren’t keeping up with rising bills," he said.

2. Smiles but no changes

Foreign Minister Gerry Brownlee met with his Australian counterpart Julie Bishop yesterday in his first formal meeting in the role.

As our Foreign Affairs and Trade Editor Sam Sachdeva reported for Newsroom Pro yesterday, Brownlee wasn't able to roll back any of the changes to citizenship rules and higher education costs that have created uncertainty for expats there.

The now regular reductions in the rights of New Zealand citizens living in Australia is adding to the pressure for New Zealanders to come home, and reducing the incentives for New Zealanders to go to live in Australia.

That's part of the picture that has driven the turnaround in net migration of New Zealanders to Australia in the last three years, which is a major factor behind the record high net migration.

Most economists, the Reserve Bank and Treasury have forecast a slide back in net migration as the relative performances of the Australian and New Zealand economies reverse, but these citizenship changes may be more of a structural change that messes with those cyclical factors. The end result may be a higher net migration rate in the long run.

3. Add myrtle rust to the list

There's been a few unwelcome surprises from across the Tasman in recent weeks.

Now we can add a wind-borne fungal disease that can seriously damage pohutukawa, rata, manuka, gum, bottlebrush and feijoa. It is a particular worry for the until-now booming manuka honey industry.

Yesterday Primary Industries Minister Nathan Guy and Conservation Minister Maggie Barry announced the discovery of myrtle rust on pohutukawa seedlings at a nursery in Keri Keri.

MPI put in place a restricted place notice to restrict the movement of any plants and people at the site.

New Zealand First Leader Winston Peters said the Government had ignored recommendations from the Crown Research Agency Scion five years ago about preparing for the arrival of myrtle rust and cut funding to deal with it. He also said Guy should have used a ministerial statement in Parliament to call on New Zealanders to notify MPI if they found the disease.

4. NEETs 'just taking time off'

One of the stranger views about young people who are Not in Education, Employment and Training or (NEETs) came from the new Minister for Tertiary Education, Skills and Employment, Paul Goldsmith yesterday.

In Parliamentary question time, he suggested the NEETs (there were 86,000 measured by Statistics New Zealand in the March quarter) were actually just on holiday.

In answer to a question from New Zealand First MP Darroch Ball, Goldsmith said NEETs were "just taking some time off."

"They are young people who are going about spending time looking after family members or having some fun," he said.

Further to our item at the top of the email, he said: "Like I say, the most important thing that we can do is make sure that there is a strong economy so that when they are ready to join the workforce, they can."

5. The Gareth Morgan roadshow

Newsroom's Co-Editor Tim Murphy went along to one of Gareth Morgan's political roadshows in Auckland this week.

Here's his report for Newsroom.

Gareth was in TOP form (that's the one attempted joke in the email).

Here's a sample, but it's worth a click through to the full report.

Morgan was asked if he expected blowback from the establishment or the electorate.

"I would rather go down in flames than sit doing nothing. Don't point the finger at me. I'm giving you the rational set of policies here. The issue is do you have the balls to do something about it or are you just going to vote for self-interest," Morgan said.

He then explained a survey TOP had done examining what motivated people when deciding if they supported a policy:

  • 40 percent said "Is the policy fair on me?" ("Pure self-interest")

  • 31 percent said "Who's promoting this policy?" ("Red or blue - tribalism")

  • 24 percent said "Who's paying for this policy?" ("If it's someone I can't stand the sight of, OK")

  • six percent said "Is this policy good for New Zealand?" ("And that's what I'm dealing with").

6. Some weekend reads

President Donald Trump is a news machine, but what is going to happen to him? Evan Osnos writes in the New Yorker about the two main paths for removing a President.

Where has Trump's reflation story gone? Neil Irwin writes at the New York Times that the low inflation world may be sticking around for a lot longer yet.

This piece from Jerry Useem in The Atlantic looks at the issue of dynamic pricing online, where prices differ for the same good or service depending on the buyer's income levels and previous web activity.

And rightly, Jonathan Taplin asks in this New York Times Magazine piece whether it is now time to break up Google.

7. Coming up...

The Reserve Bank will release the results of its latest inflation expectations survey at 3 pm today. It is closely watched, given a surprisingly low result early last year triggered a surprise rate cut.

8. One fun thing

David Rowe is the cartoonist for Fairfax Media's Australian Financial Review and a fantastic one at that. Yesterday he published a cartoon about Fairfax Media's announcement on Press Freedom Day that it would cut a third of its journalists to save A$30 million (while its CEO Greg Hywood was paid a A$2.5 million bonus).

Perhaps not surprisingly, Fairfax's staff in Australia went out on a one-week strike.

The cartoon captures the mood well. It is sombre and cuts straight to the heart of the matter.