Calls for urgent minimum wage increase as inflation hits 30-year high of 5.9 pct

There are calls for the minimum wage to increase as annual inflation hits a 30-year high of 5.9 percent. 

The increase marks the biggest annual rise since the June 1990 quarter, when annual inflation reached 7.6 percent, StatsNZ said.

New Zealand Council of Trade Unions Chief Economist Craig Renney says increasing the minimum wage is both necessary and desirable.

Renney said inflation is being driven by the price of building materials, rents and fuel. And Kiwis' wages aren't keeping up. 

"What is also clear is that workers wages are not driving the current inflation changes. The latest data on wages from Stats NZ shows that 42 percent of New Zealand workers did not get a pay rise at all last year. 

"More than 80 percent of workers are getting pay rises less than inflation. Overall, the Labour Cost Index shows that wages increased 2.4 percent last year. Whilst some economists may be worrying about a wage/price spiral, we have yet to see increased costs feed their way through to increased wages."

Renney said the most vulnerable people will be hit the hardest, which is why the minimum wage needs to increase. 

He also called for businesses to ensure workers on the lowest incomes get pay rises that match inflation. 

"What is needed now is to make sure that we are protecting those with the least ability to incur higher costs. 

"The Government can help by making sure that the minimum wage and welfare is at levels that don't see workers fall further behind."

But Renney noted the inflation data should be "treated with some caution" because it reflects the recent lockdowns in Auckland. 

"It reflects not just where we are now, but also where we were a year ago. Auckland was just coming out of a level 3 lockdown, and the New Zealand economy was still recovering from previous COVID-19 lockdowns.

"Some bounce back in prices was inevitable as a consequence. It remains to be seen if prices remain elevated as COVID-19 related lockdowns work their way through the data in the future."

Consumer Price Index (CPI) figures released by StatsNZ on Thursday show housing, household utilities and transport were the biggest drivers of annual price rises. Construction prices were up 16 percent annually, while rental prices were up 3.8 percent. And petrol prices were up 30 percent.

Infometrics is forecasting the Official Cash Rate, currently 0.75 percent, to rise by 50 basis points at the Reserve Bank February 23 review.

Annual CPI inflation of 5.9 percent is nearly triple the Reserve Bank's target midpoint for price stability (between 1 and 3 percent), suggesting "things have got out of hand".

For the everyday Kiwi, it requires looking at ways to budget for rising costs.