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New Zealand: Wage rises must match inflation
Radio New Zealand News

July 19, 2011
View the Original Article

The Council of Trade Unions (CTU) says the rising inflation rate must be mirrored by an increase in wages so workers can maintain their standard of living.

The annual rate of inflation rose to 5.3% in the year to June, the highest in 21 years, Statistics New Zealand reports.

Rises in transport costs, food, and power boosted the consumers price index by 1% in the three months to June.

CTU president Helen Kelly says a rising inflation rate has huge implications for New Zealanders, especially families.

She says the Government needs to control basic living costs, such as power, and also raise the minimum wage.

Business New Zealand chief executive Phil O'Reilly says there can be no one-size-fits-all solution and a sensible debate must take place between employers and workers.

He says employers may have to offset any wage rise by restrict hiring or investment, so a balance needs to be found, and the needs of each enterprise taken into account. Mr O'Reilly says the economic recovery is still very fragile.

Higher interest rates set to follow inflation rise

The new inflation figures have the money markets factoring in a 70% probability of a rise in the Official Cash Rate in October - months sooner than expected .

Just a week ago, the markets believed there was a zero chance of a rise before December.

Westpac economist Michael Gordon says there are signs that it's not just rising commodity prices pushing up inflation. He says the recovery in the economy, which has been stronger than previously thought, could be contributing.

BNZ economist Stephen Toplis says financial markets have seized on the latest numbers as evidence the Reserve Bank will raise interest rates much earlier than expected, most probably within three months.