RBNZ rightly looks through the one-off hike in price levels that came with the GST increase. That's not inflation. But that level shift working its way into wage settlements would be.I don't get it. Why would the RBNZ worry about a change in wages. Such a change is a change in a relative price, not a change in the price level. Or does the RBNZ believe in cost-push inflation. Oh dear!
From the latest survey of employers:
* Roughly a third say that the GST increase has been or is expected to be a factor in future wage negotiations (see Table 68)
* A majority of large (50+ employee) firms say wages and salaries either take account of past inflation outcomes, take account of expected future inflation, or are contractually linked to inflation (Table 67). Note that headline inflation numbers will include the GST hike.
Tuesday, 12 April 2011
Relative prices v. inflation
At Offsetting Behaviour Eric Crampton writes,