Tuesday, 12 April 2011

GST and inflation

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.

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.
I'm so going to win my bet with Matt.