'GST rise impact on inflation muted'

GST rise has had muted effect on inflation so far, but on-going effects would create challenge, RBNZ's Bollard says

12th Oct 10, 12:21pm by Alex Tarrant

The pass-through of the October 1 GST increase to inflation appears muted so far, but on-going inflationary effects would present a challenge for monetary policy, Reserve Bank of New Zealand governor Alan Bollard said in the Bank's 2010 annual report.

It was critical that businesses and labour groups did not try to use the GST rise as a veil to increase margins and remuneration, Bollard said.

"This means restraint by the electricity sector, other utilities, local government, and others who have a record of using strong market positions to push up prices," he said.

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11 Comments

by Mark | 12th Oct 10, 2:51pm 1286848275

I have a sneaking suspicion electricity providers and local government will put their prices up, regardless of GST.

by neco | 12th Oct 10, 4:06pm 1286852782

"This means restraint by the electricity sector, other utilities, local government, and others who have a record of using strong market positions to push up prices," he said, .... "and if they don't I'm going to put up the OCR so that the tradable sector which is in a competitive non-inflationary market position gets totally muntered."

Evidently that's "world's best practice" for controlling inflation. Orthodox monetary policy in a small, distorted economy. Sigh...

by FCM | 12th Oct 10, 4:41pm 1286854876

The prices will go up, only been a few weeks a lot of companies will hold off until end of month. the petrol went up 7 censt a litre, these costs will be passed on as well as GST through the supply chain process hence the consumer will have to pay more, they will spend less and back to negative growth, the so called tax cuts be eaten up in no time at all. The OCR will have to be held for some time yet if retail is to survive.

by Justice | 12th Oct 10, 7:06pm 1286863562

"It was critical that businesses and labour groups did not try to use the GST rise as a veil to increase margins and remuneration, Bollard said."

Planet Earth to Bollard, are you there?

by Justice | 12th Oct 10, 7:07pm 1286863676

Businesses, particularly fuel and utility companies use EVERY excuse to increase their margins! Maybe Brownlee and Bollard can have a little meeting about 'reality'

by steven | 12th Oct 10, 8:14pm 1286867664

and Bollard threatens them with yet another wet fish slap....he has NO teeth....

So far with rates up 15%, public transport up 25%, food up $20 a week....its like uh huh.....tax decrease is cancelled out....

regards

by A Lan Hubbard | 12th Oct 10, 9:22pm 1286871724

Check the date on that statement. To declare on 9 September that the effect on inflation since 1 October has been muted would require a degree of prescience beyond even the powers of the RBNZ.

Try parsing the statement a little more carefully: "There have been a number of administered price increases, including a GST rise. So far, the pass-through to inflation appears muted..."

by Alen1 | 12th Oct 10, 10:31pm 1286875883

My custard square has gone up from $1.20 to $1.50, so 25% increase. When mentioned GST has increased price by 2.5%, lady at the counter replied it’s true, but her rent increased by same amount, ingredients she needs as well, power bill...still does not stake out, but she made a point.

by Gummy Bear Hero | 12th Oct 10, 11:15pm 1286878519

Wild Bill English is doing you a favour , lard-arse ........... Give the custard squares away . Way too fattening and expensive ....... A cheaper fun thing , which will assist in losing weight ....... Wee white sticks called " cigarettes " .......... C'mon , give up the custard squares , become a Marlboro man .

[ Apologies for the " lard-arse " bit . Currently working off my cheese & shiraz gut ! ]

by A Lan Hubbard | 13th Oct 10, 8:21am 1286911269

Actually she hasn't made a point at all, since she claims back all of the GST on her inputs. March right back to that store and smack that lady upside the head.

by Hamish | 13th Oct 10, 11:13am 1286921630

Bernard, your current reader poll needs one more option;

"I won't get to see any of my extra take home pay after October 1st. It's already been accounted for by increased cost of living"