Mike's Minute: Our economy is an increasingly large hole

The Mike Hosking Breakfast

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2d ago 2:03

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Right, let's deal to the economy.

There were two interesting things yesterday.

The first was the food price inflation number showed it is not contained.

Why it is increasing beyond broad inflation is a many and varied thing, and the upside of these numbers is we can control them to a degree.

You don’t have to buy chocolate, given cocoa is through the roof.

You don’t have to buy butter, or a lot of dairy.

Vegetables are up, but that is seasonal. Seasonal fruit and vegetables are always reasonably priced.

Water though, which was the second thing, is not a luxury. Our bill arrived yesterday and, yet again, the price is going up, this time by 7%.

It's like rates and electricity – they're all going up and they're all going up beyond the band of inflation.

The trouble with this is severalfold.

Firstly, this in and of itself is inflationary and it isn't productive. In other words, we are no better off. I still use the same water, it just costs more.

Ideally what you want is more stuff done to produce the income to afford the bills. So if the cost of living is going up 3% and your income is going up 5%, we are okay and are ahead of the curve.

This, sadly, is not happening.

So we most likely have no growth driving the economy and yet we have increasing costs to operate that non-productive economy. That my friends is called stagflation.

So, can we control Israel attacking Iran and the oil price spiking? No.

Can we control the cost of the ship through troubled Middle Eastern waters? No.

But can we control, to some degree, this incessant cost-plus accounting that’s going on domestically by people who got the taste of price increases during Covid and basically never stopped? You would hope so.

This is a central Government thing, especially given a lot of these businesses, weather and power companies, water agencies, or councils have a major central Government input.

If the banks were right yesterday upon the release of the services sector numbers when they said this was an economy in recession, again, price rises in food and water aren't helping what is becoming an alarmingly large hole.

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