Price Index

Press, Volume CIV, Issue 30737, 29 April 1965, Page 18

Price Index

Sir,— During the last week we have been informed that the consumer price index rose 4.5 per cent during the last financial year. Could you inform me—and I’m sure a lot of other interested people—whether this means that the purchasing power of the pound fell by 4.5 per cent and that the people with savings accounts at 3 per cent interest consequently lost 1.5 per cent on the money they are lending to the Government and other institutions? —Yours, etc., NEST EGG. April 19, 1965.

[The Government Statistician (Mr J. V. T. Baker) replies: “The correspondent apparently refers to the 4.5 per cent increase in the all groups index of the consumers’ price index which occurred between the fourth quarter of 1963 and the fourth quarter of 1964. The consumers’ price index measures price changes in a wide range of consumer goods and services purchased by New Zealand households. So far as money, if spent, would be spent on these types of goods and services, changes in the all groups index can be used to indicate changes in its purchasing power and, on this basis, the purchasing power of the pound fell by about 4.5 per cent during the above period. It is true, therefore, to say that a person who invested his money at 3 per cent interest late in 1963, instead of spending it then on the types of goods and services mentioned above, would, with the investment and the interest on it available late in 1964, be able to buy approximately 1.5 per cent less than if he had spent his money in 1963.”]