Index shows freeze a failure—Labour

Press, 13 October 1982, Page 3

Index shows freeze a failure—Labour

PA Wellington The drop in the yearly inflation rate from 17 per cent to 16.6 per cent has been derided by Labour, condemned by unions, hailed by the Government as a first step, and welcomed by employers. The quarterly consumers price index released yesterday, showed that the index was up 3.6 per cent on the June quarter. Increases in the fourth quarter of 1981 and the first two quarters of 1982 were 3.9. 3.2, and 5 per cent, respectively. The 3.6 per cent September quarter rise came from food, 0.3; housing. 1.1; household operation. 0.3: apparel, 0.1; transport, 0.8: and miscellaneous, 1.0. - Labour's leader, Mr Rowling, said the quarterly rise marked the death of any remaining credibility for the wage-price freeze.

He said the freeze should be replaced by a comprehensive incomes, prices, and investment policy or the economy would slide into an “even more critical state early next year." In spite of the freeze, the September quarter had shown a higher rise than the unfrozen first quarter of the year, and was only 0.3 per cent lower than the corresponding quarter last year. “New Zealand is being asked to pay... for a freeze that has succeeded only in

reducing the annual rate of inflation from 17 per cent to 16.6 per cent." Mr Rowling said.

"If the September rate continues for the balance of the freeze, we would see an inflation rate of 15.2" per cent for the duration."

Mr Rowling called for negotiations on an incomes and prices policy, an antiinflation package including stabilisation of Government charges, and monetary action.

The executive director of the Employers’ Federation, Mr J. W. Rowe, said the figures showed that employers were co-operating fully in the price freeze. “All the main current production groups of the index have increased very little, while the housing group and some items involving Government charges and taxes — including changes in the August Budget — showed comparatively large increases," Mr Rowe said. The Minister of Trade and Industry, Mr Templeton, said the 3.6 per cent rise for the third quarter was “better than before but still only a first step."

The index movement showed that the high inflationary trend of the June quarter "was just nipped in the • bud by the wages and prices freeze." It showed that the freeze would have to stay for a full year to get a substantial drop in inflation, Mr Templeton said.

Co-operation would be

neeaea after the freeze to hold inflation.

"The latest figure shows what can be done, for the freeze was not in place for the entire quarter covered by the index. A big chunk of the index reflects pre-freeze price rises — mid-May to June 22. “Even so. food items covered have slowed quite dramatically. On the other hand, it is clear that rises in house prices which occurred months ago are still flowing into the index." Mr Templeton said. Social Credits economic spokesman, Mr L. Hunter, said the rise showed there had been little real improvement in inflation. Prices were not being held, real incomes and living standards would fall, goods would become harder to sell, and unemployment would continue.

The Institute of Economic Research expects inflation to drop more sharply in the December quarter. Mr D. O'Dea, the institute’s senior research officer, and editor of its quarterly predictions of inflation, said the latest index figures were “no great surprise." The institute's, own forecast. . made on information available about a month ago. predicted a slightly higher rate of 3.9 per cent for this quarter, and a rate of 1.8 per cent for the quarter ending December — the period in which the institute expects the wage-price freeze to come up with some noticeable results.