Inflation warning for wage round

Press, 15 September 1988, Page 3

Inflation warning for wage round

PA Wellington The Minister of Finance, Mr Douglas, has warned unions and employers that reducing inflation is a more effective way to maintain household purchasing power than a one-off “inflationary wage increase.” Mr Douglas was commenting on figures given yesterday by the Statistics Department showing the after-tax buying power of full-time wage and salaryearners in the June, 1988, quarter was 1.2 per cent higher than in the March, 1988, quarter.

The increases in the real disposable income index resulted from the 2.6 per cent increase in average gross incomes. This more than offset an 0.8 per cent increase in the consumers’ price index and a 1.9 per cent increase in average tax rates over the same period, the department said.

Mr Douglas said it was

vital that unions and employers took the lower inflation outlook and the positive effect on household incomes into account at the bargaining table. “A high wage round this year would upset the economic gains that have been made and set this country on the inflationary treadmill,” he said. The figures vindicated the Government’s economic policies and it was “especially encouraging” that the figures showed real disposable income for the lowest 20 per cent of income earners had increased. The spending power of the top 20 per cent fell in real terms. "This shows the Government was correct when it said low-income and middle-income people would benefit from the removal of tax privileges such as superannuation and life insurance exemptions, school fees rebates and standard employment expenses exemptions.”