COST OF LIVING

Wanganui Chronicle, Volume 84, Issue 44, 22 February 1940, Page 10

COST OF LIVING

SOARING OF PRICES HALTED DECEMBER RECOVERY Mainly because of a substantial decrease in the price of potatoes and onions, the soaring of retail prices in New Zealand during 1939 was halted in December, and effective purchasing power (the relation between costs and wages), which during the 11 months to November had retracted from the high levels reached in 1937 and 1938 to a level obtaining in 1935, recovered slightly. The year began with a nominal wage rate index of 1081, a food group index of 991, a miscellaneous index of 1054, an all-groups index of 951, and an effective wage rate (purchasing power) of 1136, which was the highest point reached in New Zealand's history. At the end of November nominal wages stood at 1100, an increase of 19 points and the highest level recorded, the food group at 1126, the highest since 1921, and an increase in the 11 months of 135 points. The miscellaneous group had also reached its highest level at 1124, an increase of 70 points. The all-groups index stood at 1024, an increase of 73 points and the second highest level recorded. The action of mounting costs on purchasing power was shown in the decline in the index in the 11 months from 1136 to 1074, 62 points, or 5 per cent. The Household Budget. The food and the miscellaneous group indices are singled out for quotation as, according to the Year Book, a household budget compiled in 1930 allocated 60 per cent, of the expenditure to these items. The remaining 40 per cent, includes rent, fuel and light, and clothing, footwear and drapery, in which the increases have not been substantial and are incomplete for the year. The effect of the December recovery was no small one. Potatoes, for example, which were selling at from 3<d to 4’id a lb. in November, declined to from 5/- to 6. - a cwt. sack. Onions showed a similar cheapening. Sugar and tea were among the commodities which rose in price, but these rises were more than cancelled out by the fall in potato and onion prices of nearly 400 per cent. As a result, purchasing power rose from 1074 in November to 1082 in December. The year ended with the nominal wage rate index at 1102, an increase in the 12 months of 21 pomic, the food index at 1105, an increase of 114 points, miscellaneous still at 1124. an increase of 70 points, and the allgroups index at 989, an increase of 38 points. The effective purchasing power index was 1082, a decrease of 54 points on 1938. The following table shows the average yearly indices in two of the most prosperous years of the 1920-30 period, a mid-depression year and post-de-pression years:—

Wages Tax Not Deducted. It has to be borne in mind that no deduction is made in these returns for the Social Security tax of 1/- in the £. previously 8d in the £ for unemployment. No such tax existed in 1928 or *1929. The effective wage rate or purchasing power is calculated on gross earnings to-day as in 1928 and 1929. No allowance is made also for this wage tax in income tax assessments. Computed on the yearly averages, food costs have risen from 1935 by 217 points or 26 per cent., all retail prices by 152 points or 18 per cent., and nominal wages by 242 nnints or 28 per cent. The margin in favour of the purchaser. however, does not exist at the moment, as the following monthly summary of purchasing power in 1939 I shows, comparative figures for the : same months in 1938 being given in narentheses: January. 1135 (1113): February, 1139 (1112): March. 1136 (1113); April. 1129 (1123); May, 1119 ‘1122): June. 1122 (1122); July. 1116 i(1135): August. 1104 (1129): SeptcmI bcr. 1105 <ll3-1': October. 1103 (1136): November. 1073 (1136); December. I 1081 (1133). Purch ising power Declines. I Those figures represent current pur- ! chasing power and reveal the extent : to which there has been a sharp decline in 1939 compared with 1938. Compared with 1914 nominal wages have risen by 76.9 per cent.; groceries by 91.2 per cent.; dairy produce by 36.3 pei cent.: the three food groups by 57.2 per cent.; rent by 66.9 per cent.; fuel and light by 59.4 per cent.; clothing, drapery and footwear by 42.3 per cent.; miscellaneous by 87 per cent.; and all groups by 67.9 per cent. For the four war months up to December, all retail prices rose by 2.2 per cent. The rent and clothing indices. however, are incomplete. In the two groups which absorb the bulk of household expenditure, food and miscellaneous. the increases wore 4.2 per cent, and 4 per cent, respectively.

Food group All retail prices Nominal Effect iv wage at e wage rate .1928 1104 1106 1016 1010 1929 1013 1004 1017 1013 1933 732 833 1048 1935 835 837 858 .1025 1936 S70 864 950 1100 1937 956 923 1036 1122 1938 991 951 1081 1136 1939 1052 989 1100 1110