2022 is ‘the year of the hangover’ due to COVID-19 lockdown and borrowing – ACT chief David Seymour
He pointed to “$60 billion in public debt, 5% inflation that some experts say will rise to 6% over the year next term, children who have missed almost six months of school at Auckland, about 37,000 operations not completed by September” and “entire sectors such as export education which have been absent”.
ACT’s latest newsletter doubles: “This year will be the year of the hangover. New Zealand will feel the effects of our lockdown, lockdown, borrow, spend and print approach to COVID.
“Labour was fooled by the illusion that isolating us from the world for two years would cost us nothing. For the United States, it might be suddenly credible. For a small trading nation of five million people , it’s a fantasy.”
July last year saw the biggest rise in inflation in a decade to 3.3%, driven by rising housing and gasoline prices. It sparked an outpouring of criticism over the government’s heavy borrowing to pay for the COVID-19 response, made possible by the Reserve Bank’s bond-buying program, or “money printing”, which has since ended. .
The Reserve Bank also lowered interest rates to ensure banks continued to lend during the crisis, which helped maintain employment but led to runaway house price inflation. The Reserve Bank has now tightened lending rules and is expected to continue raising the official exchange rate (OCR).
In the government’s latest financial update for 2021, the Treasury predicted that inflation will continue to outpace wage growth in the near future.
“Aggregate demand and wage pressures have combined with continued supply chain disruptions to push consumer price index inflation well outside the Bank of China’s 1-3% target range. New Zealand Reserve.”
Inflation is expected to peak at 5.6% in the March quarter of 2022, which the Treasury said was “significantly higher than the peak expected” in the government’s budget update earlier in the year .
ASB Bank Chief Economist Nick Tuffley now expects annual inflation for the December quarter of 2021 to hit 6.1%.
Economists believe stimulus-spurred consumer purchases are a reason for inflation. But it is not that simple. COVID-19 has also disrupted supply chains around the world, and when too much money is available to buy too few goods and services, demand outstrips supply, driving up prices.
And it’s not unique to New Zealand and not always controllable. The government cannot help, for example, the fact that global supply chains have been disrupted due to COVID-19. Finance Minister Grant Robertson described it as a “global phenomenon” due to the pandemic.
Inflation in the United States, for example, is the highest in almost four decades. The Wall Street Journal attributes this to supply chain disruptions, a shortage of goods and materials, “coupled with strong consumer demand and the benefits of government stimulus.”
National finance spokesman Simon Bridges said inflation could be avoided in New Zealand if the government halted its COVID-19-related spending.
“Basic public spending is expected to rise by 68% since Labor came to power,” he said in December. “While high spending levels were appropriate for much of the pandemic, many economists and people like the Reserve Bank are now confirming that this is an overheated economic picture where adjustments and some relaxation are needed.”
But Robertson says the country needs more investment in areas such as health and climate resilience, hence the government’s gigantic $6 billion “one-time” operating allocation, or new funds, allocated for 2022.
Another way to help limit inflation is to reduce the time contacts of COVID-19 cases have to spend isolating themselves at home, according to Seymour. The government has estimated that 350,000 people at a time could self-isolate during this Omicron outbreak, which will disrupt supply chains.
The government is offering financial support to employers to help them pay their employees who have been asked to self-isolate due to COVID-19 and are unable to work from home.
The leave assistance scheme is $600 per week for a full-time worker and $359 per week for a part-time worker.
There is also short-term absence payment available to help bosses pay employees who cannot work from home while awaiting a COVID-19 test result. This is paid at $359 per eligible worker.
More details on updated contact definitions and isolation requirements under Omicron’s three response phases will be provided on Wednesday by Associate Minister of Health Dr Ayesha Verrall.