I owe the title of today’s writing to Edward R. Morrow, a revered American journalist who reported the issues of the common folk and championed the need for commonsense in the public interest.
The reserve bank hiked the cash rate by 0.75% this week, which is set to drive up mortgage rates and send many already beleaguered homeowners to their bank manager cap in hand. Default and repossession loom for many next year.
The reserve bank says it is anxious to bring inflation under control. So how does pandemic inflation work, and will high interest rates solve the problem?
It certainly is Black Friday here in New Zealand. Supermarket shoppers are in a black mood for good reason. In my local Countdown, yesterday, tomatoes were $23.60 a kilo, and a leg of lamb was $23.50 a kilo. In contrast, at Sainsbury in the UK, tomatoes were at just NZ$4.26 a kilo, and New Zealand lamb was on special at $13.00 a kilo (including the cost of shipping it halfway around the world). UK shoppers are complaining that the cost of food has rocketed; apparently, they don’t know the meaning of it.
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It doesn’t stop there; petrol retailers in New Zealand put up prices the minute they go up overseas but don’t put them down promptly when international prices fall. Pump costs in the US have fallen steadily by a total of 27% since 10 June, but you tell me: have they fallen appreciably here?
There is a well founded suspicion that instead of playing the ‘inflation’ card, the reserve bank should be asking the ‘profiteering’ question. But here’s the rub, in my local mom-and-pop health food store, tomatoes were at an almost affordable $10.90 a kilo. So how are supermarkets able to charge so much?
They have a virtual monopoly and an addiction to profit. Back in March, despite admitting that they were making $430 million in excess profits, the government’s Commerce Commission said it would be too hard to rein in our supermarket duopoly.
So the government has put food costs in the too-hard basket and decided to squeeze homeowners out of their last pennies instead.
So Where is the Team of Five Million Now?
The pandemic did put a strain on global supply chains, but that has virtually evaporated now. However, some of our biggest retailers, manufacturers, and suppliers remain determined to hang on to excessive profits. Our New Zealand energy firms posted an increased profit of 21% in 2021, with no change on the horizon in 2022. Overseas oil and gas firms are posting record profits, and calls for windfall taxes have increased. So why aren’t we hearing similar noises from our government?
It is too hard, silly. There are so many international conferences to attend and discuss the new world order, when in fact, what they are actually delivering is local disorder by default. The current romantic involvement of the government is with big money, big technology, big ideas, and it is all happening in the unregulated global space outside of our national borders where anything goes. A sort of wild west of daylight robbery.
How does that work? Well, you have to put on your efficiency cap. We currently export 80% of our timber logs to China. Up here in Northland, we used to have a Carters wood mill turning out 2 by 4s for the local building industry. It was closed, and manufacturing was centralised somewhere in the name of efficiency. In other words, making it all in one place is slightly cheaper. Meanwhile, the New Zealand building industry is experiencing a shortage of lumber and record prices. It is not expected to end anytime soon. We have a shortage of milling capacity. Does that make any kind of economic sense?
Apparently, it does to the captains of industry who have shut down milling capacity rather than expanded it but not to you and me. The government, meanwhile, not content with the rising cost of house construction, is responding by raising interest rates that directly affect homeowners, the same ones struggling with rising construction costs and record supermarket prices. It is a triple whammy. Hurrah!
A visit to the local supermarket has become a sort of dreary, joyless, grey coloured outing, where we panic at the cost of items we used to love and add to our trolleys with satisfaction. Just reflect that our great leaders might have become a little clueless, distracted, and timid. They have been seduced by the great global reset and have taken their eye off the local scene. They are busy adopting face recognition and digital currencies. And, of course, there might also be other factors at work that you are not allowed to mention on FB.
When an Increasingly Small Circle of Corporations Can Fix the Prices of a Growing Number of Necessities, It’s Called a Monopoly.
Don’t think that nothing can be done, history teaches us that at some point governments have to step in with antitrust regulations and laws which break up local monopolies. Government should similarly organise to curb the pervasive influence of international monopolies. This will take clear thinking and analysis. Overseas suppliers will not always have our interests at heart. Measures need to be put in place to ensure local manufacturing self sufficiency is not completely depleted.
Government vision is out of focus. Governments all over the world have begun to see themselves as players on the global stage who are thinking the big thoughts, while local electorates are lesser folk with lesser concerns who don’t really matter.
So Who is to Blame?
Not surprisingly, in the words of that old traditional song:
“It’s the same the whole world over, It’s the poor what gets the blame, While the rich gets all the pleasure, Ain’t it a blooming shame.”
Our foreign-owned banks are all set to make a record annual profit of $10 billion, but according to a Newsroom podcast with John Kensington, head of banking and finance at KPMG: “The main thing has been New Zealanders’ love affair with property”. Translation: we are foolish, and the banks blameless.
In other words, we, the people, have had an absurd and ridiculous longstanding expectation of a leak-free roof over our heads. The banks meanwhile prudently expected that the pandemic would impact on our capacity to repay home loans (it didn’t) and accordingly supercharged profits to offset their non-existent losses.
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In summary, inflation appears to have a certain big picture inevitability to it that has little in reality to do with you and me, who, as always, simply need a home, health, and food on the table. Am I right?
Nations rise and fall on the back of the health, innovation, well being, education, and happiness of their populations. Let that slip with a helpless gesture and a ‘what can we do?’ lament, as is happening now not just here but elsewhere also, then we have lost the plot and mortgaged our future. Edward R. Morrow would not have been impressed. He would have spoken up. So should we. I am planting tomatoes.
Photo by Markus Spiske on Unsplash
