We mustn’t let 2022 be the year of inflation

Anew day, a new year. Optimism abounds. For many years we had a ritual with a few friends. We’d get up before dawn, meet at a nearby beach and watch the sun rise over Rangitoto, helped by some bubbly, coffee and croissants.

It wasn’t just another sunrise. The sun knew, the brightening sky knew, Rangitoto knew. Time had turned the page.

The wonderful thing about New Year is that you know just about everything you think will happen in the year ahead probably will not. Predictions are doomed. That is turning out to be especially true in a pandemic.

We’re entering the third year of a mutating virus. When countries first locked down against Covid-19, the economic consequences were predicted to be comparable to the 1939 Wall St crash that started the Great Depression. Those “9s” looked ominous.

History records that the first year after the stockmarket crash was not the worst for unemployment, nor was the next, though 1931 was getting rough towards the end. The worst year of the Depression was 1932. So I’ve been dreading 2022.

But banish the thought. It’s bound to be wrong. We already know the economic consequences of lockdowns are not the same as the Depression, thanks to the lesson learned in the 1930s. Monetary and fiscal stimulants have maintained most businesses and jobs and when lockdowns were lifted, recoveries have been rapid and strong.

Probably too strong. The vast quantities of fuel that panicked governments and central banks have poured on suppressed economies have caused another surge in the prices of houses and consumer goods as people unable to travel or dine out for a while spend their unplanned savings.

It is not unemployment we face in

2022. It’s the opposite. Inflation. You have to be somewhat past the age of

40 to know what inflation is like — and even those old enough to know have probably forgotten.

Money constantly loses value. You get big wage increases but they never catch up to rising prices. Life gets meaner, everyone watches their pennies. Spending slumps, businesses close, jobs are lost. And prices and wages keep rising, chasing their tails.

Inflation is economic cancer, encouraging hedge investment rather than productive growth. Once it sets in it is hard to stop.

The Reserve Bank has already taken steps to stop it setting in. It is likely to raise interest rates again several times this year. It could be a hard year for heavily mortgaged first home owners. If Grant Robertson is wise he will tighten spending in the

2022 Budget, “going hard and early” against inflation too.

Optimism says these things will be done. Our central bank has started tightening its monetary policy earlier than most.

But the virus still overshadows all New Year plans and predictions. The latest variant, Omicron, is proliferating in Europe, the United States and Australia. It appears to be more infectious than previous mutations but less lethal. The vaccine is less effective against it unless we get a booster.

The governments of the UK, Australia and New South Wales refused to lockdown before New Year despite rising case numbers. Leftish governments such as those of Scotland and Western Australia took a different view. It’s hard to predict what ours will do.

It is encouraging that it did not panic this week after learning an Omicron-infected visitor attended Central Auckland nightspots at Christmas. But I wish it was pushing us harder to get an early booster.

We are only now learning how effective the vaccine has been against the Delta variant. Auckland’s roadblocks were removed more than two weeks ago and there is no sign of the spread of infections epidemiologists feared.

Nor have Auckland’s case numbers risen as they predicted after restrictions on gatherings were eased. Daily new infections have steadily declined. An excited Michael Baker said this week, “It’s not impossible the virus might get eliminated entirely in this period. None of us have expected that to happen . . . ”

Eliminated? I thought we eliminated that word last year. Vaccination is not elimination but 90 per cent coverage is proving more effective than Auckland’s long lockdown.

If that is to be our last lockdown the Prime Minister should be on the phone right now to health ministers and officials, recalling them from the well-earned holiday and demanding a booster campaign with more urgency.

For two years New Zealand has delayed the inevitable. I think this is the year we will get the virus and, well vaccinated, we will deal with it.