Tackling inflation
The rising inflation has been one of the hottest topics of discussion in the last months. It started as soon as we moved into 2022, but matters became worse as from February when Russia invaded Ukraine. Since then, prices continued to rise exponentially, and this included products that are needed every day.
This has meant that the Cost of Living Adjustment that will be given to all employees as from the start of 2023 will be somewhere between €8 and €10. It will be the highest ever, but it is certainly lower than what it would have been if the government had not subsidised the cost of energy. Finance Minister Clyde Caruana said that the COLA would have been closer to €25 per week if the government had passed on the extra energy costs to the consumers.
We will know the exact figure when the budget for 2023 is presented in Parliament next month.
It is hard to imagine inflation going down anytime soon. In an interview with the media house, the director general of the Malta Employers Association said that it is not expected, in the foreseeable future, that inflation will go back to the “usual” one per cent.
This means that, in the months to come, prices will continue to rise. The COLA itself will lead to a price hike, as businesses will seek to recover their added costs, with many of them opting to pass them on to the consumer. It is a vicious circle.
The MEA has come up with a proposal that will need to be discussed once the budget for 2023 is presented. It is suggesting that, for five years starting in 2024, there should be a minimum and a maximum COLA given to employees, with the lowest amount being €2.50 and the highest €6. At the end of the five years, if it is the employees who got less than what they should have, then the “extra” would be added to the COLA of the sixth year; if, on the other hand, it is the employers who were short-changed, then the “extra” would be reduced from the COLA of the sixth year. In this respect, the MEA is contending that there will not be any shocks to the system and businesses can plan ahead better.
There is no doubt that other stakeholders will come up with other ideas. The government will also have its part to play.
What is sure is that a system that has been in place for decades needs to be tweaked, if not completely overhauled, as the world we are living in today is not the world we experienced towards the end of the last century.