Ten-year wait looms for CPI action

A DECADE may pass before the special inflation indexes designed to measure the true level of inflation for superannuitants, beneficiaries, poorer people and Maori result in a fairer system of lifting benefits.

New Zealand has been a standout internationally for having just one measure of inflation, the consumer price index, or CPI, which is used to help set monetary policy and for monitoring the performance of the economy. Its other use, however, is to adjust New Zealand Superannuation and unemployment benefit payments once a year, so these payments maintain their purchasing power. It is also popularly used by employers and employees in wage negotiations.

Now work by Statistics NZ has identified that the cost of living for some subgroups is higher than the CPI indicates, suggesting that indexing government payments like NZ Super and other benefits may mean they are not maintaining their purchasing power.

The reason is that many population subgroups have different spending patterns, and these result in significant differences in consumer price change for some population subgroups.

‘‘Lower-income households had the highest price change and higher-income households had the lowest price change,’’ Statistics NZ found.

Similarly, looking at annual CPI movements from the June 2008 quarter to the September 2012 quarter indicated ‘‘all household’’ inflation was 2.35 per cent annually. The movement for superannuitants was 2.69 per cent. It was 2.55 per cent for beneficiaries.

More work needs doing to ensure the ‘‘basket’’ of goods and services those figures were calculated on accurately reflects the spending patterns of the subgroups.

Statistics NZ’s Chris Pike warned that just because new indexes become available, that doesn’t mean immediate change in government policy.

‘‘In Australia, they started doing similar types of indices for different groups in the late 1990s,’’ Pike said. ‘‘They were put there for about 10 years before they got picked up.