Matt Cowley says inflation is impacting everyone. Photo / 123rf
Matt Cowley says inflation is impacting everyone. Photo / 123rf
COMMENT:
Inflation is impacting everyone.
We’re all facing rising mortgage, rent, transport and food costs. Businesses also have growing expenses – including the minimum wage increase announced this week – and face the ongoing threat of cooling income.
Put simply, inflation will ease when everyone fairly shares the pain ofabsorbing these rising costs, while knowing income won’t be growing at the same rate as last year.
Employees, navigating rising costs of living, are understandably seeking more pay, while employers must balance cooling customer demand with their rising costs as well.
This creates a standoff between employees and employers – one that is not simple to resolve.
The most common driver of inflation across all industries right now is the shortage of staff, which is pushing up staff wages. As long as there are more vacancies than people to fill roles, employers will be forced to offer increasingly higher wages.
But businesses also need to retain staff to keep operating, which gives employees the bargaining power.
You may have heard of ‘quiet quitting’… but a new TikTok trend is called ‘rage applying’. This is where employees vent their frustration by applying for lots of new jobs – seeking better pay and working arrangements.
The catch-22 in all this is that if wages continue to inflate, the Reserve Bank of New Zealand will continue to increase interest rates.
This will only make it harder for homeowners, small businesses and customers to service mortgages and commercial loans.
For more than a year now, the Minister of Immigration has been consistently told by businesses that staff and skill shortages remain at the top of their list of issues.
Either there are no skilled Kiwis to fill a vacancy, or not enough willing Kiwis to perform the roles.
When Hon. Michael Wood attends the Chamber’s morning session next month, I will be asking why he is holding onto his position so defiantly. What is he seeing that is different from the common view of business leaders?
Tauranga Business Chamber chief executive Matt Cowley. Photo / Mead Norton
It’s possible the minister could be preparing for New Zealand’s economy to cool later this year, which will force employers to lay off staff and make more Kiwis available to fill remaining vacancies.
We have seen big tech companies in the US undertake mass staff layoffs ahead of a cooling economy. Some New Zealand companies will likely follow suit later this year, as the global economy enters its next phase after the pandemic and inflation.
Unfortunately, if the economy doesn’t cool, and employee wages keep inflating, the Government risks driving New Zealand into further economic pain as the Reserve Bank will keep lifting the Official Cash Rate – making everyone’s situation worse.
If you’re keen to hear from Hon. Michael Wood, tickets to our March 1 event are available at the Chamber’s website.
