According to Government the New Zealand economy was never in trouble; just wish someone had warned us that inflation was about to go out of control.

Oh, wait, someone did; inflation/inflation-ii/inflation-iii

Hate to be that guy but I feel as though, I mean, if I knew that giving handouts to the people was going to achieve no long-term gains other than increased inflation, then surely our official finance guy should have had some clue.

Grant Robertson should have had the financial acumen to know that giving out regular minimum wage increases is not conducive to a country’s long-term prosperity; as asserted in one of the above ‘Inflations’, a better way to increase public cashflow/decease public living costs is to start at the other end – rather than effectively increasing wages across the nation with a minimum wage increase, what if Government subsidised the cost of basic goods?

We have struggling families in New Zealand who cannot afford to feed or clothe their children; this concept of subsidising the staples would provide relief to low-income families without having a dramatic effect on the dreaded inflation.

If our government removed, for example, GST from bread, meat, milk, fruit and vegetables, also children’s basic clothing items, it would cost no more than a minimum wage increase (oh, wait, raising the minimum wage does cost the Government nothing, anyway); rather, it would cost the Government no more than a benefit increase and, for those lower socio-economic groups, instead of receiving a sudden increase in cash to do with as they please which may well result in the purchase of desirables rather than necessities, these people will discover the products they most need are now more affordable.

The reason this concept works where constant minimum wage increases does not, relates to a truth which Socialism likes to believe is an economic injustice; the truth that the so-called wage-gap must exist.

If not for the high-income bracket (currently paying over 30% in taxes), who would pay the benefits of the lower income bracket (paying under 18% in tax) – unemployment benefits, social welfare, DPB, ACC?

Additionally, it is the monetary differential which makes the system of currency work; if all working classes enjoyed a similar income, every person would have basically the same amount of money thus no one would have any more buying power than anybody else – if nobody is creating buying power there is no commercial competition and if there is no competition there is no way to gauge value or to determine price and/or regulate the setting of prices.

This phenomenon was/is experienced in nations operating with communist governments; with a negligible wage-gap thus minimal commercial competition a country’s currency will soon lose value causing prices to rise with continued inflation, and in relation to the rest of the world, amid a land run by Communism, that country’s currency will soon become undervalued.

Example given, I am soon to return to a business venture in – formally communist – Vietnam where a high weekly income is the equivalent of NZD500 and a lower income is under NZD100 a week; same thing, different scale, but Vietnam are rebuilding their economy from the disrepair left by years of Communism and, as seen above, have reinstated a healthy wage–gap which will encourage commercial competition in their land of aspiring Socialism/Capitalism.

Vietnam’s currency is the greatest example of the damaging effects of unrestrained inflation; Vietnamese currency has more zeros than any other monetary unit in the world – 1 New Zealand Dollar being comparable to approximately 15,000 Vietnam Dong.

New Zealand’s current economic despair, it seems, can be easily reversed; Grant Robertson, pay attention – the solution is not giving the people more cash, it is about making essential products affordable.

Good luck with that.

Article by Tim Walker

Edited by Gavin Ut Cash

Photography by Anne Phlation