20 Jan 2012

Inflation fall no reason to scrimp on pay rises, say unions

6:20 am on 20 January 2012

Unions are warning employers not to use a steep fall in the annual inflation rate to short change workers in wage negotiations.

The official measure of annual inflation has fallen to 1.8%, its lowest rate in more than a year.

Westpac economist Dominick Stephens says the inflation slump could cap future wage demands.

But Council of Trade Unions economist Bill Rosenberg says official inflation - as measured by Statistics New Zealand's Consumers Price Index - is not a fair reflection of actual living costs for many.

He says basing wage settlements on the the new, lower rate would short-change workers who have had to cope with increased GST and excise taxes and had little in the way of wage increases to compensate.

The October 2010 increase in GST dropped out of the calculation in the final quarter of last year, lowering the annual inflation rate from its previous level of 4.6% at the end of September.