NZ is tackling inflation by reducing the disposable income of people with debts. Govt are also cutting 'wasteful' spending.
Both are aiming to reduce consumer demand & increase unemployment... assuming that this will slow price & wage rises.
Same everywhere? Nope [🧵1/n] Bit of context: In 2021/22, oil & gas price spikes sent an inflation 'impulse' through the global economy. The world runs on fossil fuels so high energy prices quickly infected other prices (eg transport). This drove a 'sustained change in the price level' (aka inflation) [3/n]

Govt tax take is tanking - now well over $1 billion behind forecast. What could possibly be going wrong? Quick 🧵 to explain (it's uncomplicated).
Corporate tax is main driver (for now). Real term consumer demand is plummeting, sales are down, so firms scaling back/closing [1/n] Income tax is holding on (for now) because new arrivals have filled vacant jobs, wages have been pulled up by cost of living, and more people are being caught by higher tax brackets. I say 'for now' because... [2/n]

Short 🧵 inflation musings..
1970s inflation across the world - inc NZ - led to a sustained shift in the price level of NZ imports.
The 1980s stock market crash hit NZ hard. We also introduced GST in 1986 and raised it in 1989 creating our very own inflation spikes 🙏 [1/n] We had a few inflation blips between 2000 and 2023, all triggered by sudden increases in import costs - apart from *one* in 2011. What happened? We increased GST again for the win ✌️. [2/n]

Just a timely reminder that Govt has over $31 billion in its Crown Settlement Account. Govt could pay for the floods recovery today without 'raising any finance' or running a hundred special Lottos. What's the catch? [1/X] When Govt spends $100m, the Crown Settlement Account reduces by $100m, and the Settlement Account of a commercial bank goes up by $100m. The Crown then starts paying interest on that $100m at 4.75% (current OCR). Gross interest payments on total balances is $6.24m per day! [2/X]

Windfall taxes are back in the news today. I thought it would be worth doing a quick thread on why windfall taxes are a ‘feel good sticking plaster’. First, humour me and ‘follow the money’ through the NZ economy of the last ten years, a 🧵 [1/X] Brand new NZ Dollars come from 2 places: Commercial Bank lending and Govt spending. Commercial banks pumped $232Bn of new money into our economy over the last ten years (private debt is now a whopping $554Bn). Govt gave us a measly $30Bn - taking Govt ‘net debt’ to $70bn. [2/X]

Only had a minute to look briefly at the Business Price Indices today. They provide a crude comparison of input costs vs prices. Just thought I'd pick a few out...
First up (and topical) 'big stuff' construction - note how closely input costs and prices align. 🧵[1/X] Now residential building construction - some signs of widening margins there as we went crazy building and renovating our weatherboard palaces in 2021 and 2022. [2/X]