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New Zealand consumer prices rose at a slower-than-expected pace in the third quarter on falling transport, taking the annual pace of inflation below the Reserve Bank's target band.
That’s a bad headline.
The story really says that house related costs are going up while food and transport related costs are going down.
Net change is about zero.
Where does the average pay packet go? 50% shelter 50% other?
Harry the Hedonic statistics hustler
thinks these numbers up for fun.
Don’t they pick a basket of basic consumer goods and track it’s price over time. So it’s an honest figure.
A more useful figure would be the tracking of an average household’s weekly (essential) outgoings compared to their weekly incomings.
(Bit more difficult than popping down to the supermarket with a calculator).
It would be the total of the essentials tracked, essentials like shelter, water, food, heating, council fees, …
A more useful figure would be the tracking of an average household’s weekly
(essential) outgoings compared to their weekly incomings. It would be the
total of the essentials tracked, essentials like shelter, water, food, heating,
council fees, …
I agree, although who would get to define what's 'essential?' Maybe that's
a real problem so they avoid it by ignoring it?
It's what they track and how they track it, that can screw the results.
As an example, why include the price shift in international air travel or
cruise ship voyages if many, many people can only ever dream of such
an expense? The price of new cars is a similar 'distortion.'
The new cars price shift is similar but worse. First, how many can only
dream of that, too?
Second, (an example) if this year's new car has power seats and electric
ash trays and surround sound entertainment as 'standard,' and last year's
didn't, the prices compared are adjusted to allow for those additional features.
That some people just need wheels to get to and from work, rather than all
the bells & whistles, means the bells and whistles differential is an abstraction
to them and a distortion in the real costs of their daily transport.
To illustrate:
Last year, the car cost $50k
This year, the cost is $55k
Price difference: $5k
Percentage increase: 10%
But the hedonic hustlers say that the bells & whistles in this years model
are 'worth' $2.5k. So - they say - the actual increase in the price of the car
is only $2.5k, not $5k. That then translates into (an annual) percentage
increase of 5%.
All well and good, but - like power steering - there is no choice to have
or not have those bells and whistles. So that inflates the cost of all cars
by a 10% figure that's really felt in their pocket by the average Jill or Joe,
rather than the 5% abstraction of the statisticians.
Exactly.
Are Mortgage or Rent costs included in the basket?
The obvious cheat would be to let things outside “the basket” inflate.
Is the Reserve Bank mandated to keep inflation within the target range?
Or only to keep inflation on “the basket” within the range?
ANZ bank said prices for "necessities" were moving at a different speed to other goods and services, "with the prices for the former items generally rising, but prices for more discretionary-type spending falling".
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