Inflation: problem or symptom?

By Tim Wilson February 01, 2022

With that record-breaking quarterly inflation rate (at 5.9% the worst in 30 years), the political blame game started immediately.

National’s Christopher Luxon pointed to “wasteful spending” by Government, saying, “You have to get really clear right now about the nice to have stuff and the need to have stuff.”

“Locking the economy down and borrowing $50 billion so far,” added ACT’s David Seymour, “has left us with a mountain of debt and rising prices.”

“Inflation isn’t an offshore problem that New Zealand is caught up in.”

But Prime Minister Jacinda Ardern rejected this, pointing to global pressures, “…what we’re seeing in oil prices and international tensions that affect those oil prices, are a contributing factor.” There’s some truth here; anyone who’s stood at a petrol pump recently will confirm the 30% rise in fuel costs.

Economists joined the fray, with Infometrics economist Brad Olsen noting, “Inflation isn’t an offshore problem that New Zealand is caught up in.”

“There are real and intense pressures throughout the New Zealand economy,” said Olsen, “which are seeing supply unable to match the demand for goods and services.”

But what are we buying? Possibly sadness and despair.

Supply and demand: the economic yin and yang. Supply chains are broken, that much is clear. Perhaps because demand is more constant, we don’t question it as often. After each lockdown, the hankering for consumer goods and services always rebounded (KFC anyone?). As economic researchers BERL noted, “It seems as though even the toughest lockdown measures can’t hamper consumers’ appetite for spending.”

But what are we buying? Possibly sadness and despair. University of Auckland research shows a pandemic-related increase in demand for eating disorder services for young people. And data from the Ministry of Health during 2020 shows a “disproportionate increase” for dispensing antidepressants to younger people, compared to other age groups. Moreover, Southern police attended nine per cent more threatened or attempted suicide events between January and November in 2021, compared to 2020.

Perhaps we’re also chasing the wrong outcome.

Yes, the pandemic and lockdowns play a major role in these alarming statistics, but perhaps an existential question lies within them: supply can’t meet demand; because it never will. You can’t consume your way to happiness, you’ll always want more.

America, the temple of consumerism, has discovered this already. As Arthur Brooks observed in The Atlantic in 2020, “According to the United States Census Bureau, average household income in the U.S., adjusted for inflation, was higher in 2019 than has ever been recorded for every income quintile.” But, “one of the greatest paradoxes in American life is that while, on average, existence has gotten more comfortable over time, happiness has fallen.”

Inflation? That’ll come and go. But here’s a deeper dilemma: What are you chasing?

In New Zealand, if we’re buying the wrong products, perhaps we’re also chasing the wrong outcome. Recently my Mum and Dad celebrated their 60th wedding anniversary. At the celebration, their wedding day photos were on display, showing youthful excitement, joy, and happiness. Sixty years on another emotion was present: the contentment of enduring love.

Inflation? That’ll come and go. But here’s a deeper dilemma: What are you chasing? There’s nice to have stuff, and need to have stuff. Choose wisely.

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