Inflation and non-discretionary spending

Discussion in 'Markets & Economies' started by mmm....shiney!, Nov 15, 2020.

  1. mmm....shiney!

    mmm....shiney! Administrator Staff Member

    Nov 15, 2010
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    The cost of essential goods ie items "purchased because they meet a basic need or maintain current living arrangement or are a legal obligation" rose more than the official CPI during the period 2012 - 2019.

    Life's essential goods rose cumulatively 14.8% during that period, the cumulative CPI rate was 14%. Discretionary spending eg non-essential goods rose cumulatively by 12.9% of which tobacco made the biggest contribution. Without tobacco in the mix the cost of non-essential items only rose 6.4%.

    There were no prolonged periods where the cost of discretionary items outpaced the cost of non-discretionary items, and price rises in essential goods even managed to outpace wage rises in some years. Falling prices for clothing, vehicles, furniture etc contributed to the lower rise in discretionary price inflation.

    Under a MMT framework, the government would do well to focus on those industries where consumer demand is not being met - reducing housing, health and education costs. Throwing money at discretionary spending eg restaurant vouchers, doesn't address the real need.

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    66rounds likes this.

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