Reserve Bank Governor, Adrian Orr, has said: “Inflation is the thief in the pocket.” He’s not wrong; the crippling cost-of-living crisis is robbing cash from practically every household in the country. But it doesn’t have to be this way.

The inflation driving rising prices isn’t solely an unfathomable issue generated by unaccountable offshore forces. The rising prices that we are seeing in groceries, fuel and services can be directly attributable to homegrown events and government policies. 

The economy is stuttering through the combination of an incredibly tight labour market and supply chain issues, with these factors combining to drive up the price of practically everything. If companies don’t have the labour to produce the goods, what’s available will go up. If companies don’t have the employees to confidently invest in increased service delivery, they will cut back. In countless ways, an economy in poor health will put the brakes on business growth and sap the country’s overall confidence.

Low unemployment is masking an economy that’s struggling; the cost-of-living crisis we are all experiencing is directly linked to a shortage of workers and government policies that lack a nuanced approach to the labour market.

Using low unemployment as the sole measure of success means that businesses will always lack the employees to feed products into the market, which inevitably prevents the economy growing. National has been pointing out this inescapable fact for some time, arguing that targeted loosening of immigration needs to happen. The government has the levers to balance immigration with protecting workers already in New Zealand, unfortunately it seems to lack the skills to employ them.

Respected economist, Cameron Bagrie, said: "A lot of the stagnancy has just been because of supply. We haven't been able to meet demand because we've seen the damage to the labour force.”

The damage Bagrie is referring to is the shortage of skilled and unskilled labour that’s forcing businesses to retrench. Off the back of a global pandemic, pent up demand exploded in economies around the world, and getting ahead of that should have been the prime focus of New Zealand’s government. Unfortunately, Labour did nothing. That inaction has fuelled a scramble to employ what workers we had in the country, essentially burning up the fuel an economy needs to grow.

It's also a mistake to think that inflation is a temporary problem. Inflation won’t fix itself; there needs to be active involvement from the government that goes beyond hoping the Reserve Bank will find the answers all on its own. The government needs to be ready to take the tough decisions to re-balance our economy.

It's very likely that you have a job and that you’re enjoying a healthy wage right now. But you are also losing much of that spending power because the economy is out of balance. There’s no reason why you can’t enjoy secure employment and good prospects within an economy that’s growing, it just has to be managed that way. We can’t wait for some miracle or overseas event to sort this out, there are parents in remote communities that can’t afford the petrol to drive their kids to school. That’s the reality of our cost-of-living crisis.