There's been a lot of discussion about the inflationary effects of the GST increase since the Budget, but everyone is looking in the wrong direction. They're talking about consumers and interest rates and ignoring savers who are taking the biggest hit.
Labour is pointing to the combined effect of the GST hike, increased power and petrol prices from the Emissions Trading Scheme, and increased ACC levies as a sign the Government is increasing taxes and making consumers poorer. Even the Treasury is forecasting annual inflation will hit 5.9 per cent in 2011.
The Government responds it has structured the income tax cuts and various top-ups to ensure both middle and lower income earners are not disadvantaged.