In November 1966, five women in Auckland placed an advertisement in the paper with a simple message: “Who wants to do something about rising prices?” They listed their names and numbers and waited. Then the phones started ringing, and for a week they didn’t stop. The Campaign Against Rising Prices – or Carp, as it became known – was born.
The next month, the price of wool collapsed, sending the economy into freefall. Inflation rose. Keith Holyoake’s National government opted for austerity in response, slashing subsidies on bread, flour and butter, increasing postal, electricity and rail charges, putting up state house rents, and hiking taxes on tobacco, cars and spirits.
The impact on households was brutal. To the women who placed the newspaper ad, it was an outrage. Carp branches soon sprang up around the country and membership grew to the thousands by 1970. It set to work organising protests, writing newsletters, monitoring prices, and lobbying MPs with its demands – price controls on essentials, the control of profits, tougher action on profiteering. It also took the fight to businesses directly, calling for boycotts of products from companies that it saw as hiking prices unfairly. Unilever soap powder and Wattie’s tinned tomatoes both came into the firing line. The price of both dropped as a result.
Finance minister Rob Muldoon accused the group of being led by a bunch of communists. He wasn’t entirely wrong – at least one of Carp’s leading figures was a Communist Party alumna. But the movement was far broader than that, bringing together working-class women from Whakatāne to Dunedin and enjoying support from the male-dominated blue-collar trade unions that subscribed to Carp’s newsletters and turned out to its protests while waging their own militant campaigns to protect wages. Underpinning these movements was a worldview that saw the cost of living as a fundamentally political issue that could only be addressed through collective action.
Fifty years on, the price of everything from meat to mortgages has skyrocketed. During 2022, food prices rose at a faster rate than at any time in the past 30 years, and have continued to climb fast this year. Household costs overall have increased by more than 17% since the end of 2020. In May, nearly half a million people were receiving food support from registered food hubs, an increase of nearly 165% since the start of the Covid pandemic.
Inflation is more than a hip-pocket issue. A newly published Scottish study predicts that the UK’s current cost-of-living crisis will result in a 6.5% rise in premature deaths (people dying before they reach 75), the Guardian reported.
It is no surprise then that many of us now stand gormless in the supermarket aisles, baffled at the price of kūmara, or that the cost of living consistently tops polls as the No 1 issue this election.
In many ways, with the return of inflation, the 1970s are back. But there’s one glaring difference: political movements like Carp are nowhere to be seen. To Toby Boraman, a Massey University politics lecturer specialising in 1970s social movements, this absence is puzzling. “There’s a major cost-of-living crisis. People are hurting, struggling to pay for the basics of life. So why aren’t we seeing big consumer lobby groups? Why aren’t we seeing boycotts?”
Instead of taking the fight to government and business, we’re now seeing a “largely individualistic response”, Boraman says, with families struggling alone against the rising inflationary tide. “You see news stories about how to cut costs and how to save money – plant your own veges, do bulk buying, bargain shopping. It’s all about coping as an individual. I think a lot of people have internalised that belt tightening is the only thing they can do.”
Exactly why this shift has happened is “the hundred-million-dollar question”, Boraman says. But it’s clear that, to many, the idea that the price could be anything other than what it is feels like an impossible fantasy.
Rising profits
Fonterra has just posted an annual net profit of $1.58 billion, nearly triple that for the previous year. It was a remarkable result given the price of a kilo of tasty cheese passed the $20 mark in some supermarkets last year, turning what was once a household staple into a luxury for many.
Fonterra isn’t the only business thriving. From mid-2021 to late 2022, Kmart, Bunnings, Fletchers, Mainfreight, NZ Steel and the petrol retailers, among others, all saw profits surge, while banking profits reached record levels.
Edward Miller, a research and policy analyst at First Union, was struck by these results as he read through the annual reports of New Zealand’s major companies last year. He wondered: might these huge profits play a part in rising prices?
The dominant view has been no, they don’t. Low interest rates during the pandemic led to excess demand, pushing up prices across the economy, and global crises such as the war in Ukraine have added fuel to the inflationary fire by tightening the supply of key inputs such as grain and fuel.
Some have also pointed the finger at government spending, or at rising wages, taxes and regulation. But according to a report authored by Miller and published by the Council of Trade Unions, First Union and ActionStation in August, the true picture may be more complex.
By analysing national accounts data, the report found that rising profits contributed more than half of domestic inflation from mid-2021 to late 2022, outstripping the contribution from wages and taxes. The implication is that the cost-of-living crisis is not simply the result of impersonal forces beyond anyone’s control but is being driven – or at least exacerbated – by companies maximising profits.
Some have termed the phenomenon “greedflation”, but in Miller’s view, this isn’t helpful. The point is not that businesses have sought to swindle the unsuspecting public, or that global pressures have had no impact, but that businesses have successfully fought to defend profit margins as input prices have risen, resulting in bigger profits overall and pushing the burden onto consumers. Imagine, for example, that the wholesale price of flour doubles. If the supermarket then doubles the retail price but keeps its own margin steady, the supermarket’s actual profit from the sale of flour will double. As Miller puts it, “changes in input costs can give cover to businesses to take opportunities to increase profits at various points”.
Business costs
Needless to say, these findings have been controversial. Industry group Business NZ released its own report in June, which found, using a different methodology, that inflated profit margins have not been a significant factor in driving up prices, concluding that profit-led inflation is an “imported narrative” with little relevance in New Zealand.
“Our members tell us the cost of doing business has increased – in fact, some sectors are making less and even entering negative-profit territory,” Business NZ director of advocacy Catherine Beard told RNZ at the time.
Surprisingly, Miller agrees with one main criticism of his report – that it doesn’t necessarily show what has caused recent inflation, just where the money has gone. But this is fine with him. He says the report shows “the vast majority of the money has ended up on one side of the ledger. In other words, there are winners and losers from the inflation process.”
“I don’t mind if we can’t attribute causation, because it still tells us there’s a need for a policy response to govern how we respond to an inflationary shock in the future. And I suspect there will be more inflationary events in a context of increasing climate events, changes in oil prices, potentials for global conflict. I think we need a smarter policy framework to ensure businesses can’t run away with enormous profits while workers play catch-up the whole time.”
Uneven burden
The New Zealand that Carp inhabited was a radically different country from the one we live in today. Not only was the public more willing to take to the streets over high prices, the government was more willing to intervene in response. Many essentials were subsidised. Stringent regulation made it unlawful to sell goods or services at “unreasonably high” prices.
That world was swept away in the 1980s as the complex system of interventions was replaced by a more hands-off, market-oriented approach. Rather than intervening to control prices and profits, the government would instead promote fair prices by creating the conditions for competition. Inflation would be left to the Reserve Bank, whose independence was enshrined in law.
Although often pitched as an economic success story, this shift has in fact resulted in an “abdication of responsibility” by governments on both sides of the spectrum, according to economist and researcher Geoff Bertram, which has allowed the burden to fall on the most vulnerable and left the public powerless to respond.
“The general population has an air of weary resignation that there’s no point of contact between them and the priesthood who are driving the OCR [official cash rate],” Bertram says. “When they talk to their politicians and say government should do something, the politicians wash their hands and they’ve abdicated responsibility. There’s just a total sense of lack of agency now.”
Even before the recent inflationary surge, lower-income groups had been hit much harder by rising prices than high-income earners over the previous decade. The reason is that the cost of essentials – electricity, food, housing – have long been rising faster than inflation overall. Bertram attributes this largely to weak competition rules, which have allowed businesses in uncompetitive sectors to rip off consumers with little consequence. The most obvious example is the supermarkets. Last year, the Commerce Commission estimated that Countdown and Foodstuffs make about $430 million a year more in excess profits than they would if the market were truly competitive, a claim the companies dispute. The construction, fuel, banking and electricity sectors have also attracted scrutiny.
At the same time, the primary remedy for inflation – interest rate hikes – is not neutral in its impacts, says Bertram. “Raising the OCR (see “Breaking the spiral”, page 20) and driving up interest rates causes enormous social distress to indebted households – to middle-class households that have to face mortgage payments going up and find their budgets really squeezed, and to lower-income households that rely on payday lending to get through the week.
“It’s a strangulation of the poor and of the middle class. The only people who are happy about the OCR going up are the rich.
“The world economy is putting the squeeze on New Zealand at the moment. New Zealand Inc is faced with a massive need to borrow just to pay the bills internationally,” Bertram says, pointing to the current account deficit, which shows we are spending 7.5% more than we are earning overseas.
“And as you look around New Zealand Inc thinking, well, who can be squeezed to cover some of the costs of this borrowing, the answer is the poor, because the rich just refuse to be squeezed. It turns out that the lower half of the income and wealth distribution still has enough in it to enable blood to be squeezed out. And so long as that remains the case, New Zealand governments, whether they’re Labour or National, will keep on squeezing.”
The cost-of-living election
What change might the cost-of-living election bring to the cost of living? Not a lot, probably. While National’s planned tax cuts may provide momentary relief to some, it seems dubious that its proposals to reduce the cost of doing business will meaningfully benefit consumers – given that many sectors have been enjoying high profits recently without passing them on.
Labour’s approach – which focuses on supporting households by extending childcare support, providing free dental care for under-30s, and removing GST from fruit and vegetables – is far from ambitious.
These proposals are a long way from the changes that Bertram says are needed to prevent the burden of future cost-of-living crises from being pushed down the ladder: introducing wealth taxes, beefing up anti-competition laws, breaking up monopolies and bringing others into public ownership, strengthening the hand of unions, supporting the shift to a low-carbon economy.
Perhaps the absence of plans like these is because the public isn’t asking for more. Perhaps that is because they don’t think more is possible.
“It is possible to change things, but a lot of people think it’s not,” says Toby Boraman. “They see corporations and the government as pretty much unchangeable and feel powerless. But you can change things. You don’t have to accept belt tightening. Instead of spending your life worrying about how to pay the bills, you can actually get by.”
Oliver Neas is a journalist and barrister based in Wellington.
