"JERSEY'S EVENING PROPAGANDA"
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Saturday, 18 June 2011
"More Misery For The Poor Of Jersey"
Prices up – but no pay rises, please?
ISLANDERS are being warned to expect a tough 12 months with forecasts that the cost of living could rise dramatically this year.
Jersey economists have predicted that the recent GST rise, coupled with a rise in global food and production costs and the strong possibility that interest rates will go up could push inflation to five per cent.
The economists are now urging Islanders and businesses not to make the situation worse by agreeing large pay increases, which could push prices up further.
However, Economic adviser Dougie Peedle, who helped produce the forecast, said that although there would be some pressure on Islanders in the short-term, the overall outlook was more positive.
Islanders in Jersey are being warned that inflation is expected to rise to around 5% later this year - largely because of the hike in GST from 3% to 5%.
But even though pay rises are likely to be outpaced by inflation, the island's economic adviser says demands for inflation-linked wages should be resisted.
The latest quarterly review from Jersey's Economics Unit does not make good reading. Not only is inflation expected to jump as the rise; people with mortgages can expect a double whammy: the Bank of England is poised to raise interest rates this year and next. Economic Adviser Dougie Peedle says the surge in inflation will be a temporary blip caused by GST, and increasing food and fuel costs.
Mr Peedle believes the underlying rate of inflation (that's when housing and mortgage costs are stripped out) will remain flat
And Mr Peedle advises against trying to match wage rises with the headline rate of inflation. He says that will be bad for the economy and job prospects.
Whether pay bargaining groups see it that way is the big worry for government at the back end of 2011.