The government has decided to increase GST by 2.5% so the media dutifully does a survey and we get this.
Shoppers face GST price-rise rort. Typical. First rule of commercial media, distorted, untrue, hysterical headline, "Danger Will Robinson!!!!" Shall we meander through the story a little?
Consumers face price increases beyond the likely 2.5 per cent rise in GST later this year, according to a survey of small businesses.
Almost half of the 500 firms surveyed say they intend pushing up prices by up to 5 per cent or more, to claw back margins eroded during the past two years.
Unless the Herald has forgotten, there's this thing called business and it involves making a profit from your activities, ie, getting more for the product or service than it actually costs to produce. However you feel about that, its a legitimate activity in this society and businesses have been doing it hard for a while now.
I have a guy doing some renovation for me and he was saying the other day that new home builders he works with used to get about $25,000 for building a new, average sized home. These days they can barely get $12,000, so time have been hard on profits. There is absolutely nothing wrong with trying to increase those profits. Taking the opportunity to recover some when people are already expecting a price rise is not a rort, unless they try to blame all the increase on the rising GST. Actually that's a fraud, but in any case, we mostly have choices about where to buy something and whether to buy at all and as long as not everyone is trying this tactic, it mostly wont work.
As, apparently, some businesses have already figured out.
More than 60 per cent say their own sales will be affected by the increase, likely to be announced in next month's Budget, to come into force in October.
Now here's the rub. If 50% are going to push prices higher to claw back lost profits they must think they have some pricing power, yet 60% say they will lose business, a classic indicator of lack of pricing power.
So at least 10% of these people think they have no pricing power but can push prices higher anyway. We need smarter businesses and better training or we are going to have somewhat fewer businesses quite soon.