Rising Retail Prices

At the outbreak of war, retail prices were 25 per cent above their 1933 level and had been increasing steadily. After a first tentative increase of a little over 1 ½ per cent in 1934, annual price increases had been around 3 or 4 per cent, except for the increase of nearly 7 per cent in 1937 which was probably attributable in part to the general wage increases of the previous year. The rate of price increase was fast.

There were considerable inflationary influences on the economy, especially after the Labour Government commenced its legislative programme in 1936, but unemployment was being steadily reduced and New Zealand's production was expanding. In other words, a considerable portion of the extra spending potential was being absorbed by extra production and reduced unemployment, so it is a little surprising that the rate of price increase was so rapid.

In this context, however, it should be noted that, in 1939, retail prices had still not reached the level of the highest pre-depression year. In the 1920s prices had been relatively stable, fluctuating by only 4 per cent upwards or downwards, but between 1929 and 1933 they had dropped by a fifth. By 1939, after six successive years of rises, prices were still just a little below the average for the 1920s.

Chart 9 shows price changes between 1920 and 1939.

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