Summer is not exactly the right time to go through the raft of statistics that keep flowing in from Brussels and other quarters highlighting particular aspects of the island’s economic life. Yet, one can hardly totally ignore figures that show particular trends. Taking inflation, for instance, according to the European Union’s statistical agency, Malta had the highest monthly increase in the euro area last month. It rose by 0.6 per cent to 3.1 per cent, when the average inflation in the euro area remained unchanged between May and June – 2.7 per cent.
Even though this does not mean Malta has the highest annual inflation rate in the euro area, the jump in June is quite noteworthy. Prices have been going up for quite some time now and the general consensus is that the allowance given in the last Budget to make up for the rise in the cost of living was far too small to keep up with the trend.
Earlier this month, the government agreed to give an additional once-only compensation for the cost of living to some 60,000 low-income families. It decided to do this following a study by the economics unit within the Finance Ministry meant to reduce the blow on families of several financial burdens, particularly fuel costs.
The amount to be given has not been announced yet but it is expected that the compensation will cost the government about €2 million. This will naturally place the government in a dilemma for it is most likely that other segments of the population, besides the low-income group, will expect compensation too.
The rise in inflation is in fact already fuelling speculation about the amount the government will decree as a cost-of-living adjustment in the next Budget, probably late in October or the beginning of November. There is talk that the rise could reach as high as €5 but, of course, it is a bit too early to say. It was to be expected that the Labour Party would make the most of the latest inflation figure and, in truth, this is not altogether without good reason for a rise in the cost of living affects most people, particularly those with low income and pensioners.
Labour deputy leader Anġlu Farrugia lost no time in attributing the situation to the governance of Prime Minister Lawrence Gonzi, which, he said, lacked direction. Labour, he said, would not tolerate that people continue to be burdened by more taxes to “make good for the arrogance, waste, squandering and corruption” of the government. That was quite a mouthful but then Dr Farrugia now needs to tell the country how Labour would exactly deal with the situation. Arrogance, waste and squandering are not as hard to prove as corruption but, then again, it is absolutely useless for Labour to beat the drum unless it has a good battle plan. Up to now, it does not seem to have one.
It is one thing for Labour to lambast the government over the rising prices but quite another to tackle such a multi-faceted problem as inflation. Hourly labour costs in the first quarter this year were 2.4 per cent higher than in the same period last year. Cost-of-living adjustments that are not backed by productivity rises or that could not be absorbed by industry could well be counterproductive. So, all factors would have to be taken into the equation, not just the compensatory allowance to make up for the rise in the cost of living.