Inflation in the quarter was up 2.3%, right on the Reserve Bank forecasts, to give a 4% annual rate of inflation.
Forecasts estimated that the higher GST rate brought in on October 1 would add between 1.7% and 2% to the headline inflation rate - the consumer price index, the official measure of inflation.
But Mr English decided to start off the election year by pointing out that excluding the one-off impact from the rise in GST, annual inflation stayed around 2% last year.
Tellingly, he went on to say that price increases put pressure on families, particularly after the difficult economic times there had been in the past two or three years.
"So it's important that we do all we can to take pressure off prices and interest rates."
Well Mr English, a 4% increase in inflation is still a 4% increase in inflation, whether or not you put in or take out the October 1 rise in GST.
What that means for employers and employees alike is tough times as prices for business inputs rise because of inflation.
While there is an ability to claim back GST if you are registered, generally prices for goods will need to rise.
If average private-sector wages are due to rise by only 1.5% in the year to March, there starts to be a significant gap in buying power of people as they watch the value of their money fall, eaten up as it is by inflation.
Fonterra has already reported people are buying less milk because of the rise in GST and is forecasting that less milk could be bought from March, after the board of Fonterra increased its payout to farmers.
There were some good signs in the CPI data released by Statistics New Zealand yesterday.
Economists indicated that underlying CPI inflation, which excluded GST and one-off government charges, rose a more sedate 0.3% for the quarter to give a 1.6% annual rate, well inside the Reserve Bank's 1% to 3% target range.
However, largely as a result of higher GST, prices in 10 of the 11 groups in the CPI had registered quarterly increases - and that is where the problem lies for consumers.
Of the individual components, higher petrol (up 6.8%), package holidays (up 15.6%), purchases on new housing (up 2%), medical services (up 5%), international air transport (up 5.5%) and property maintenance service (up 4.4%) were influential. A 3.3% fall in vegetable prices provided a slight offset.
While petrol prices now are below the peaks seen in mid-2008 when they reached almost $2.18 a litre for unleaded 91, the sharp increase in recent weeks is likely to have dented consumer confidence and helped restrain discretionary consumer spending.
ASB economist Christina Leung said the surprise in the CPI largely reflected the pass-through of GST being slightly less than she expected.
Tradeable inflation came in below expectations, reflecting the difficulty retailers of imported goods had in passing on higher costs, given household demand remained subdued.
The weaker-than-expected fourth-quarter CPI means the annual peak in inflation will be slightly lower in June but will still be 5.1%.
The Reserve Bank assumes that the host of government policy changes, including the GST increase, will have little effect on price and wage setting behaviour in the future.
But will it? Council of Trade Unions secretary Peter Conway said the tax cuts which came into effect in October gave significant benefit to those on high incomes while the GST increase negatively affected those on low and middle incomes.
Food and petrol prices accounted for a large part of the sharp increase in the CPI.
Both of those items had a greater impact on the cost of living of the low paid because they swallowed up a larger proportion of their take-home pay, he said.
Higher inflation meant real wages were falling as a result, causing New Zealand to drift further and further behind Australia.
The Government must take all those factors into account when it considered the upcoming annual adjustment to the minimum wage, Mr Conway said.
Employers could expect unions to be seeking "appropriate" wage increases this year, which took all factors into account, including the ongoing effect of higher prices.
Mr English said other than the one-off impact of the GST rise and recent petrol price increases, general underlying inflation in the December quarter remained relatively modest. And it did.
But what the Government seems to have forgotten is that prices rose for New Zealanders to remain sheltered, warm and fed.
No matter which way the minister spins it, the disposable income of New Zealanders fell in the year ended December, unless their wage rise was more than 4%.
- dene.mackenzie@odt.co.nz.
- Twitter: @mackersline
