09 March 2005

The Web

Rising cost of living - not just a perception
By Kurt Sansone

An inflation rate on constant increase for 14 months since November 2003 leaves little doubt as to why a vast majority of people cite the cost of living as a major reason for dissatisfaction with the way the country is being run.
January saw a marginal decrease in the rate of inflation over the previous month, partially fuelled by the post Christmas sales in the clothing and footwear retail sectors. But when compared to January 2004, this year’s January inflation still stood 1.17 points higher.
According to a survey published last Sunday, 75 per cent of Maltese are unsatisfied with the way Government is running the country and 64 per cent of them cited the increase in the cost of living as a reason for their dissatisfaction.
Malta has become a dearer place to live in and for the first time last year, people not only perceived a pinch but actually felt it. The Sunday Times survey reveals that among the lowest income earners (DE category), the increased cost of living was cited as a reason for dissatisfaction by more than 74 per cent. But it was also a major reason for dissatisfaction among the higher earners (AB category) with 60 per cent spontaneously saying the increase in the cost of living cannot be borne.
The increased cost of living may be attributed to a number of factors both international and domestic. But a primary cause could very well be Government induced costs through additional taxation.
A closer look at the retail price index published by the National Statistics Office shows that the food index saw a drop for five consecutive months between February and June 2004 only to shoot back up with month-on-month increases for the rest of the year.
The removal of levies by May, when Malta officially joined the EU, contributed to the drop in food prices but the trend was reversed soon after.
Although the food index in January 2005 stood at 104.6 points as opposed to 105.16 points in January last year, it still registered an increase of 1.09 per cent over the previous month’s figure.
A constant increase in prices was also registered for items under the health and personal care index, most of which became subject to VAT in May last year.
Throughout 2004 the health and personal care index registered month-on-month increases except for a slight drop in November. In January this year the index once again registered an increase of 0.81 per cent over the figure for December.
Major price rises were registered for utilities and fuel, with the index showing a constant increase for 13 consecutive months since January 2004. This may have occurred because of rising diesel prices at the pumps, which also have a direct bearing on industry’s costs.
In January this year the utilities and fuel index stood at 118.86 points as opposed to 100.08 points registered in January last year. The January 2005 figure also represents an increase of more than 13 per cent over the previous month’s figure.
On Saturday Prime Minister Lawrence Gonzi attributed last year’s increases in inflation to the change in the VAT rate to 18 per cent. He also said that VAT’s impact was expected to level off in 2005.
A question mark still hangs over the possible impact Government’s budgetary measures may have on inflation. As yet no official calculations have been published to indicate how, the electricity surcharge, the tax on mobile telephony, the increase in bus fares, eco taxation and the increase in the passenger travel tax will impact on the rate of inflation for this year.

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