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A reasonable approximation of the effect of changing how statistics are derived is given by -
Actual method of calculating the change in GDP;
Real quarterly GDP was 4.1% - 3.5% inflation = .6%.
Using the March figures annualised which is not correct but a reasonable approximation to compare the effect of CPI calculation methods on GDP calculations we get -
Current method 4.1 - 4.0 = .1
Pre 1998 method 4.1 - 7.3 = -3.2
Pre 1983 method 4.1 - 11.3 = -7.2.
The benefits of understating inflation include;
Reducing welfare payments.
Reducing interest rates.
Overstating GDP.
Reducing wage pressures.
And depending on one’s point of view transferring wealth from savers to speculators.
Gives an inflated impression of prosperity.
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