ANZ Pacific Economist Dr. Kishti Sen anticipates that wage inflation will take effect in the fourth quarter of this year, potentially boosting the retail sector sales in Fiji.

With a 50-cent increase in the minimum wage rate to $4.50 per hour, a seven to 10 percent increase for salary-based civil servants, and 10 to 20 percent increments for other civil servant wage earners starting August 1st, Sen believes these adjustments will directly lead to increased consumer spending.

Dr Sen highlights that for most people, an extra dollar earned translates into an extra dollar spent.

The ANZ Economist explains that wage inflation is not the same as wage-price inflation.

“Wage inflation is wages going up. What I’m trying to say here is that with wages going up, that’s got to translate into more spending by households and support demand, consumer demand.”

Sen further stresses that there is no danger of a wage-price spiral risk.

Deputy Prime Minister and Minister for Finance Professor Biman Prasad says the theory that wage increases will lead to higher prices for goods and services does not always hold true.

“For example, if there are people who think that they can now save more, and savings plus consumption. One option is that those with the lower income, whatever increase in income they get, they will spend it. So if you think that that is going to cause prices to go up, not always, because I think the businesses are also sensible.”

Prasad further explains that Fiji’s interest rates are still very low, which also helps control inflation.

He adds that the Reserve Bank’s fiscal policy framework is also very strong.