Belfast Telegraph

Co-dependency is not ideal for our economy

By Margaret Canning

Co-dependency - a state in which one factor depends on another for pretty much everything - is never a desirable state for a relationship.

One half of a partnership should never depend wholly on the other for decision-making and activities.

Inter-dependency, where both parties can thrive independently but still maintain togetherness -is a much more desirable state of affairs, relationship gurus tell us.

The co-dependency of so many factors in the economy was brought home to us yesterday as inflation reached the record low of 0.5%, making the prospect of an increase in interest rates and respite for skint savers more remote than ever.

Looking back on the heady years of 2007-8, when we first began panicking about high inflation and rising food prices, it's hard to believe we've come into this part of the economic cycle.

Inflation has been falling because of plummeting fuel and food costs.

Oil prices are at their lowest for nearly six years, and supermarket competition - as big beasts like Tesco, Asda and Sainsbury's fight for market share - has brought food prices down.

It's great news for consumers in Northern Ireland, where our lower wages mean we pay out much more from our relatively meagre pay packets for fuel and food.

And because low inflation and interest rates exist in a state of co-dependency, policy makers put up interest rates to off-set the effects of higher inflation.

As inflation is low, the historic low in interest rates is expected to remain - again, good news for mortgage borrowers but not so good for savers. And Northern Ireland is also facing rising house prices, a factor that's greeted with enthusiasm in most quarters.

As a fellow business journalist points out, it's an eternal conundrum of consumer economics/psychology that falling prices of all things except house prices are greeted with enthusiasm.

Generally speaking, we don't want inflation to fall too low and prices to fall so that our firms stop making money and don't introduce long-overdue wage increases.

If wages don't start going up, then the real costs of basics like mortgage repayments will start to increase, and even low interest rates won't help.

The prospect of inflation falling too far in Northern Ireland is an instance of co-dependency that the region, with its already low wages, could do without.

Belfast Telegraph

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