MAJOR threats to the state of the Jersey economy such as Europe’s attitude to zero-ten taxation and the effects of the global recession have tended to push another vital issue – the rate of inflation – into the background.

Unfortunately, cost of living figures published last week show that we cannot afford to minimise the danger of the old enemy – which could be poised for a new onslaught.

The latest cost of living figure – as measured by the Island’s All-items Retail Price Index – was 5.4 per cent. As well as being far higher than the government’s target of 2.5 per cent, the figure exceeded the rate at which wages are growing and totally eclipsed the base lending rate, which remains at 0.5 per cent.

As anyone in paid employment or in receipt of savings income will realise, this is not a healthy situation.

There is, however, one feature of the figures which makes them marginally less alarming. The rate of the Island’s goods and services tax, GST, increased from three per cent to five per cent in June, and the States Statistics Unit has calculated that this accounted for 1.3 per cent of the increase in the All-items index.

This one-off factor produced a temporary effect which will not be repeated – unless, of course, there are further increases in the rate at which GST is levied.

But even if the GST effect dilutes the bad news on the cost of living front to some extent, there are other elements of the Statistics Unit report which accompanied the headline figures that offer cause for concern.

It is reasonably clear that wages have played a very limited role in driving up inflation during recent months, but the same cannot be said of prices. To take just two examples, the costs of motoring rose by 11 per cent during the 12-month period of measurement and the cost of food by eight per cent.

Those responsible for pricing policies would no doubt offer all sorts of reasons to explain why prices have had to rise, but they should be aware of the demands for restraint which are directed at the Island’s workforce whenever wage claims threaten to spur inflation. To use a well-worn phrase, what’s good for the goose is good for the gander.