In 2008/2009, the Central Statistical Office (CSO) conducted a Household Budgetary Survey-an exercise that was meant to provide detailed insight into household expenditure, income and savings in Trinidad and Tobago. One of the main purposes of the survey is technical: it is used to modify the basket of goods and services consumed by households from period to period. The data form the basis of the revision of the Index of Retail Prices, which in turn is the basis of the Central Bank's monthly reporting on the rate of inflation. Although the survey was concluded in 2009, two years later the CSO is yet to deliver to the public a report on its findings.
This delay by the CSO means that the basket of goods and services, which the Central Bank uses to determine the rate of inflation every month, is based on information from 1998, 13 years ago. It should be obvious to most that there have been several quantum shifts in patterns of household expenditure, income and savings in the last 13 years-and that the information collected in 1998 would be almost useless for constructing the Index of Retail Prices in 2011. This may mean that the inflation rate being reported by the Central Bank may be badly skewed because it is based on a basket of goods and services that is completely irrelevant to today's realities. The fact that the Central Bank is reporting inflation data that may be skewed is not simply an academic exercise.
Inflation data has a significant influence on the demands made by trade unions for higher wages.
Such data, as well, has an influence on prices set by businesses and the extent and frequency with which prices are adjusted. There is also a profound relationship between inflation data and the pension adjustments made by the Government and the National Insurance Board. There are also some important prices-like the price of electricity-that are set in relation to the rate of inflation. It should also be noted that traditionally central banks have adjusted what is described as their policy interest rates based on their analysis of the rate of inflation. Therefore the cost of money-in terms of the interest rate that financial institutions are paid to lend money-is often determined by the rate of inflation.
Quite recently, for reasons that now seem obvious, the T&T Central Bank has paid much more attention to the rate of credit growth than the rate of inflation in determining adjustments to its repo rate-the overnight rate at which financial institutions borrow from the Central Bank. Given the importance of accurate inflation data in determining wages, prices, pensions and the cost of loans, it may well be argued that making judgments based on 13-year-old data is like shooting in the dark with a blindfold.
Some may argue that this means that the entire basis of economic and financial decision-making in T&T is resting on a foundation that is very shaky indeed. The likely consequence is that the possibility of accurate economic forecasting and future scenario planning are made much more difficult for the private and the public sectors as well as trade unions, pensioners, potential investors and even the proverbial man-in-the-street.
This is an unfortunate, even sorry, state of affairs which cannot sit well with the professional economists inside and outside the Central Bank, the private sector organisations, the trade union movement or, indeed, the Government and the state sector, which are the largest employers in the country. Therefore, the faster the CSO is able to provide the Central Bank with the revised basket of goods and services, the faster the Central Bank will be able to revise and rebase the Index of Retail Prices to bring it in line with today's realities. Given the profound importance of the Household Budgetary Survey-and we have not even touched on the importance of the survey in defining poverty and determining poverty lines-we urge the new Minister of Planning, Dr Bhoe Tewarie, to view its completion with the very highest priority.