Luckily we will put the municipal elections behind us this Sunday. Then the politicians will not feel obliged in the next three and half years to stuff our pockets full. Maybe this relaxed period will help the economy to revive for the long term.
The two-thirds majority has the clear advantage that the government rules communication across the country. At least it does not come to a battle of wild promises that have hardly anything to do with reality. Fidesz-KDNP only has to take care not to promise all sunshine and happiness yet. Although even that would be no problem because the voters do not see any other political option…
Breaking down annual utility cost-cuttingfor stronger effect in media
They are raving about the settlement with the banks that will save about a million people from the trap of foreign-currency loans. A lot of people will only get confused once the loan is converted to forints, inclusive the interest rate for forint loans – but that will only happen in the first semester of 2015.
Plus there is constant communication about the policy of utility cost-cutting. These measures are being introduced this year divided over three months. This way the Fidesz-supportive media have the chance to praise this third round of the welfare policy not once but three times.
The previous utility cost-cuttings of around 10%, which were executed in one single step, clearly received less media attention than the reductions that are happening this year: 6.5% on natural gas, 5.7% on electricity and 3.3% on central heating. The gas prices were cut on 1 April, which might have been the end of the heating season but was an ideal date directly before the parliamentary elections. The electricity prices were cut next on 1 September, and one month later and just 11 days before the municipal elections the central heating tariffs were also reduced. This way both elections could have a slice from the cake of utility cost-cutting.
2010-2013: general inflation undermines effectof utility cost reduction
If the politicians would rely more on the data and conclusions of the Central Statistical Office (KSH) in their speeches, they might be closer to reality. The KSH publishes a lot of indicators about consumer prices, so it is possible to compare prices even in the distance of decades. Before the political turn there was nothing to highlight; let’s just mention that HUF 5,000 was a fortune at that time, a tram ticket costing around HUF 2-3 and a good imported Czech beer HUF 14-18.
Since nowadays Fidesz likes to emphasise how great the government is doing in reducing prices, we should compare specific prices from 2010 and 2013 (the yearly average prices for 2014 are of course not available yet). The consumer price index was around 6.4% at the beginning of 2010 and it decreased to 3.1% by the summer of 2011. After that – note under the leadership of the “price-breaker” Orbán government! – it increased back to 6.6% until September 2012, no matter that the inflation was practically brought down to zero by the policy of utility cost-cutting by the end of 2013.
KSH calculated an average price decline in the last four years of around 20% for an average Hungarian household. Although you should not be shocked to learn that eggs, cheese and oil cost about one fifth more than four years ago. The explosion in the prices of sugar and cigarettes, however, exceeded the tolerance threshold of the population, so shopping tourism into the neighbouring countries began to flourish, just like the black markets.
In the meanwhile the price corrections of fuel sold at service stations happening even several times a week are unnerving the millions of drivers; the bottom line is that owners of cars with petrol engines are paying about one fourth more than four years ago, while diesel owners pay about a good one third more.
Wood prices increase further on, unaffected
In the same time, between 2010 and 2013, average gross salaries rose by about 14% in the Hungarian economy, coming to about HUF 230,000 a month. The net amount that remains in the pockets of full-time employees is on average around HUF 150,000; the increase here kept up with the rise of gross salaries in terms of percentages, and if we express it in absolute value we would find HUF 20,000 more in purses after the monthly payment on average.
Unfortunately the average indicators do not show that according to the deep sociological studies around 60% of people are actually doing worse than before. For these families inflation takes away the surplus amount of money. These are families who can rarely enjoy the larger price advantage of household items planned for long-term use (such as fridges and LCD-TVs) due to their limited budget.
For these people wood and propane-butane gas are the most commonly used energy sources, not electricity, central heating and natural gas, where Fidesz announced the end of “extra profits”. No wonder that the prices of these energy sources on the market are growing further, uninfluenced by the intention of the government.
However, the real joke in the official KSH statistics is that the prices of electricity and natural gas behave quite differently than the Fidesz publicity would have us believe. Fidesz showed a statistic during the electoral campaign according to which people only have to pay three-fourths of the price for electricity that they had to pay under the social-liberal government. KSH calculated though that two rounds of electricity price-cutting with a nominal 20% decrease only reached a real decrease of 6% if compared against the prices of 2010, and a cubic metre of natural gas became even more expensive!
(To be correct it should be noted that the second round only came into effect in November 2013, therefore the results will only be reflected by the middle of 2014. For the full picture we also have to see that electricity and gas became more expensive under the rule of Fidesz – it might be that the Orbán government did not have the energy in the beginning to take on the fight with the multinationals, since they had their hands full with the expulsion of the International Monetary Fund and weakening the forint.)
Untouched middle class
Those members of the middle class who are benefitting from Fidesz’s tax policy might read all this with understandable reservation. If someone, regarded as a politically welcome citizen, is taking home HUF 50,000, 70,000 or even 100,000 more each month, he might not be (financially) upset by the introduced price increases. However, even these people will notice that today they are clearly paying more for everyday goods than they did in 2010.