Prime Minister Benjamin Netanyahu announced Sunday that he would form a team to tackle the cost of living, amid persistent inflation and rising public criticism that his government has neglected the matter while focusing on its planned judicial overhaul.
The premier’s announcement came days after the government passed a two-year state budget that critics say is short on measures targeting the most pressing issue for voters.
Netanyahu said in comments at the start of the weekly cabinet meeting that the contentious budget was “important for economic stability and the fight against the [rising] cost of living.”
The premier said he instructed the cabinet secretary to submit a draft proposal to establish a new committee to deal with the matter.
Netanyahu said that he would head the panel, which would consist of the finance and economy ministers, and “additional ministers and professionals.” No further details were given on the identities of those additional members.
Despite the fact that the government has been mainly focused on judicial overhaul legislation over the past few months, the prime minister claimed that “the fight against the [rising] cost of living tops our government’s list of national priorities.”
“We will take determined and strong action to lower prices in all areas. I am convinced if we work together, together with the budget we passed, along with the reforms in the Arrangements Law, we will succeed in stemming the cost of living and in assisting all citizens of Israel,” Netanyahu said.
No details were given on the specifics of the steps that would be taken.
In addition to sticky and high inflation, Israel’s economic growth forecasts have been cut and investments are hampered by the uncertainty surrounding the government’s planned contentious judicial overhaul and a slowdown in the global economy.
Opposition leader Yair Lapid said Netanyahu’s announcement of a committee to deal with the matter was in fact a sign that he would not really be taking action.
“A few years ago, Netanyahu said to me: ‘Do you want to make sure that something does not progress? Establish a committee on the matter.’
“The citizens of Israel know that the government would not take care of the cost of living. Because it’s just not important enough to them,” Lapid charged.
Last week, lawmakers ratified the NIS 484 billion ($131 billion) and NIS 514 billion ($139.5 billion) 2023-2024 state budget, ending months of coalition bickering over funding priorities and satisfying demands made by Haredi and far-right parties, who held the power to potentially bring down Netanyahu’s government.
Included in the spending plans for the next two years, the government has okayed the allocation of billions of shekels in funds to causes that the Finance Ministry and leading economists have warned will lower incentives and qualifications for the Haredi community to enter the workforce, and will stifle economic growth.
Finance Minister Bezalel Smotrich applauded the passage of the budget, which he said “focuses on growth, infrastructure, encouraging investment in high-tech, agriculture, massive investment in the health system, which has been neglected for years, massive investment in sovereignty and the defense establishment, and massive investment in higher education and all aspects of the education system.”
However, Daphna Aviram Nitzan, director of the Center for Governance and Economy at the Israel Democracy Institute (IDI), told The Times of Israel last week that the budget did not address the cost of living crisis.
“The budget does not serve and does not provide a response to the needs of Israeli citizens such as investment in reforms for tackling the high cost of living in the country, which is not adequately addressed,” she said. “Instead, it allocates funds that are not growth drivers for the economy at the expense of a diminishing working population, which will have to carry the high tax burden to finance this budget.”
Last week, the Bank of Israel raised its benchmark interest rate for a 10th consecutive time, lifting borrowing costs by 25 basis points to 4.75% as it struggles to tamp inflation growth in recent months.
The aggressive interest rate hikes by the Bank of Israel have rapidly fueled the costs of mortgage holders who are struggling to pay off monthly payments. Over the past year, the average cost of monthly mortgage payments has gone up by an estimated NIS 1,000.
The central bank’s move came after the consumer price index (CPI), a measure of inflation that tracks the average cost of household goods, rose in April at almost double the rate than was forecast. The April CPI increased by 0.8% above analysts’ expectations of 0.4% to 0.5%, taking annual inflation over the past 12 months to 5%, according to data released by the Central Bureau of Statistics on May 15. The April CPI monthly reading was the highest since July 2022.
In addition, in recent weeks, Israel’s largest food manufacturers have announced price increases in the retail sector, led by milk products and products such as instant coffee, sugar, and cocoa.
Polls have shown the public is dissatisfied with the government’s performance on the matter, saying that the coalition is concentrating on its contentious judicial overhaul instead of the spiraling cost of living.
A survey released by the IDI last week showed that two-thirds of respondents think that food prices are the most significant factor, and around half blame housing costs, and 29 percent indirect taxation.
The majority of the public believes that the high cost of living is the fault of the government’s lack of action and only 27% blame the large monopolies, and 3-4% attribute responsibility to local manufacturers, importers, or supermarket chains, the survey found.
Sharon Wrobel contributed to this report.