September 17th, 2024

Inflation bites New Zealand households: Food and housing costs surge

The lowest-spending households saw a 6.9% increase, beneficiary households faced a 6.7% increase, Māori households a 7.5% increase, and superannuitant households a 7.1% increase.

Food prices, particularly for grocery items, fruit and vegetables, have surged by 12% for the average household, while rent and interest payments have also contributed to the increase.
Food prices, particularly for grocery items, fruit and vegetables, have surged by 12% for the average household, while rent and interest payments have also contributed to the increase.

Food and housing costs have driven up inflation for all household groups in New Zealand, with the cost of living for the average household increasing by 7.7% in the 12 months to March 2023, according to figures from Stats NZ on Monday.

Food prices, particularly for grocery items, fruit and vegetables, have surged by 12% for the average household, while rent and interest payments have also contributed to the increase.

Why it matters: Inflation rates have varied across different household groups, with the highest-spending households experiencing the highest annual increase in living costs at 8.7%. The lowest-spending households saw a 6.9% increase, beneficiary households faced a 6.7% increase, Māori households a 7.5% increase, and superannuitant households a 7.1% increase.

Driving the news: The household living-costs price indexes (HLPIs) measure how inflation affects 13 different household groups, as well as an all-households group referred to as the average household. Rent and interest payments have been major factors contributing to the increase in the cost of living for various household groups.

  • Rent accounted for about a third of beneficiary household expenditure, compared to 13% for the average household and 5% for the highest-spending households.

  • Interest payments increased by 38% in the 12 months to March 2023 for the highest-spending households.

Transport prices: Transport prices declined for beneficiary and lowest-spending households, while remaining flat for Māori households. All other household groups experienced an annual increase in transport prices, driven by falling petrol prices and rising airfare costs.

Between the lines: Superannuitant households experienced a 7.1% increase in living costs but faced lower inflation than the average household. Consumer prices manager James Mitchell explained that superannuitants are more likely to own their own homes without a mortgage, making them less affected by rising mortgage interest rates.

What's next: The New Zealand government will need to address these rising costs of living, particularly for vulnerable groups like beneficiaries and low-income households. Policy measures could include targeted financial assistance, rent controls or increasing housing supply to alleviate some of the pressure on the housing market. Additionally, addressing the factors driving up food prices will be essential to mitigate the impact of inflation on all household groups.