The cost of living for Kiwi households rose by 7.7% in the 12 months to March 2023, according to Stats NZ.
A 12% increase in food costs plus a 38% increase in mortgage interest costs were key components in pushing up the costs for households. The food increases included higher grocery food, fruit and vegetable prices.
These figures are according to Stats NZ's latest household living-costs price indexes (HLPIs).
The living costs indexes 7.7% increase is considerably higher than the Consumers Price Index (CPI) inflation figure for the March year that came out as 6.7%.
In terms of quarterly increases, the HLPIs rose by 1.8%, which compared with a quarterly CPI increase of 1.2%.
A major difference between the HLPIs and the CPI is that the CPI includes the cost of building a new house (which rose 11% in the year to March), while the HLPIs instead includes mortgage interest payments - which as stated increased by 38%.
In fact that 38% figure is down somewhat from the figure for the year to December 2022, when the increase totalled 45%, while the increase in overall living costs during that period came in at 8.2%.
The household living-costs price indexes measure how inflation affects 13 different household groups, plus an all-households group, while the consumers price index (CPI) measures how inflation affects New Zealand as a whole.
Stats NZ says the two measures of inflation are typically used for different purposes. A key use of the CPI is monetary policy (through the Reserve Bank and its use of the Official Cash Rate to help control inflation), while the HLPIs is to provide insight into the cost of living for different household groups.
On the food price increases, Stats NZ's consumer prices manager James Mitchell said these had increased by 12% for the average household, "which was the main contributor for most household groups".
In terms of the groups covered by the indexes, Stats NZ gave these figures for the increases during the 12 months to March 2023:
- all households 7.7%
- beneficiary 6.7%
- Māori 7.5%
- superannuitant 7.1%
- highest-spending households 8.7%
- lowest-spending households 6.9%.
*We also spoke with Bill Rosenberg in a recent episode of the Of Interest podcast about the HLPIs v the CPI.
14 Comments
A major difference between the HLPIs and the CPI is that the CPI includes the cost of building a new house (which rose 11% in the year to March), while the HLPIs instead includes mortgage interest payments - which as stated increased by 38%.
A chocolate fish for that man! Thanks, David. Most other MSM sites do NOT point this out and public discussion becomes a mess.
The HLPI is a better guide to people's wallets than the CPI.
And it is why I think the RBNZ has totally overcooked its rate rises. Such a massive increase in mortgage costs for the 1/3 that are owner occupiers, and goodness know how many investors, is going to see a massive mess!
This winter is going to be wildly harsh for many.
And it is why I think the RBNZ has totally overcooked its rate rises
I believe Stats NZ deliberately leaves mortgage costs out of the CPI basket, otherwise it would be considered double counting (RBNZ raising rates because of the impact of its previously hiked rates).
I understand one of the intended consequence of RBNZ's rate hikes is a squeeze on household budgets for them to cut back spending elsewhere, i.e., reduce aggregate demand to meet supply.
Which indicates a terrible understand of feedback loops and control theory. The system would react to those raised rates, mitigating the effect those raised rates had. You'd need a pretty high multiplier to make it unstable.
Instead what we have is no direct measure of what we're trying to control at all. Nearly all the inflation of the past 3 decades has happened in the housing market, but it's not fed back into the system at all - rents [which are included] are tied to incomes more than they are to house prices.
So interest rates were driven lower in an effort to stimulate the economy, all the while missing the stimulation happening in the asset bubble.
Increasing the cost of living to tackle the cost of living. Ain't medieval monetarism brilliant?!? I'd laugh if it wasn't so damn sad.
Interestingly, the Stats NZ data (Table SNE025AA) suggests that interest rate rises are actually benefiting households overall - total interest received by households is actually higher than total interest paid. The big losers are non-financial businesses who are paying about (net) $1 billion more per month than they were. Obviously adding costs to our businesses is a great way of tackling higher prices. Mind you some businesses are doing great... namely banks and the big corporates with the market power to demand higher prices (take a bow Air NZ).
Of course, what we are seeing here is that monetary policy is all about redistribution - reducing the spending power of people with debts and protecting the wealth of people with lots of money.
Customer service throughout NZ has gone to the dogs. I have stopped going to cafes and restaurants, I am sick and tired of low staff levels and poorly strains staff as well as staff who don't give a damn. Since Covid, customer service wise things have just not returned to normal. We are a sadder world for it.
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