Household living cost increases accelerate - up 7.4% in past year

Personal Finance / news

Statistics NZ says food and housing continue to be key drivers of increased costs for households

26th Oct 23, 11:13am by David Hargreaves

Source: 123rf.com

The cost of living for the average New Zealand household is again going up at an increasing rate, according to new data released on Thursday by Statistics NZ.

Interest rate payment hikes and rising food costs are key drivers.

Stats NZ's household living costs figures show that costs for the average household increased by some 7.4% in the 12 months to the September 2023 quarter. And that's actually up on the 7.2% annual increase figure recorded for the 12 months to June 2023, although it is down on the peak recorded for the December 2022 quarter of an 8.2% increase.

All this comes as the officially recognised measure of our inflation, the Consumers Price Index, has been showing steadily reduced rates of increase, down to an annual rate of 5.6% for the September quarter from 6.0% in the June quarter and down from the peak seen in June 2022 of 7.3%.

The key difference between the two sets of data is that mortgage interest rates don't get included in the CPI, but they are included in measurement of the household living costs price indexes (HLPIs).

In the 12 months to September, average households across the country faced a 27% increase in interest costs. Interest cost increases have been at elevated levels for some time now. A year ago the rate of increase in interest costs was actually 44%.

Food prices, which have also been a significant factor in increased costs, continue to be so, with an 11.1% rise over the 12 months.

These were the key contributors to the 7.4% living cost rise:

interest payments increased 27.3%
grocery food increased 11.1%
rent increased 5.0%
insurance increased 12.9%
property rates and related services increased 9.6%.

Each quarter, the household living-costs price indexes (HLPIs) measure how inflation affects 13 different household groups, plus an all-households group, also referred to as the average household. In contrast, the consumers price index (CPI) measures how inflation affects New Zealand as a whole.

"The two measures of inflation are typically used for different purposes. A key use of the CPI is monetary policy, while the HLPIs provide insight into the cost of living for different household groups," Stats NZ says.

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53 Comments

by CrispyKahawai | 26th Oct 23, 11:31am 1698273117

And Te Whatu Ora still think it's acceptable to offer their senior medical officers a pay increase that (especially now) significantly lags inflation. Slow motion train wreck.

by Independent_Observer | 26th Oct 23, 1:43pm 1698281026

Current policies mean the quality of life in NZ is going to be (by purpose/policy) eroded to pay for the covid 19 stimulus.

We could have pulled the bandaid of quickly then (short term intense pain) but instead we’ve chosen to pull the bandaid off very slowly - as slowly as possible to we experience low pain for a long period of time.

by mfd | 26th Oct 23, 2:03pm 1698282220

It has been more targeted in the public sector. Lower wage professions, especially those with pay equity deals, seeing 20-30% raises over the last few years while higher paid groups saw freezes and then sub-inflation offers. A deliberate policy to compress the pay scales in the public sector.

My specialist healthcare profession (not a Dr) has gone up between 7% (top of the scale) and 11% (trainees) since the start of 2020 - inflation has been about 20% over that time.

by interesting1234 | 26th Oct 23, 2:22pm 1698283336

Just wait for the unemployment to tick over and the job scarcity to get worse. Aint nobody going to get anything claiming inflation then as they won't be able to jump ship so readily for more pay anymore. The ultimate reality check after the bumper career years of COVID. Come to think of it there are going to be lot of sectors getting a reality check post Labour. Construction, Retail, Local and Central Government, Journalists having to change face.

by HouseMouse | 26th Oct 23, 11:32am 1698273144

HFL

by Dgm | 26th Oct 23, 12:48pm 1698277697

JH.. everyone needs to adapt and accept it

by Retired-Poppy | 26th Oct 23, 5:43pm 1698295435

According to the vested, people are already getting "used" to it. Its a strange assumption to make that the supposedly "wise" investor Landlord's can get so used to wasting vast sums of money, indulge in top-ups out of wages and getting second jobs just to stay afloat. Denial does indeed manifest itself on the forum in the strangest of ways. It's certainly not my idea of living.

Health is your wealth not bank owned houses.

by Sam B | 26th Oct 23, 11:45am 1698273931

But rising prices are 'a good problem to have', right?

Given that the official economic plan of the incoming government is to reflate the Key bubble, this should be hailed as good news!

by Independent_Observer | 26th Oct 23, 1:47pm 1698281278

Only rising house prices are a good problem to have - it’s a sign of success.

7% house price inflation (ie prices double every 10 years) is a great success - while the cash flows that pay for the asset (incomes) are by policy targeted to rise at 2%. And apparently this combination of factors can continues on forever because it is how it has always been (the last 30 years at least - or winces boomers purchased their first properties so it must be a timeless principle)

by Palmtree08 | 26th Oct 23, 3:36pm 1698287817

Well it is what the majority of NZers want. They did vote for a policy Nats made no secret of.

by Beanie | 26th Oct 23, 3:41pm 1698288074

No. They voted out Labour.

by Jonny.Foe | 26th Oct 23, 12:16pm 1698275796

Hi Adrian, what do RBNZ do when prices are increasing too quickly and people have less money to spend?

Easy, my old mucka, we increase the cost of doing business, make sure mortgagors are bleeding out, and kill the construction industry so that housing demand exceeds supply.

What about you Grant, what do you do?

We (blah blah blah fiscal responsibility) reintroduce fuel excise duty, put up the cost of public transport, and open the borders to make sure demand for rentals exceeds supply.

Thanks for the clarification. At least you're working together I guess.

by Independent_Observer | 26th Oct 23, 1:56pm 1698281764

Until we stop deficit spending interest rates are going to stay high/keep going up.

Governments have been spending $$ like it’s WW2 while we haven’t increased the quantity of goods and services produced within the economy (so we have equilibrium between money supply and the goods/services that the money supply can purchase) and then wonder why we have very high inflation!

I think we need wealth taxes because austerity won’t be acceptable by the majority of the people. I can’t see any other solution to the current predicament we face. Reducing government spending is going to hurt a lot of people (including National/Act supporters). What will they do when the tenants of their properties can’t afford rent because they lost their job or have lost their benefit that was covering over their weekly expense? (And the prices of the assets they own start tanking because the associated cash flows on the margin are taking a hit?!)

by interesting1234 | 26th Oct 23, 2:27pm 1698283643

What will they do when the tenants of their properties can’t afford rent because they lost their job or have lost their benefit that was covering over their weekly expense?

Landlords will either have to lower the rent, or keep booting tenants left right and centre, over and over again thinking they will continue to get high rents until they realise that it isn't at an affordable level. The level of homelessness will continue to increase, crime will uptick as a result, social cohesion will continue to head down the gurgler further. You will see more mortgagee sales if they can't find tenants willing to meet the mark and won't budge on rent price due to how leveraged they are, and prices will drop further. That or the govt will do something silly again to keep the prices rising until even they realise it is too late.

by Jonny.Foe | 26th Oct 23, 4:02pm 1698289324

There is literally no correlation between deficit spending and interest rates. It's a complete myth based on a quantity theory of money that has no validity.

by kiwi_overseas | 26th Oct 23, 12:24pm 1698276274

ABSURD

As an arm of government, local government has a moral responsibility (it should be legal) to target 1-3% rate rises to match the NZ inflation band target.

9.6% rates increases are insane and makes local government partly responsible for the high inflation rate in NZ.

Whilst I agree there is a local government funding issue (the ratepayer or taxpayer or user will still be the end payer even if this is sorted out, even in the case of water reform), local government still needs to restrict its rates rises to 1-3%. This means deferring substantial capital works and lowering service levels.

by Pragmatist | 26th Oct 23, 12:36pm 1698276973

They can't defer capital works, having sewers pumping shit into the streets like Wellington, & Auckland have recently is not acceptable.

Public transport is a mess in both as well.

by kiwi_overseas | 26th Oct 23, 12:40pm 1698277202

I dont disagree that capital works would need to be prioritised & some may not be deferable.

Local government has bought this on themselves by failing to invest in maintaining infrastructure and spending capital elsewhere.

by Hamish | 26th Oct 23, 1:13pm 1698279220

By trying to outbid each other for growing their population with beautifying projects and throwing money at events. 'Economic impact study blah blah blah.....'

by BigOldWeapon | 26th Oct 23, 12:55pm 1698278100

I haven't fact checked your 9.6% rates increases. But assuming the is correct and it's over three years - that is 3.2% annual increase. Not far outside your 1-3%.

by kiwi_overseas | 26th Oct 23, 1:03pm 1698278607

the 9.6% is correct and is over 1 year as indicated in the article

by BigOldWeapon | 26th Oct 23, 1:39pm 1698280745

rates don't change every year though, they change every three.

by Nzdan | 26th Oct 23, 1:59pm 1698281951

Pretty sure it's the rating values that change every 3 years. They'll still increase the rates amounts each year in line with council's funding requirements, it's just the metric in which they apportion that amount changes every 3 years.

by Palmtree08 | 26th Oct 23, 3:43pm 1698288189

What part of the country do you live in? I've owned property and can never remember a rates bill that didn't increase annually. Admittedly the annual increase was in the $10s back then. Now it's in the $1000s.

by Sluggy | 26th Oct 23, 1:02pm 1698278523

Shouldnt rates match inflation ? To be fair it really only concerns those that own property, which is likely to be a minority in the near future.

by 1689 Baptist | 26th Oct 23, 1:24pm 1698279849

The cost will eventually be passed on to renters so actually it is everyone's concern.

by BirdieNZ | 26th Oct 23, 2:02pm 1698282149

Landlord costs don't get passed onto renters; this has been demonstrated incredibly clearly over the last ~6 years where landlord costs decreased drastically (low interest rates) and then increased drastically (high interest rates + removal of interest deductibility + increased cost of compliance through HH standards). Rents did increase during this time, yes, but only at the same ratio of average income as previously. Rents follow tenant incomes, not landlord costs. This only changes when supply sufficiently outstrips demand that rents actually stop increasing or even decrease.

by Hans Brink | 26th Oct 23, 1:03pm 1698278583

It's not "absurd" anyone could see this coming as many councils have kept rates increases to a minimum to appease rate payers for many years now. They would have been better off to increase steadily rather than having a sudden catch up.

If you want usable infrastructure then pay up. How else can it be paid for?

by kiwi_overseas | 26th Oct 23, 1:33pm 1698280439

By making sure money was spent in the best areas first. E.g maintaining water infrastructure.

Local councils aren’t required to do cost benefit assessment on all their spending and then rank the projects.

They should be.

by Rampart | 27th Oct 23, 1:05pm 1698365129

Unfortunately 1-3% rate increase isn’t enough to sustain our crumbling infrastructure. Especially when adding extra demand from migrants. Should the government top up rates?

by kiwi_overseas | 26th Oct 23, 12:26pm 1698276377

ABSURD.

Rent increases of 5% because the government is running a high immigration rate pushing up housing demand.

Government is partly responsible for the high inflation rate because it's failed to put a population strategy in place as recommended by the productivity commission.

by Jesse1 | 26th Oct 23, 12:54pm 1698278051

5% is lower than the inflation rate so rents have actually become more affordable (it may well get worse though). The Australian increase was 7.6% in the year to September 30th so we've done much better than them.

National's talk of Labour's housing policies causing big rent increases was just BS along with Nicola Willis stating that their changes will cause the speed of increases to slow with their policies. This means we should expect less than 5% increase in rents after they let investors deduct interest again according to her. I can't see that happening.

by kiwi_overseas | 26th Oct 23, 12:45pm 1698277524

That assumes everyone got a pay increase that matched the CPI change.

by Jesse1 | 26th Oct 23, 12:57pm 1698278255

Yes and it seems that most have done at least that well.

by 1689 Baptist | 26th Oct 23, 1:26pm 1698280019

The effects of Labour's policies on rent hasn't been fully realized yet. 5% is just the beginning. If you increase business cost (in this case landlords) you will increase consumer costs (tenants). Even if there is a year or two lag.

by kiwi_overseas | 26th Oct 23, 12:28pm 1698276532

ABSURD.

NZ followed the US and took direct house prices out of the CPI. Houses are the biggest consumer good.

This means the current fall in house prices is not reflected in the CPI and interest payments increased 27.3%.

This is government directly contributing to the high CPI inflation rate.

by Pragmatist | 26th Oct 23, 12:34pm 1698276846

They took land prices out of the CPI, the price of the building and its maintenance is still in there.

by kiwi_overseas | 26th Oct 23, 12:37pm 1698277030

Yeh, Na.

Only new build costs are included.

Consumers buy a range of houses not just new builds.

The full cost including land should be included.

by Pragmatist | 26th Oct 23, 2:33pm 1698283997

Nope, what a lot of administrative bollocks that would take. What other 2nd hand goods would you include?

by kiwi_overseas | 26th Oct 23, 2:55pm 1698285349

Houses are the largest purchase by any consumer. Whether it’s brand new or second hand.

The average or median house price could easily be used.

Without house prices in the CPI, the CPI went way too low during Covid-19 and blew house prices sky high (as a financial asset inversely proportional to the interest rate)

by Pragmatist | 26th Oct 23, 3:00pm 1698285613

And houses are already included in the CPI. Just like TVs, Clothing etc. New prices only, because that is how they enter the economy, and they just depreciate from there (unless major renos are undertaken, which is also included in the CPI).

by Zwifter | 26th Oct 23, 5:35pm 1698294922

Well spot the obvious problem there, houses don't depreciate they appreciate, how else can you explain our old house that went from $20K in the 1970's and the same house is now $1.4M.

by Pragmatist | 26th Oct 23, 11:24pm 1698315859

The house, or the dirt it's sitting on?

by kiwi_overseas | 26th Oct 23, 12:30pm 1698276617

ABSURD.

grocery food increased 11.1%

Again the government's fault. They allowed the supermarkets to form oligopolies and have failed to break them up.

by chemistpeter@g… | 26th Oct 23, 12:47pm 1698277669

I'm glad I don't have a mortgage. Food is bad enough to buy nowadays, even on a $150+ salary.

Other bills increasing well more than inflation, petrol, gas, power, rates, insurance, where will it end............

You will own nothing but be happy, yeah right.

by Sluggy | 26th Oct 23, 1:04pm 1698278682

You will own nothing but be happy - this statement is truer than you would think, all the angst is due to asset ownership.

by the Joneses | 26th Oct 23, 1:13pm 1698279189

You will own nothing but be happy

When you use that quote, what do you mean exactly?

It appears originally to come from someone at the WEF, where an individual imagined increased leasehold or renting of more expensive consumer goods and assets. But the WEF has said it is not a specific goal they are working towards.

Do you think the economy has been orchestrated to take peoples assets off them?

If so, who is doing it? The reserve banks? The WEF? The already wealthy? The last government? All governments?

by Jesse1 | 26th Oct 23, 1:13pm 1698279184

It's going to be interesting to see what our birth rate is over the next year. Something's got to break and I think it's our birth rate. And the political response will be more immigrants. Nothing to see here...

by Uncle Bulgaria | 26th Oct 23, 2:06pm 1698282393

My house insurance just went up 700 dollars!

by Nzdan | 26th Oct 23, 2:16pm 1698282965

Mine went up $1400 with car going up $300 p.a. on top of that.

by interesting1234 | 27th Oct 23, 8:30am 1698348633

We switched to 3rd party as wee had paid around 80$ the cost of the car in insurance already so no point getting full anymore

by WellingtonInvestor | 26th Oct 23, 4:32pm 1698291154

So 'real life' inflation is actually increasing , not decreasing.

by nktokyo | 26th Oct 23, 8:11pm 1698304272

Insurance is the latest punch to land