Household living costs on the rise

Personal Finance / news

Average household living costs up 5.2% in year to December 2021 quarter, with rising interest rates and petrol prices a couple of the culprits

10th Feb 22, 3:59pm by Toby Allen

Image: Dave Dugdale. Licence: CC BY 2.0

The annual cost of living for the average household increased 5.2% in the December 2021 quarter, year-on-year, Statistics New Zealand says.

For seven of the 13 housing groups Statistics NZ has been measuring since the data series began in 2008, the December quarter saw the highest increase since the series began.

The Household Living Costs Price Index (HLPI) measures how inflation affects various household groups, including beneficiaries, superannuants and high and low spending households.

The 5.2% average household increase sat between increases of 4.8% for beneficiary households, and 5.4% for high-spending households. Māori households experienced an annual living-cost increase of 5.3%.

High spending households broke their long run of lower increases, said Katrina Dewbery, consumer prices manager at Statistics NZ.

The HLPI, which reports on households, is a separate measure from the Consumer Price Index (CPI) which measures the effect of inflation as a whole and was up 5.9% in the December 2021 quarter.

The two measures also treat housing differently: the CPI captures the cost of building a new home while the HLPI captures mortgage interest payments.

"In the HLPIs, interest payments increased 7.8% for the average household in the year to December 2021."

"In the CPI, the cost of building a new home increased 16% in the year to December 2021," said Statistics NZ.

Households appear to be still adjusting to the to rude awakening from a long-term climate of low interest rates that had reigned since the aftermath of the Global Financial Crisis (GFC).

“Highest-spending households spend 7.3% of their expenditure on interest payments, compared with 4.6% for the average household. This means the highest-spending households experience the price increase more than others,” said Dewbery.

Aside from increased mortgage or rent payments, other factors weighing heavily on household cost of living were higher prices for petrol and second-hand cars.

Higher petrol prices contributed to quarterly inflation for all 13 household groups in the December 2021 quarter, but impacted middle-spending households the most.

The middle-spending household groups spend 5.2% of their expenditure on petrol, compared with 4.6% for the average household, said Statistics NZ.

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37 Comments

by Brick in the machine | 10th Feb 22, 4:14pm 1644462883

But GDP was up good to so even right

by Smudge02 | 10th Feb 22, 4:27pm 1644463678

I believe many don't really understand the potential impacts of this inflationary environment we are currently entering. Maybe they believe, like the Govt, that it is transitory but it isn't.

With wage growth lagging and a population severely juiced up on debt I think the rapidly rising cost of living, combined with rising interest rates is going to really hurt this country. Blame whoever you want but when you encourage reckless borrowing/spending with a view that nothing will ever change and it is just 'normal', then at some point reality is going to send you a big wake up call.

by Sam B | 10th Feb 22, 4:35pm 1644464131

The idea of high interest rates is just 'an idea' to most people.

There's going to be a rude shock when the RBNZ raises rates... and the $NZ continues to sink anyway, and petrol prices continue to rise, and the government can't do a damn thing about it.

by Brick in the machine | 10th Feb 22, 4:37pm 1644464279

Side note - looks like Iran is about to re-enter the global oil markets, may get some relief there

by realterms | 10th Feb 22, 4:53pm 1644465180

Maybe. Cynically, much of that production is really on the market, in the sense that it is bought by participants who might otherwise buy on the market.

by Advisor | 11th Feb 22, 9:48am 1644526092

True. Dynamics have changed a bit since the last market oversupply event.

Plenty of US shale assets have changed hands during Covid-19 from independent producers to oil majors. These corporations, unlike the independents, play the long game for higher margins and are less likely to flood the market with supply in response to higher crude prices.

by fortunr | 11th Feb 22, 1:20pm 1644538839

I have been saying for almost two years that the stupidly reckless, un-necessary ultra-loose monetary policy enforced by the clowns at the RBNZ would have caused enormous problems to the NZ economy and society. I have also been saying that the timidity by Orr in raising rates in the last few months will be paid dearly later on, with even higher rates.

Unfortunately, it seems that I was right.

The OCR must be raised to 3% at the very least, and right now, if there is any hope to keeping inflation in check. The longer we wait, the higher interest rates will have to go later on. The urgent need to raise rates now, and aggressively so, is becoming a real emergency. Maybe it is the time to finally sack Orr and put at the helm of the RBNZ somebody who knows what is doing and is not afraid to take the urgent if unpopular necessary steps.

by Notgreedykiwi | 10th Feb 22, 4:48pm 1644464909

Where is our beloved, hand holding, hugging, showman hand gestures on the podium PM? And her favorite bureaucrat Orr?

They have created this mess for us poor kiwis and our families. This is not a big deal for rich kiwis. So certainly there is no team of 5 million now as i am being hammered with high costs, high prices of almost everything.

Paying taxes and a lot more of GST. I even pay taxes/GST on the food i buy to feed my family. And basically these politicians salary I am paying by feeding less to my kids. The bureaucrats and politicians who get salaries from the tax and gst i pay are responsible for my kids not getting a full feed now.

They should bring policies which help me and my family and bring the cost of everything down in this country. I do not pay the salaries of bureaucrats up just warm bum on seats and do nothing. If they can decrease OCR by 1% and create this mess, grow balls to increase by 100 basis points straight away and fix this inflation right now.

by Smudge02 | 10th Feb 22, 5:00pm 1644465658

Unfortunately they are never, ever going to admit that any of this is their fault and will in fact to continue to preach how great they have in done and continue down the path of "We know best, shut up and do what you are told".

The only way out of this is voting, and then we have another issue.......does any party genuinely want to step up and fix this? I think there would have to be some tough calls made that may not be popular with some but if NZ and the majority of its people are in very dark place, voting for a 'sea change' may look very appealing indeed.

by Jarlaith | 10th Feb 22, 5:32pm 1644467547

When was GST increased?

by DTRH | 10th Feb 22, 7:05pm 1644473149

15% of $100 is $15 prices go up 15% of $120 is $18 and so on

by imhenry | 11th Feb 22, 9:59am 1644526785

Govt laughing all the way to the bank

by Pa1nter | 10th Feb 22, 7:00pm 1644472840

Covid created the mess and our reserve bank and government are just reacting to it. The same issues are being felt the world over. Europe was going through stagnation and hasn't done much at all with rates due to covid, and theyre still getting inflation. Our supply chains and production capacity is based on overnight delivery and covid has disrupted that.

You're naive if you expect the pandemic wasn't going to hit people in the pocket somehow, rises in asset prices become worthless if they're not realised.

by Independent_Observer | 10th Feb 22, 7:59pm 1644476362

I didn’t realise a virus could print money - unless you’re referring to some mental illness that resides in the collective minds of central bankers?

by Pa1nter | 10th Feb 22, 9:08pm 1644480510

They're applying a very similar rulebook which makes decisions based on past experience.

The rates will go up just as oversupply kicks in, just watch.

by Notgreedykiwi | 10th Feb 22, 8:47pm 1644479236

@Pa1nter mate, Inflation is not everywhere in the world mate. It's only in countries who had loose fiscal policies or dumb people making them.

Look at Israel, I think the smartest small country in the world. That's what intelligence means in how to react to a pandemic.

But who am i explaining this too.. The grey cells would have to work hard to understand.

by Pa1nter | 10th Feb 22, 9:06pm 1644480399

Hey Bro, check it out

https://en.wikipedia.org/wiki/List_of_countries_by_inflation_rate

We're sitting about in the middle for inflation worldwide.

Unavoidable, because we are all tied into the same global market, that is in turmoil. This is a long game.

by HouseMouse | 10th Feb 22, 10:36pm 1644485780

That's way out of date, aren't we up around 5%, yet Aus is about 3.5%?

by GV 27 | 11th Feb 22, 7:41am 1644518490

Inflation on top of a social structure that rips between 40 - 50% of what you earn away in accommodation costs alone? Yea, not everyone is facing that. That's our stuff-up.

by Carlos67 | 10th Feb 22, 9:57pm 1644483447

Israel is probably the smartest country in the world full stop. Probably not a good idea to start comparing them to us, makes us look bad.

by Advisor | 11th Feb 22, 9:59am 1644526742

One in 20 Israeli households heated their water using solar power back in 1967 when the entire world had no idea such technology existed. Enough said!

by Carlos67 | 10th Feb 22, 5:20pm 1644466849

Petrol just hit $3 a liter for 98 in Tauranga, filled up yesterday. Its about time they started measuring inflation correctly and house prices need to be included, your mortgage is the single biggest outgoing every month.

by Smudge02 | 10th Feb 22, 5:39pm 1644467949

At the supermarket this morning and a young couple in front of me checked out their groceries but then pulled several items out and handed them back (mainly meat) once they saw the total cost. Maybe a coincidence, maybe a sign of the times???

by Carlos67 | 10th Feb 22, 5:36pm 1644467802

Sounds like a really bad sign to me. Seen people have to leave the odd item at the checkout but never several in 30 years of shopping.

by Firstclass | 10th Feb 22, 5:42pm 1644468162

That is just sad.

Young people facing tough choices, and it may be just the beginning ?

by Pa1nter | 10th Feb 22, 7:03pm 1644473010

Maybe payday is Friday ......

by Room319 | 10th Feb 22, 8:37pm 1644478657

Not particularly unusual.Ive been in the queue before and seen people dump all manner of stuff but keep booze and fags.

by MortgageBelt | 10th Feb 22, 5:40pm 1644468014

Gas prices going up and will soon be scarce as Labour have banned oil & gas extraction.

https://www.pce.parliament.nz/media/197015/restricting-the-production-o…

by DTRH | 10th Feb 22, 7:02pm 1644472946

It’s seems the government cannot deal with more than one thing at a time Omicron is all they are interested in if these muppets don’t start sorting out housing and inflation the protests will overwhelm wellington. People have had enough of showing passports for a coffee most people have had Jabs and just want to get on with life without government dictating over our life’s Omicron is here and 5 boosters will not stop it.

by Pa1nter | 10th Feb 22, 7:06pm 1644473166

Yeah it's almost like governments are accustomed to taking long periods of time to make decisions rather than making lots of vital decisions in very short timeframes.

Sort of like how most large companies I'm dealing with are struggling to get by day by day, and aren't making long term decisions.

by Galloleous | 11th Feb 22, 3:01pm 1644544904

You mean except when they push through a heap of completely unrelated bullshit legislation under the guise of a Health Crisis. Because they can act plenty fast when they can get what they want by going around the checks and balances.

by MortgageBelt | 10th Feb 22, 7:12pm 1644473570

They can operate Microsoft Word & Excel and shuffle data and policy but no real world abilities.

Gas supplies to houses for hot water & hobs are now entering extermination.

by Jonny.Foe | 10th Feb 22, 10:12pm 1644484329

So petrol prices and interest payable on mortgages are driving higher costs of living for the average kiwi? Quick, put up interest rates because that will reduce the international price of oil, and, errrm, reduce interest paid on mortgages.

by HouseMouse | 10th Feb 22, 10:38pm 1644485898

It's a partly valid point. Raising interest rates can, perversely, have a degree of inflationary impact.

by brisket | 11th Feb 22, 9:01am 1644523281

…while low interest rates will only drive an ever-greater proportion of capital into housing and other rentier assets, while discouraging risky productive lending. Which is already our biggest economic problem and one that will dog us for decades to come with the setup we have. It has to end somewhere.

by Tigadee | 11th Feb 22, 11:34am 1644532468

High inflation only hurts the poor and middle-class - for the rich, a 10% increase in prices means nothing. But for the poor and middle-class, it erodes their savings and future.

And we can see the rich have ridden out this pandemic quite well, thank you very much.

by Galloleous | 11th Feb 22, 3:06pm 1644545164

The rich own assets that appreciate faster than the rate of infaltion. The middle class and poor have few assets, earn a set sallary that changes once (maybe twice) a year and spend most (if not all) of their income on living expenses.

Global elites who make the rules are absolutely creaming at the expense of the average Joe. And they will let inflaiton run high rather than crash the stock market.