Stats NZ says its household living-cost price indexes show that all household groups in the country faced higher cost increases in the 2023 year than the 4.7% indicated by the CPI, the official measure of inflation

The cost of living for the average New Zealand household increased by 7.0% in the 12 months to the December 2023, way more than the official rate of inflation of 4.7%.

Stats NZ has just released its latest household living-cost price indexes (HLPIs), which differ in composition from the officially recognised measure of inflation, the Consumers Price Index (CPI).

The CPI for the December quarter showed inflation of 4.7%, down from 5.6% as of the September 2023 quarter.

The HLPIs increase of 7.0% for the year to December was down from 7.4% in September.

A very significant difference in the calculation of the HLPIs versus the CPI is that the HLPIs includes interest payments, while the CPI does not. Instead the CPI measures housing as the cost of constructing a new home.

And in the 12 month period, average households faced a 31% increase in interest costs, according to Stats NZ.

As Stats NZ's consumer prices manger James Mitchell explained, "inflation, as measured by the consumers price index, eased more than the cost-of-living over 2023. This is because our cost-of-living measure includes different ongoing costs that aren’t included in the CPI, such as interest payments, which have increased by 31% for the average household over the past 12 months".

Each quarter, the 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.

Stats NZ says 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.

"For each of the [13] household groups, the cost-of-living increase was above 6% for the 2023 year,” Mitchell said.

"This compared to the 4.7% inflation we saw over the same time.

"Groups with a higher proportion of spending on mortgages had interest payments as the largest annual contributor to their cost of living. For groups that paid less in interest payments, their cost of living was still being driven by food and housing costs," Mitchell said.

Stats NZ said aside from the interest payments increases, other key contributors to the rise in cost of living were private transport supplies and services (such as petrol) increased, up 9.0% and rent, up 5.1%.