Increase in cost of living reaches new high

The annual cost of living increase, as measured by the household living-costs price indexes, was the highest recorded since the series began in 2008 for 7 out of the 13 household groups, Stats NZ said today.

The cost of living was 5.2 percent higher for the average household in the December 2021 quarter than the December 2020 quarter.

The increase in living cost was higher for every household group in the December 2021 quarter compared with the December 2020 quarter, with living cost increases ranging from 4.8 percent for the beneficiary household group to 5.4 percent for the highest-spending household group.

The cost of living increased 5.4 percent for highest-spending households in the December 2021 quarter compared with the December 2020 quarter.

“However, this follows a long period of lower increase in living cost experienced by the highest expenditure group,” consumer prices manager Katrina Dewbery said.

How the HLPI differs from CPI

Each quarter, the HLPI measures how inflation affects 13 different household groups, while the consumers price index (CPI) measures how inflation affects New Zealand as a whole.

The all households group, or the average household, represents all private New Zealand-resident households.

While inflation measured by the CPI was 5.9 percent from December 2020 to the December 2021 quarter , inflation for the average household as measured in the HLPIs was 5.2 percent. These two measures of inflation are typically used for different purposes. A key use of the CPI is monetary policy, while the focus of HLPIs is to provide insight into the cost of living for different household groups.

One important difference between the two is the treatment of housing. CPI captures the cost of building a new home while HLPI captures mortgage interest payments. In the HLPIs, interest payments increased 7.8 percent for the average household in the year to December 2021. In the CPI, the cost of building a new home increased 16 percent in the year to December 2021.

Highest expenditure household group experience cost of living increase of 5.4 percent

The highest expenditure group experienced an annual cost of living increase of 5.4 percent from the December 2020 quarter to the December 2021 quarter. The middle-spending and middle-income household groups were also at 5.4 percent, higher than any other household groups.

This was mainly influenced by higher prices for petrol, mortgage interest payments, and second-hand motor cars.

Prices for all interest payments, including mortgage interest payments, increased 7.8 percent in the December 2021 quarter.

“Interest payments started falling in 2018 and are now starting to jump back up. However, they are still at a lower level than they were two years ago,” Mrs Dewbery said.

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

Cost of living increased 5.3 percent for Māori households

Māori households experienced an annual living-cost increase of 5.3 percent from December 2020 to the December 2021 quarter, compared with the 5.2 percent experienced by the average household.

This was driven by higher prices for petrol, housing rentals, and mortgage interest payments.

“Māori households spend about 20 percent of their expenditure on rent, compared with about 14 percent for the average household. This means that the impact of higher rent prices is felt more by Māori households,” Mrs Dewbery said.

Māori households spend a similar proportion of their expenditure on petrol and Interest payments as the average household.

Beneficiary households experience lowest living-cost inflation of 4.8 percent

Beneficiary households experienced the lowest annual living-cost inflation of 4.8 percent from December 2020 to the December 2021 quarter.

“Beneficiary households typically spend a smaller proportion of their expenditure on petrol and interest payments when compared to the average household,” Mrs Dewbery said.

Beneficiary households spend 2.1 percent of their expenditure on interest payments, compared with 4.6 percent for the average household.

Higher petrol prices drove quarterly living-cost inflation for all 13 household groups

Higher prices for petrol have driven quarterly inflation for all 13 household groups in the December 2021 quarter, as measured by the HLPIs. This impacted middle-spending households the most.

“Higher petrol prices have impacted middle-spending households more as they typically spend a larger proportion of their expenditure on petrol,” Mrs Dewbery said.

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