Petrol and interest payments drive up cost of living

The three middle-to-high spending household groups experienced the highest increase in annual living costs of all of the 13 household groups. In the March 2022 quarter their cost of living was 6.9 percent higher than in the March 2021 quarter, Stats NZ said today.

Higher prices for petrol and interest payments contributed most to this increase.

The middle-spending household group spends about 5.2 percent of their expenditure on petrol so were most impacted by higher petrol prices. This compares with 4.6 percent for the average household and 4.0 percent for the highest-spending household group.

The highest-spending household group spends about 7.3 percent of their expenditure on interest payments. This compares with 4.6 percent for the average household and 2.0 percent for the lowest-spending household group.

Living costs for lowest-spending households increased by 6.0 percent, while the average household increased 6.6 percent from the March 2021 quarter to the March 2022 quarter.

Beneficiaries and lowest-spending households experience smallest living cost increase

Beneficiary and lowest-spending households experienced the smallest increase in cost of living of all of the household groups at 6.0 percent in the March 2022 quarter compared with the March 2021 quarter.

The beneficiary households’ cost of living increase was mainly influenced by higher prices for housing and household utilities, with increasing prices for rental housing.

“Beneficiary households typically spend a smaller proportion of their expenditure on petrol and interest payments, when compared with the average household, so are impacted less by these increases,” consumer prices manager Matthew Stansfield said

“However, rising rent prices impact beneficiary households more as they typically spend almost a third of their expenditure on rent.”

Māori households’ cost of living increased 6.7 percent

Māori households experienced a cost of living increase of 6.7 percent in the March 2022 quarter compared with the March 2021 quarter, slightly higher than the average household at 6.6 percent.

Higher prices for petrol, rentals for housing, and mortgage interest payments were the main drivers of the increase for Māori households.

Interest payments and food drove quarterly cost of living rise

The other expenditure group, which includes mortgage interest payments, or the food group were the main contributor to the increase in the cost of living for every group in the March 2022 quarter compared with the December 2021 quarter.

The other expenditure group was influenced by higher prices for interest payments, including mortgage interest, which increased 13 percent for the average household in the March 2022 quarter compared with the December 2021 quarter.

“Interest payments started falling in 2018 but began increasing again in December 2021, and are now back up to similar levels from two years ago,” Mr Stansfield said.

Long-term living cost increase lowest for highest-spending households

The cost of living increased 6.9 percent for highest-spending households in the March 2022 quarter compared with the March 2021 quarter. This compares with 6.6 percent for the average household and 6.0 for the lowest-spending household group.

“Since the series began, highest-spending households have typically experienced lower living cost increases, while the lowest-spending group have typically experienced higher living cost increases,” Mr Stansfield said.

How the HLPI differs from CPI

Each quarter, the household living-cost indexes (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. Lowest-spending, middle-spending, and highest-spending groups relates to expenditure quintile 1, 3, and 5.

While inflation measured by the CPI was 6.9 percent in the March 2022 quarter compared with March 2021 quarter , inflation for the average household as measured in the HLPIs was 6.6 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 13 percent for the average household in the year to March 2022. In the CPI, the cost of building a new home increased 18 percent in the year to March 2022.