Households earning up to $100,000 a year but still struggling to make ends meet

Thursday, 31 January 2019

The cost of living is increasing. So what's behind it?

At $74,000 a year, solo mum Melissa*, 39, earns just enough to survive each week.

'I live in South Auckland in order for us to live in a house,' she said.

'My son goes to One Tree Hill College and I work in Mt Albert. But that is the only way we can afford a lifestyle, you know, buy fruit and vegetables because that's always the first thing to fall off the list when money gets tight.'

Balancing the bills is becoming more difficult for those earning close to six figures, a Nielsen survey finds.

Almost half of Auckland households earning between $70,000 and $100,000 a year say they are just able to make ends meet.

* One in 10 New Zealand families fell into 'Struggle Street' since 2006

* Households earning more than $100,000 still struggling

* Rise in housing costs outpaces income**

Figures released from the 2018 Quality of LIfe Survey, produced by Nielsen, revealed 46 per cent of respondents in New Zealand's largest city said they just had enough money to meet their everyday needs for things such as accommodation, food, clothing and other necessities.

A further 17 per cent of households earning within that band said they did not have enough money to meet those needs.

In Christchurch, 34 per cent of residents in the $70,000 to $100,000 band said they had just enough to survive, and 11 per cent said they didn't have enough to cover their basic needs.

The 2018 survey measured the perceptions of over 7000 New Zealanders, with people drawn from eight council areas which account for two-thirds of the country's population.

Melissa said she thinks she should be getting ahead.

'I am supposed to be buying a house, I am supposed to be doing all these things and I just can't afford it.'

Wellington journalist and author Max Rashbrooke says middle New Zealand is feeling the squeeze.

'I go to budgeting services and they would say, 'your budget looks great', and I would respond 'cool, but how do I stretch it further?',' she said.

Income inequality specialist Max Rashbrooke said the numbers reflected that the benefits of economic growth had been denied not just to the poorest, but also average New Zealanders.

'The only people who have really seen their incomes grow in the last 30-to-40 years are the people in the richest parts of the country.'

The average household income in New Zealand was around $100,000 a year.

'Since 1982, adjusted for inflation, the average person's income after tax had only increased from about $28,000 to $37,000 a year. Over a long period of time, that's not a significant increase,' Rashbrooke said.

While a $70,000 to $100,000 household income 'sounded like a lot', that was only two people on about the living wage, Rashbrooke said.

Economist Shamubeel Eaquab says Quality of Life survey figures reflect a global pattern around incomes and the cost of living.

'I think [the survey response] is a sign that middle New Zealanders are struggling. We have an economy that delivers benefits disproportionately to those who are doing already well. It also signals that we are quite a low wage economy and we have been for some time.'

Economist Shamubeel Eaquab said the figures reflected a global pattern around incomes and the cost of living.

'Around the world we are seeing the same pattern. People are living with high incomes and struggling to make ends meet,' he said.

'A $70,000 household income in a small town could seem high, but in Auckland it's probably not enough. Incomes have not kept pace with rents.'

Eaquab said public policy solutions were difficult to develop and slow to take hold.

'The question is, do you lift incomes are fo you try to reduce other costs?'

He said solutions were easy to put forward but difficult to implement, he said.

Individuals and households needed to be deliberate about spending choices, Eaquab said.

'Even at a personal level there aren't a lot of ways to reduce costs but you need to make deliberate choices and get professional advice,' he said.

Ricardo Menendez, from Auckland Action Against Poverty, said the organisation had always argued that income levels had been an important factor in the fight against poverty, but it was complicated.

'The way things are going in Auckland and even Wellington with the cost of living, we are seeing households requiring six-figure salaries to cover the high cost of rent, and mortgages and other expenses,' Menendez said.

'But we do think the way the Government is doing things, looking at income alone and providing subsidies like the housing supplement or other forms of subsidies, is not really addressing the core issue, the cost of living, which is ultimately driving these families to struggle.'

* Name changed to protect her identity.