'Everything costs so much more': Young people confront inflation

Wednesday, 31 August 2022

Many young New Zealanders are getting their first taste of high inflation – and it’s not pleasant.

Annual inflation has only gone past 5% once since 1990. But before then, high inflation was not uncommon and was particularly rampant during the 1970s and 1980s.

Hope Makiri-Henning​, an 18-year-old Countdown worker from Auckland said the rising cost of just about everything was making life tough for young workers who had just finished school.

Makiri-Henning said the wages from her full-time work were not keeping up with the escalating cost of food, petrol and household bills.

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“It has really been a struggle. We are coming out of college as young graduates and facing a reality in which bills, cost of living, and everything is far more expensive than it has been over the past few years,” Makiri-Henning​ said.

University students in her friend group were facing the same thing, she said.

“My mates that are going to uni are also struggling. They are trying to live off the student loan living costs [payment], but everything now costs so much that it is not enough to sustain a proper life,” she said.

KiwiBank economist Mary Jo Vergara​​ said younger people had a tougher time dealing with high inflation because of their generally lower income levels, and lack of negotiating power in the workforce.

“Inflation has a greater effect on households on a fixed or low income. So naturally younger people early in their careers, or living off the student loan living costs, will be hit the hardest by rising prices,” Vergara​ said.

Students in particular were hit hard by rapidly rising consumer prices because the allowances and payments many lived off did not adjust to inflation as quickly as wages, she said.

While the most volatile inflation figures were seen in food, transport costs, and energy prices, the thing that would most affect younger New Zealanders was increases to housing and rent costs, she said.

“We have seen rents increase 4.3% compared to last year. Housing has been a real driver of domestic inflation and increases to rent prices makes up a big proportion of that.

“Rising rents is potentially one of the largest worries for households of young people.”

But inflation was so widespread that it was difficult to point to one particular area as a problem, she said.

“If you strip away the inflation of food, transportation and energy costs, then core inflation is at around 6.3%. That means every time a young person goes into a store, goes shopping, buys clothes or appliances, they are paying a higher price for those goods.”

Kiwibank data showed that younger people were already pulling back on their discretionary spending.

But while the volume of spending was decreasing, the value of spending was increasing, she said.

“This is a signal that young people are starting to get cautious with how they are spending. They are adapting for a new, more expensive environment.”

Financial adviser and founder of Enable.Me Hannah McQueen​​ said the current economic environment could have long-term impacts of this generation of young people, if they did not feel they could set financial goals.

“The big challenge with inflation for young people is it creates a lack of vision. There is a trend of many young people not knowing what they should be aiming for, so they do not set clear financial goals,” McQueen​ said.

The solution was to find a financial goal that excited them, and that they could work towards during this difficult period of high inflation, she said.

“Young people feel stuck, they feel like they can’t do anything to help themselves. Remembering that while inflation is painful, it is temporary, might give them the forward momentum they need.”