Cost of living climbs 7.2% as higher interest rates add to inflation

Thursday, 27 July 2023

The cost of living is rising faster than inflation.

The cost of living increased by 7.2% for an “average household” in the year to June 2023, Stats NZ said on Thursday.

Stats NZ’s estimate of the rise in the cost of living differs from its inflation data, mainly because it includes mortgage payments and disregards the cost of constructing new housing in its calculations.

“Higher prices for interest payments and grocery food were the biggest contributors to the 7.2% increase,” consumer prices manager James Mitchell said.

“These were partly offset by lower prices for private transport supplies and services, things that keep your vehicle running, such as petrol and diesel.”

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Between June 2022 and last month, the average amount of money people were spending on interest payments rose 28.8%, Stats NZ reported.

That was higher that the 13.2% jump in grocery food prices.

Beneficiaries, who in general are less impacted by rising interest rates, saw their cost of living rise 6.5% on average, while the cost-of-living for Māori households rose on average by 7.1%.

Rent makes up about 30% of beneficiaries’ household expenditure and, on average, it has been rising at a slightly lower rate than overall inflation.

But the highest-spending households out of the 10 income groups Stats NZ tracks experienced a 7.8% jump, primarily because of higher interest rates.

Superannuitants experienced a lower-than-average 6.8% rise, because although they are more likely to own their homes they are less likely to still have mortgages than other household groups.

Those changes reversed the trend earlier on in the Covid pandemic when interest rates plummeted and beneficiaries and poorer households were impacted disproportionately by rising costs.