Here’s how cost-of-living crunch has really hit
Wednesday, 6 March 2024
Household sending has increased more than 18% over four years.
Food costs have been one of the biggest increases.
Households are swapping international travel for domestic holidays.
New spending statistics from Stats NZ show the effect of the cost-of-living crunch on households’ budgets.
The latest household expenditure data shows that the average amount spent by households across the country in June 2023 was $1598 a week, up 18.4% compared to four years earlier.
Housing costs and household utilities were the biggest single expense, at 24.9% of the average household’s spending.
Food took up 18.7% of an average household’s expenditure and transport 15.7%. Food spending was up 28.1% over the four years.
Health costs were up 18.5%.
One-person households and single parents had the lowest expenditure.
People whose homes were owned by a trust were spending significantly more than those who were in accommodation owned by other people.
Kiwibank chief economist Jarrod Kerr said the data showed that people were cutting back on discretionary spending as they spent more on the essentials.
“We’re seeing discretionary spending coming off as people are forced to pay more for the essential stuff. That’s a big theme and it’s been playing out over a while now.”
He said the numbers also showed the big increase in interest costs being experienced by many households.
“Normally in periods of higher inflation, it’s very unfair, it hurts the lower-income households much more than the higher-income households, they don’t have a lot of discretionary income and they’re spending on essentials.
“This time that inflation problem is affecting everyone and on top of that we have this massive increase in interest expense. That’s showing up in higher-income households because they’re the ones with the most debt.”
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BNZ chief economist Mike Jones said it was confirmation that households were taking a “hard look” at discretionary spending.
“The data also only reference the year to June 2023 and we know that these pressures have only stiffened since then.
“We can see spending cutbacks in the likes of cars, international flights, domestic holidays - even camping spending, and household appliances and furnishings. That seems to have helped free up cash to spend a little more on food, which now comprises 19% of weekly outgoings from 17% in 2019, and other essential-type stuff like rates and insurance.
“Still, it was interesting to note we’re saving a little more - 3.8% of weekly spending from 2.7% in 2019 - and also giving a tiny bit more away - 0.5% v 0.4% in 2019.”
Stats NZ said the total number of trips reported by households rose by 7.5% between the years ended June 2019 and 2023. The number of domestic household trips reported rose by 29.7%, while the number of overseas household trips decreased by 32.5%.
“While spending on domestic accommodation services has reached its highest annual expenditure since this series began in 2007, spending on overseas accommodation has more than halved since 2019,” wealth and poverty statistics senior manager Victoria Treliving said.
Kerr said it was another example of cutting back. “Instead of spending $5000 going to Australia they’re choosing to spend $1000 doing something local.”
He said it was all part of the same picture. “GDP numbers are soft. Spending is soft. I’ve been talking to retailers - very soft. It all ties together, this is the core of the cost of living crisis and the rapid rise of interest rates.”