The household cost of living hasn’t risen at the rate of inflation - for one key reason

Wednesday, 29 April 2026

The latest Stats NZ data shows average household living costs have grown less than inflation overall. (file image)

The cost of living for the average household increased 2.1% in the 12 months to the March 2026 quarter, according to the latest Stats NZ figures.

The 2.1% increase, measured by the household living-costs price indexes (HLPIs), followed a 2.2% increase in the 12 months to the December 2025 quarter, Stats NZ said in a statement on Wednesday.

Meanwhile, inflation – as measured by the consumers price index (CPI) – was 3.1% in the 12 months to the March 2026 quarter, the newly released figures said.

“Falling interest payments for households was the main reason for the lower increase in the cost of living compared to New Zealand’s overall inflation rate,” Stats NZ prices and deflators spokesperson Nicola Growden said.

This was the fourth consecutive quarter in which a fall in interest payments was the main contributor to keeping the cost of living for the average household (as measured by the HLPI) lower than the overall inflation rate measured by the CPI.

“Interest payments fell nearly 20% for the average household over the past year, while the cost of building a new home increased 1% over the same period,” Growden said.

“This is the largest annual fall recorded for interest payments since the series began 18 years ago.”

A reduction in mortgage interest rates had a clear impact on household spending. (file image)

A 20.9% decrease in mortgage interest payments had the most impact on highest-spending households, which recorded the lowest annual inflation rate of all household groups, 0.7%, Stats NZ said in the statement.

Since highest-spending households spend a higher proportion of their expenditure on interest payments, particularly mortgage interest, falling interest rates have kept their living cost increases comparatively low.

The impact of falling mortgage interest payments was lower for superannuitant households as superannuitants were more likely to own their own homes and not have a mortgage, the Stats NZ statement said.

Quarterly average household inflation at 0.8%

The household living-costs price index rose 0.8% in the March 2026 quarter, compared with the December 2025 quarter, Stats NZ said.

Rising prices for petrol (up 3.5%), pharmaceutical products (up 17.7%), and electricity (up 2.6%) were the main contributors to the quarterly average household inflation rate, the new data that did not include April revealed.

For an average household, petrol contributed 17.5%, pharmaceutical products contributed 16.4%, and electricity contributed 14.2% to their quarterly inflation rate.

Increased petrol prices at the pump have been felt differently by different households, with lower spending ones feeling the pinch the most.

The increase in petrol prices impacted each household group differently. Lower-spending households were most affected by higher petrol prices, as petrol made up a larger proportion of their total expenditure.

“Some lower-spending households allocate nearly 5% of their spending on petrol, whereas the average household spends less than 4%, and highest-spending households less than 3%,” Growden said.

For highest-spending households, petrol contributed 33.2% to their quarterly inflation rate of 0.2%. Highest-spending households had the lowest quarterly inflation rate of all household groups. Lower mortgage interest payments had the biggest impact for highest-spending households, helping to keep their inflation rate lower.

For the average household, prices for pharmaceutical products increased in the March 2026 quarter – up 17.7%, driven by an increase in prescription charges.

The prescription count for the prescription subsidy scheme reset on 1 February 2026, meaning households who had previously exceeded the 20-prescription threshold, and were receiving free prescriptions, now had to pay the prescription co-payment.

Higher prices for pharmaceutical products had more impact on superannuitant households, contributing 14.4% to their quarterly inflation rate of 1.1%. The impact was lower for beneficiary and Māori households, Stats NZ said in its statement.

Electricity prices for the average household increased 2.6% in the March 2026 quarter. For lowest-spending households higher electricity prices was one of the main contributors to their quarterly inflation rate of 1.1%. Electricity made up 7.5% of their expenditure. This compared with 4.1% for the average household, and 2.1% for highest-spending households.

The decrease in prices for mortgage interest payments (down 4.8%), international air transport (down 6.9%), and overseas accommodation prepaid in New Zealand (down 4.1%) helped keep the quarterly inflation rate for an average household down to 0.8%, the Stats NZ figures showed.

“International travel became less expensive for the average household over the March 2026 quarter,” Growden said.

“Lower airfares to Europe, Australia, and the Pacific Islands, as well as lower prices for overseas accommodation, contributed to cheaper international holidays.”