The big living squeeze hits Southland

Friday, 18 March 2022

Ann Reedy, 74, is shocked at the cost for essential living requirements. She always shops around for the best supermarket deals.

The stress of paying for essential items keeps Jenny Keen awake some nights.

The bottom line of Keen and most other Southlanders’ budgets are being hit by ballooning food, petrol and housing costs, though one economist sees it as a temporary surge.

Southland company DT Kings Transport has seen its fuel bill increase $1m, or 25 per cent, in the past year.

Managing director Grant Loader said the company ran about 180 trucks, carting logs, stock, composites and bulk across the district.

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New Zealand’s inflation hit 5.9 per cent in the three months to the end of December, marking the highest annual inflation figure since June 1990.

Fuel prices dipped slightly across the country when the Government removed 25 cents in petrol tax.

That came after petrol prices topped $3-a-litre the week of March 7, on the back of nervousness about Russia’s invasion of Ukraine pushing oil and commodity prices sky-high.

The price pinch is being felt at the bowser and in shopping baskets as annual food prices rose 6.8 percent in February 2022 compared with February 2021, Stats NZ says, that being the largest annual increase since July 2011.

A volunteer worker at Age Concern and The Pantry, Jenny Keen said some nights she got little sleep worrying about how she was going to pay for essentials.

'Thinking to myself, how am I going to pay for this,' she said.

'I can just manage, no savings … I just buy the necessities.'

Keen used to buy blocks of cheese, but now found she saved money by buying packets of cheese slices.

Invercargill superannuate Ann Reedy says it saddens her when people can no longer afford to buy fruit for their children.

The cost of living increases were 'shocking' and it was affecting everyone, she said.

'It's really hard out there, you have to prioritise your spending and money.'

Reedy, 74, has a strict budget with no treats included. Her superannuation and wages from 15 hours of weekly employment at Age Concern cover her bills and enable her to have occasional social trips with family or friends.

'I get the cheapest of everything. If I have to shop at three supermarkets to get what I want at a more reasonable price, I'm not too proud to do it.'

Milk, butter and cheese were essential items but costly, Reedy said. She now buys margarine instead of butter to save money.

Keen and Reedy agree cans of tomatoes, sweet corn, spaghetti and baked beans are value for money.

Invercargill couple Ella Flynn and Bradley Quine have kept a strict budget since buying a house.

Stats NZ uses a weighted average retail price in its tracking of many consumer items. They are not statistically accurate measures of average transaction price levels, but do provide a reliable indicator of percentage changes in prices.

In January 2012 the weighted average retail price of fish and chips was $5.74. In January 2022 it is $8.07.

The weighted retail price of 110g of baby food has stayed between $1.03 and $1.23 for the past 10 years.

A 420g tin of canned spaghetti was a weighted $1.86 in January 2012, and $2 in January this year.

In the 10 years to January 2022, the weighted average price of 250 grams of supermarket chocolate has gone from $3.90 to $4.38.

Economist Tony Alexander said the current cost of living increases were a temporary surge, and he did not draw parallels between now and between 1970 and 1987, when cost of living doubled every six years.

It was also easier to make money now, he said, with Trade Me and the tight labour market offering more opportunities to pick up extra work.

Unfortunately for the hospitality sector, Alexander said the easiest way to save right away was to eat and drink at home.

The second-easiest way to save was looking at what online subscriptions you needed, third delaying big spending like a new car or couch, and fourth chop up credit cards and avoid buy now, pay later agreements.

Finally, people should review their broadband, electricity and cell phone plans, Alexander said.

“After that, it’s looking overall, identifying things you don’t really need. Go through your bank statements for the last three months.”

Most people were taking two to three-year fixed mortgages, and Alexander anticipated the Reserve Bank “would not need to do much more” than a 2 per cent interest rate increase, “at the most”.

The Southland economy was under-pinned by the Invercargill CBD developments and the primary sector, he said.

“I have a good outlook for the regional economies.”

A report commissioned to Infometrics, which looked at Southland post-Covid-19, says the district performed strongly through the [2020] lockdown, with key industries such as agriculture and food manufacturing able to keep operating.

The report says the outlook for Southland's economy over the next five years is steady with most industries expected to be back to their pre-Covid size by 2025.

Southland's primary sector and food manufacturing industries are expected to continue to provide stability throughout the Covid-19 recovery too, the report says.

Speedy Signs owners Dylan and Carla Meehan, with their children Halen, 9, left, and Lars, 13. The Meehans grow some of their own food and get meat from a friend’s farm.

Young Invercargill couple Ella Flynn and Bradley Quine have kept a close watch on their finances since buying a home eight months ago.

Beforehand, they used to go away for weekends and dine out frequently, but since taking on a mortgage it doesn't happen as often.

The cost of living had increased a lot since they became house owners, she added.

'The grocery bill has gone up roughly $80 a fortnight.'

Flynn, 21, and Quine, 23, do supermarket shopping together, with one of them adding prices on a calculator to make sure they keep within budget.

They have made savings by altering plans on their gym memberships and having one account, instead of two, with music streaming service provider Spotify.

Having a boarder, with another soon to arrive, has also been a money source for the couple.

Asked if there was a part of their life that they missed through strict budgeting, Flynn said: 'Doing things you enjoy without thinking about it. Whereas now, if you want to go away for a weekend you've got to save for three months for it”.

Businesswoman Carla Meehan and her husband Dylan have also noticed an increase in living costs.

The couple have two children - Lars, 13, and Halen, 9, and own Speedy Signs in Invercargill.

Budgets for the household and business are ticking over okay, but Carla is wary of winter bills for their diesel heating system at home.

'Now that we're coming into winter and the cost of diesel is so high at the moment, we've got to think about when we fill our diesel tanks and the most viable way to do so,' she said.

'Buying 400-500-litres of diesel is not cheap.”

The cost of vegetables, especially lettuces, has prompted the Meehans to bring back their garden. It was taken out but Carla noticed lettuces rising in price from $1 last year to $6 this year, and reckoned it was time to re-introduce it.

Having friends on a farm with a homekill meat service comes in handy for the family's food requirements.

The Meehans' grocery bill can be a bit higher than most households because they are all gluten-free.

For the business, when the Meehans and their staff travel to clients, they try to make multiple visits on one trip to reduce fuel costs.

Infometrics principal economist Brad Olsen said many households would likely cut back on travel because of high fuel costs, and increase their focus on a DIY attitude, to make or fix stuff themselves and keep costs down.

With forecast back-to-back 0.5 per cent Official Cash Rate rises, household budgets would be squeezed and discretionary spending limited, Olsen said.

Regional areas have had greater inflationary pressures than metro areas in recent times, which suggested there was a sustained level of economic demand which should support continued high levels of job activity, he said.