The cost of living: So what changed at the end of 2021?

Tuesday, 18 November 2025

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The cost of living is still the most pressing issue for Kiwis, the latest Ipsos Issues Monitor survey revealed on Monday.

Sixty-one per cent of the 1004 respondents identified inflation/cost of living as a concern, followed by healthcare/hospitals (42%), the economy (32%), and housing (22%).

Ipsos country manager Carin Hercock said that the economy category is broad, referring to factors including unemployment and business confidence, while the cost of living is more discrete - reflecting the impacts on people personally.

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For many New Zealanders, it feels as though that personal impact from the cost of living crisis has been going on forever.

But in reality, it didn’t become our biggest issue until 2022. Before then it was trumped by housing, healthcare - and the wider economy at times.

Let’s look back at the data.

Cost of living concerns ramped up late in 2021

Ipsos conducts Issues Monitoring surveys four times a year. Looking back at the results since September 2018, it’s clear that the cost of living shot to the top of Kiwis’ concerns in early 2022.

Between October 2021 and February 2022, the number of respondents identifying it as a concern rose from 31% (third place) to 53% (the top issue).

The only other issues that have seen rises that quick were the economy and unemployment in early 2020 (these rose by 34% and 33% respectively as New Zealand went into the first Covid lockdown).

So, what caused the rapid increase?

Well, according to the economists, it was inflation.

Basically, if goods go up in price - and wages don’t follow at the same rate - the cost of living gets tighter.

“In June 2021, the rate of inflation increased to 3.3%. Then it got up to 7.3% through 2022,” senior Motu Research fellow and Victoria University professor Arthur Grimes said.

“That drove up the cost of living. We saw house prices increase by almost 50% throughout the country, and that fed into rents. We saw a big increase in consumer prices too.”

Grimes, a former chief economist and chair of the Reserve Bank, attributed the massive spike to the then-government.

“The Labour government changed the target for the Reserve Bank from being solely focused on inflation, to a mixture of inflation and employment. Once that happened, the bank no longer concentrated solely on keeping the cost of living stable, but also on the employment side,” he said.

“Of course during Covid we saw a decrease in employment, so they hugely loosened the monetary policy in line with their revised mandate. That caused inflation to explode.”

Of course, Covid did more than impact employment. There were strong global factors at play too.

“Annual food prices rose 6.8% in February compared with the same time last year - the biggest annual increase in more than 10 years, according to Stats NZ,” we reported in March 2022. In a separate article, we quoted an economist who attributed the rises to supply issues, labour shortages and rising global food commodity prices.

Meanwhile, the “global energy crisis” brought on by the Russian invasion of Ukraine had fuel prices so high that the then-government cut fuel taxes.

All of this - combined with skyrocketing house prices driving up rents - led ASB to conclude that all the increases would add $150 per week, on average, to household living costs that year.

It wasn’t just New Zealand

As a global market research firm, Ipsos carries out polls across numerous countries. One is called “What Worries the World”.

Like the Issues Monitor, this asks respondents what worries them most. Only this one takes responses from 30 countries.

It’s clear from the latest report that concern regarding inflation was growing worldwide at the end of 2021.

According to Grimes, this was because most countries responded to the pandemic in a similar way. At least in terms of monetary policy.

“Monetary policy around the world became very, very loose during Covid,” he said. “Everyone focused on the very short term. They didn’t think about what their policies were going to do longer term. So I think a lot of countries are now still trying to overcome the inertia that happened with an increase in inflation through that period.”

Nowadays, some countries are doing worse and some countries are doing better, he said.

Canada currently has 2.4% inflation, while in New Zealand we have 3%. China has 0.2%, France has 0.9%. The UK has 3.8%, while Argentina has 31%. In short, very varied.

But even with inflation back within the Reserve Bank’s target range, cost of living concerns are still high here. That’s because prices are still rising - they’re just rising more slowly than they were.

“Basically, what’s happened is that inflation has gone up 3% on top of the 2% that it went up last year, on top of the 4% it went up the previous year and on top of the 7% it went up the year before that,” Grimes said.

“It is a compounding effect - people have seen these huge price increases, but prices are still rising. And that’s really hurting people, especially people on fixed incomes.”

Just remember - it hasn’t always been our biggest issue. Just like it won’t always be going forward.