Price rises bite middle- and low-income earners

By Amelia Wade

Essential items like food, petrol and electricity, have all increased in price. Photo / Thinkstock
Essential items like food, petrol and electricity, have all increased in price. Photo / Thinkstock

More than one in three New Zealanders believe they're worse off than they were two years ago and have less disposable income.

And 43 per cent feel they're about the same.

Economists say the bleak view is because low and middle-income families are feeling the increase in the cost of living more than those at the top end of the scale.

Since 2011, the amount we're paying for houses, cars and power bills has increased, as has the unemployment rate, but on average we're earning more and have less debt.

Mangere Budgeting Services chief executive Darryl Evans said the rise in the average wage was being skewed by high earners, deepening the divide between rich and poor.

The country's average salary of $45,000 was more than double that of many lower-income families who struggled to pay rent, Mr Evans said.

"Once you've paid rent and power bills and put petrol in the car so you can get to work, there's not much left over for food."

The rise in private rent was the toughest factor in the increase to the cost of living, he said.

Mr Evans knows of one rented Mangere house which has 14 adults and 11 children living there for just over $540 a week.

"It's too much for one family to be able to afford."

Lower-income families usually owed substantial debt to loan sharks and money lenders, which took a huge chuck out of their weekly earnings.

Mr Evans said the Government needed to act more quickly on regulating loan sharks to help stop poorer families getting massive amounts of bad debt they couldn't pay back.

A Herald-DigiPoll conducted this month found just 18.1 per cent of New Zealanders felt they were better off with more disposable income than two years ago.

Principal economist at the New Zealand Institute of Economic Research Shamubeel Eaqub said that on average we are better off than we were two years ago, as there are more jobs and wages are up, but the impact of that was different depending on people's income level. Higher-income workers didn't notice the increase in life essentials as much.

Mr Eaqub said the Consumer Price Index, which had risen in line with inflation, was being kept down because it included discretionary items such as electronics and clothing, which had dropped in price.

But essential items like food, petrol and electricity, had all increased in price.

"Quite often you'll feel like prices are rising because the prices you gauge with are the things that you buy on a day-to-day basis, like fuel, that you use as a benchmark and those prices have been rising relatively persistently over the last couple of years," Mr Eaqub said.

"Everyone has a 'holy s**t moment' when they go to fill up their car and it's above a hundred dollars."

Mr Eaqub said highly skilled people survived the recession better than those without higher education. Now was a good time to train and upskill so that when they got work, they could start in a higher pay bracket.

- NZ Herald

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