Cost of living surged 6.2 per cent for average household in year, but inflation slowing down

A big leap in interest payments for the average Kiwi household was recorded. Photo / Getty Images

The average New Zealand household’s cost of living went up 6.2 per cent in the year to March 31, Stats NZ said today.

The household living-costs price index for the March quarter was down slightly from the 7.0 per cent hike recorded in the year to December 31.

But it was still well above the inflation rate of 4.0 per cent measured in the consumers price index (CPI) for the year to March 31.

The ghoul responsible for this was most likely mortgage rates, creeping up for many households. Interest payments increased by 28 per cent for the average household in the year to March 31, Stats NZ said.

Those interest payments are among costs measured in the household living-costs price index, whereas the CPI does not include mortgage rate increases.

“Overall, what it’s showing is that housing costs are still a pretty important squeeze on households’ purchasing power,” Westpac senior economist Satish Ranchhod told the Herald.

Ranchhod said some of that pressure was manifesting in spending data for retail and other parts of the economy, including food and groceries.

“They’re shifting away from the luxury or nice-to-have items, in favour of value-for-money necessities.”

Ranchhod said about 90 per cent of mortgages were fixed and about 60 per cent of them will be refixed this year.

It was most likely they would increase, but at least at a less hectic pace than before, largely because no hike in the Official Cash Rate (OCR) was expected this year.

Ranchhod said Westpac economists right now expected no OCR cuts until early 2025.

Despite the big annual increase, the pace of household inflation did slow in the March quarter.

In the September 2023 quarter, the average household’s living costs went up 2.5 per cent compared to the June quarter.

But in December 2023, that slowed to 1.2 per cent and in this year’s March quarter it slowed again to 1.0 per cent, quarter-on-quarter.

Employment indicators

Stats NZ also released new jobs data.

In March this year, there were 2.41 million filled jobs, up 0.4 per cent from February.

Jobs in primary industries were down by 1292 or 1.2 per cent month-on-month.

There were 1572 more jobs in goods-producing industries, a 0.3 per cent increase.

And 8498 jobs were added in service industries, equating to an increase of 0.5 per cent.

Year-on-year, healthcare and social assistance jobs had the biggest overall increase. More than 14,500 jobs were added in this sector, an increase of 5.5 per cent.

The education and training sector added 8673 jobs, up 4.3 per cent on a year earlier.

Stats NZ said there were 5.2 per cent or 8121 more jobs in public administration and safety.

The transport, postal, and warehousing category added almost 7000 jobs, up 7.4 per cent.

Manufacturing jobs declined, down 1122 or 0.5 per cent, according to Stats NZ.

The agency also recorded fewer jobs in admin and support services, down 2.8 per cent or about 3200 jobs.

And job numbers also fell in professional, scientific and technical services, down 1.8 per cent or about 3400 jobs.