“And people on lower incomes have to spend a bigger proportion of their budget on food, which is a great stress.
“What are your alternatives when your budget can’t cope? Unfortunately, the answer is just going without.”
Though overall food price inflation is easing, coming in at just 2.1 per cent for the year to February – the lowest it has been since the year to May 2021 – grocery food prices increased 3.9 per cent over that same period, Stats NZ figures showed.
But both figures were much lower compared with the annual change from a year ago, when they were sitting around 12 per cent.
Forty-four per cent of respondents in the Consumer Pulse survey said they’d already felt some easing at the checkout.
“It’s the old rockets and feathers situation, where prices are quick to rise and slow to fall back down to earth,” Pitchers said.
According to the Consumer Pulse report, 70 per cent of Kiwis said there’d been no relief from cost of living pressures, while nearly half (48 per cent) did not expect any let-up in the year ahead.
Half of homeowners have cut back on non-essential spending such as eating out, entertainment and fashion with another 20 per cent going even further by cutting back on essential items like groceries, electricity and phone usage.
That was reflected in the latest card spending data earlier this week which showed a lack of appetite from shoppers to open up their wallets.
Retail spending fell 1.8 per cent, or $120 million in February compared with January, according to Stats NZ.
Westpac senior economist Satish Ranchhod said: “The softness in spending highlights the squeeze on households’ spending power from higher inflation and interest rates.”
More than half (56 per cent) of the survey’s respondents said they were living payday to payday.
“If you’ve got a $500k mortgage and over the past three years it’s gone up from 3 per cent to 7 per cent per annum, you’re having to find an extra $1000 per month, and that has to come from somewhere,” Pitchers said.
He said this year’s report reflected the intense pressures Kiwi households faced and their preparations for a tough year ahead.
On the mortgage front, more than a third (36 per cent) of homeowners who re-fixed their mortgages recently said they faced a 30–50 per cent increase in mortgage repayments, the report found.
Another 9 per cent said their repayments went up by over 50 per cent.
But Pitchers said one of the biggest surprises of the report was that most people are coping with their mortgages, despite all the headwinds.
“70 per cent of homeowners in our survey said they are financially prepared for interest rates to stay at their elevated levels throughout this year. [This] shows that people have learned to make cuts and tightened their belts accordingly.
“There are still plenty of people out there who are going to be refinancing to higher mortgage rates this year, which means a bit more belt-tightening before, hopefully, some official cash rate relief towards the end of the year and cheaper home loans in 2025.”
Pitchers said he was also surprised first home buyers were still bullish in the market.
Just under 60 per cent of Kiwis believed they could raise the funds for a deposit within four years, up from 49 per cent in 2021.
However, first home buyers were static last year with 26 per cent of respondents looking for a first home, down from 29 per cent in 2021.
“Unlike homeowners, they’ve not seen their rents go up by $1000+ per month, so haven’t been so badly affected by the huge hike in the cost of living,” Pitchers said.
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports.
