Julie Wakefield picks up the lamb chops - and promptly replaces the neatly-sealed pack on the chilled shelf of the supermarket meat section. The pack of four chops looks enticing, but it's not on special.

Nearby, however, pork chops are heavily reduced. That's what the Wakefields will be having for dinner tonight.

It's the way Julie, a 43-year-old grandmother and motel owner from Hastings, has shopped for decades, composing menus based on price.

Julie remembers the days of high inflation in the 1980s when she was a struggling young mother of one. "You had to be very careful what you chose, she says. "It was a real balancing act.

"But it's getting like that again and I think in some ways it's worse."

If you've begun to dread your weekly or fortnightly supermarket shop, trawling the aisles, shopping list in hand, your heart sinking at what seem to be relentlessly rising prices, you are not alone.

Inflation in New Zealand nudged 4 per cent in the October-to-December quarter - the second-highest level in the past 20 years. And since then it's got worse.

A Herald on Sunday investigation shows consumer prices have jumped further since the most recent official statistics were published in January.

We checked with hundreds of retailers around the country to measure the average price of 70 basic household items from the Consumer Price and Food Price indices. We found that their average cost has risen more than 5 per cent over the past 12 months. Items like beer, cigarettes, petrol and diesel have gone up 10 per cent or more just in the first months of this year; the prices of some fresh produce, like potatoes, carrots and butter, have risen as much as 50 per cent in the past 12 months.

This won't surprise economists in their glass and concrete tower blocks on The Terrace in Wellington. The Treasury has predicted the Consumer Price Index (CPI) will rise 4.5 per cent in the year to March, and 5 per cent in the year to June.

The Reserve Bank's forecasts are similar.

This is not yet on a par with the mid-1980s, when inflation hit nearly 20 per cent just before the Black Monday sharemarket crash plunged the economy into recession.

Veteran restaurateur Tony Astle, of Antoine's in Parnell, remembers serving his first $50 main course in 1987 - a price that would have been unthinkable just a year before.

"The lunches were huge," he recalls. "Before the 87 crash, it was like a competition to see who could spend the most on lunch. We had a Krug champagne and crayfish combo. That was $400 for the Krug and $100 for the main."

The other day, he says, someone came in and asked for caviar - the first time he could recall anyone requesting it since 1987.

Today is very different from the heady days of the mid-80s. Yes, some people are still flush with cash, but they're a lot more careful about how they spend it.

"Recently we've had to increase our prices - you can only absorb so much. Milk and cheese especially are very expensive now," Astle says.

"Lamb and beef prices have gone through the roof. I think it's criminal how much we pay for lamb. We pay $40 for a rack of lamb, $50 for a leg. It's unbelievable."

Forecast inflation of more than 5 per cent means prices at the dairy, supermarket and petrol pump, and the cost of building a new house, will rise so steeply that wages won't be able to keep pace.

Paul Keane, of retail consultants RCG in Parnell, says that in the 1980s people had secure jobs and their wages were rising. Today the economy is stagnant and inflation is increasingly rampant.

"In the eighties we all had jobs and salaries were good. It's the reverse of today," he said. "Mortgage rates were high but money was easily available, hence inflation for the average consumer was not too much of a problem.

You had drinks and barbecues at your home. You lived with it.

"Carless days were a frustration but mortgage funds were readily available and similarly savings were returning a high rate of interest."

Today, a growing number of households are finding it increasingly tough to balance their weekly budget. And this is without factoring in the as-yet unknown economic impact of last week's Christchurch earthquake.

So what does it mean for a whole generation who have grown up untroubled by inflation?

Shamubeel Eaqub, principal economist with the New Zealand Institute of Economic Research, says New Zealand's expected financial recovery has been "deferred".

Growth projections have been revised down from around 2.3 per cent to 0.3 per cent.

"There are three separate issues here," he explains. "The earthquake, and spikes in both food and fuel prices.

"The high food prices are caused partially by drought in central Europe and a shortage of wheat production. The price of fuel, caused by an unstable Middle East, also affects everybody, including manufacturers and producers.

"In the 1970s the oil shocks were quite disruptive to the global economy and I think we'll see that again. I believe food prices will go up 10 per cent this year. And that's a lot. Particularly when incomes are not rising."

Eaqub says that while some goods may have become cheaper in the recent recession, as manufacturers compete for business, food has not.

"It might be cheaper to buy an LCD TV," he says."But it's more expensive to buy milk. And this hits home because we can't do without food.

"People have to keep buying food. But other retailers of what we call frivolous goods - a lipstick, for example - will feel the pinch.

"If people have to spend more on food, they will cut back on things they perceive to be less necessary items. I believe we're going back into recession."

In previous recessions people simply borrowed more money. But this time, he says, people are cutting back and spending less. That strangles the retailers. It is a vicious circle.

Then there is the impact of the Christchurch earthquake. Aside from the cost of rebuilding, said to be in the region of $16 billion, Canterbury is home to 15 per cent of the country's employers and contributes a large chunk to the national economy.

Every day the CBD remains closed slices 0.01 per cent from GDP, according to economists.

What can be done? The Government's welfare payments to Cantabrians have been greeted with almost unanimous approval - but they will also come largely out of the public pocket through taxes or an earthquake levy.

Sir Roger Douglas, the former finance minister who some claim single- handedly saved New Zealand from financial ruin with the tough love economic policies in the 1980s, says the Government is spending too much.

"We're in a mess," he says. "And I believe it's because politicians put their own interests ahead of those of the average New Zealander. They think that if they did what they need to do they'd lose votes.

"If the first $35,000 of income was tax-free, each taxpayer would have extra cash to insure themselves for health needs and save towards pensions. They'd also have more money in their pockets to spend, which would support ailing retailers."

Certainly it's true that the classical recipe for keeping down inflation, according to most economists, is a deregulated economy, cheap foreign imports, high taxes on goods and services but low taxes on income.

Last year, the Government was cooking according to that recipe, cutting income tax while hiking GST from 12.5 to 15 per cent in October. But anything that did to rein in inflation may be offset by the costs of the earthquake.

Back at the supermarket in Hastings, Julie is at the checkout, having finished her weekly shop.

The bill is more than $300-about $50 higher than it was two months ago, despite the fact she's imposed economies like buying her veges frozen, and opting for sale items wherever possible.

Julie and her husband Maurice can afford to absorb much of the spiralling bill-and she's grateful that although food is going up, other things like children's clothing appear to be almost constantly on sale.

But she says young people - including her own children - feel they are fighting a losing battle.

"I have more money than when I was younger so we can live all right," she says. "And we have simple tastes.

But when I was young, though I was careful, I wouldn't say we struggled - not in the same way.

"Young families are really doing it tough now. My husband and I often have to help the kids out. They just can't keep up with the price rises."

Shoppers search for the specials
Rising food prices are forcing Kiwis to cut back on luxuries, search out specials and even overhaul their diets.

Doing the shopping at Countdown in the Auckland suburb of Grey Lynn, Sue Elliott says she and her family used to enjoy a dinner of meat and three veges four or five times a week.

But the Westmere mum says high food prices have forced changes to her family's diet unthinkable just a few years ago. "We used to have maybe one vegetarian meal a week but now we have vegetarian meals three or four times a week," she says.

Fish is also disappearing from her family's diet, despite the fact that New Zealand has a large fishing industry. What was previously on the menu once every week has now become a once-a-month luxury.

At Pak'nSave in Royal Oak, Shannon Tarawa says his friends and family are often talking about high food prices.

While he accepts that some prices, like those for fresh produce, will go up and down, he has noticed a steady increase to his total grocery bill recently.

"We're making changes and buying less. We just try and stick to the budget," Tarawa says.

That budget is strained even further by the long recession.

The Avondale dad's work slowed down and he is now on a temporary unemployment benefit.

Mike Watson also says his shopping basket is getting leaner. Judging by the changes he has made, Watson will be getting leaner too.

"I'm cutting down on everything. Everything. I'm sifting through the specials now.

"Some prices are outrageous. I find it disgusting how much we pay for milk and cheese."

Watson says he now doesn't buy any luxuries, except the coffee he "can't do without".

As for Sue Elliott, she has decided to redefine "luxury".

As well as becoming accidental vegetarians, the Elliotts no longer eat out, having every dinner at home.

"Takeaways are out. That's one of the biggest adjustments."

All these Kiwi shoppers say they expect prices to keep rising. They point to wild weather, natural disasters and rising oil prices here and abroad.

"Why will prices keep rising?" Elliott asks. "They'll keep rising because they can. I mean, no one's stopping them."

Cost Cutters
Even before the Christchurch earthquake, Frauke John and her husband Donald Pettitt were finding balancing their household finances a challenge. Frauke, 40, and Donald, 48, lived in South Brighton with their 3-year-old son Lenny and had Donald's 10- year-old daughter Phoebe to stay for four days a fortnight.

Donald earns $34,944 a year as a social worker. He often cycled to work and Frauke had become expert at swapping produce such as vegetables with neighbours and buying second-hand clothes to help make ends meet.

Yet over the past few months she noticed the cost of her fortnightly groceries had still mushroomed from around $250 to $300 each shopping expedition.

And then came the devastating earthquake, which all but destroyed their four-bedroom home in South Brighton.

Friends have now loaned the couple a holiday house in Picton, for no cost. But Frauke and Donald, both vegetarian, say the cost of buying groceries now is even higher.

"It's about 10km to the nearest little supermarket and I would say the prices are about 10 per cent dearer than what things were costing at Pak'nSave in Christchurch," Frauke said.

"I spent $90 the other day and thought I didn't get very much. I haven't noticed particular shortages but I've noticed that prices were higher. I don't know why."

She and Donald had traded vegetables and other foodstuffs with friends and neighbours in Christchurch, and she believed that could help communities deal with rising supermarket prices, especially after the earthquake.

"It's something I'd like to introduce on a wider basis across Christchurch in the wake of this tragedy. I'm a community development officer and our old community and our new one have been so wonderful.

"I'd like to start schemes that would help people cut costs - and help them cope and communicate with each other at this difficult time."