Tobacco tax hike drives up cost of living for beneficiaries, Māori

One cigarette cost about $1.50 in the March 2019 quarter. Photo / 123RF

The government's annual 10 per cent hike on cigarettes and tobacco was most keenly felt among the country's poorest, resulting in a higher cost of living for beneficiaries and Māori.

Stats NZ figures show the cost of living for beneficiaries rose 0.6 per cent in the three months through March, and rose 0.4 per cent for Māori. The national average increase in the cost of living for the period was 0.1 per cent.

The government department said that was primarily due to more expensive cigarettes and tobacco, which typically account for 4.1 per cent of a beneficiary's household spending, 4.8 per cent of spending in a Māori household and 2.5 per cent across all households.

"One cigarette cost about $1.50 in the March 2019 quarter, up from about 54 cents a decade ago, partly a result of regular excise tax increases over the past 10 years," consumer prices manager Gael Price said in a statement.

Tobacco excise has increased annually since by 10 per cent plus inflation since the previous government introduced the Smokefree Aotearoa 2025 target in 2011. In December, officials cited their impact on Māori and Pacific households when advising the government not to extend the legislated increases when they end in 2020.

Crown financial statements showed the government's tobacco excise revenue was tracking $179 million ahead of forecast at $1.63 billion for the eight months through February, though that was still down from the $2.68b it received in the year-earlier period.

Government data last month showed March-quarter consumer inflation came in below expectations at an annual pace of 1.5 per cent and would have been even lower had it not been for the annual tobacco tax hike.

Cheaper petrol and international airfares benefitted the higher-spending households in the March quarter, with the fourth and fifth quintiles registering a 0.2 per cent decline in their cost of living in the March quarter. Similarly, the fourth and fifth quintiles by income saw no change in their cost of living.

Price said international airfares accounted for about 2.8 per cent of spending by top-quintile households, compared to 1.5 per cent for all households.

On an annual basis, the cost of living for all households was up 1.4 per cent in the March quarter, slowing from the 2.1 per cent pace in the December quarter. Beneficiaries and superannuitants faced the biggest increases at 1.8 per cent, while the highest spending households registered a 1.1 per cent increase in their cost of living.

Labour data out later this week is expected to show a 0.5 per cent quarterly pace of wage growth in the three months through March, for an annual increase of 2 per cent.