Struggling families are taking short-term loans or applying to their KiwiSaver providers to withdraw their savings to buy food, despite a reported drop in food prices.

Annual inflation was 1 per cent for the year to June 30 - the lowest since 1999 - and vegetable prices fell 5.1 per cent and milk, cheese and egg prices by 3.7 per cent.

But South Auckland-based Aotearoa Credit Union manager Bruce Bleakley said times were "desperate" and people were seeking help from his organisation to buy food.

Mr Bleakley said it was giving a growing number of loans of $150 to $250 for families who were short of food.


"It is definitely one of our big loan categories. It's probably a new phenomenon that has become more noticeable in say the last 18 months - people need money for food."

"People can go to Winz and get food subsidies and support. They can only get so much a month so this has become quite significant for us."

Mangere Budgeting Services chief executive Darryl Evans said the positive effects of the fall in inflation had been negated by rising rental prices, power and heating costs, which were placing more pressure on lower-income working families.

"Food parcel requests remain high and as a result we see many of our families needing to apply to their KiwiSaver provider to withdraw their savings," he said.

"These withdrawals are not for holidays or luxury items. Most tell us they need to withdraw due to rising costs, rental and power arrears and in some cases to buy food, clothes and school uniforms," he said.

A South Auckland woman said she had taken four loans of "about $150" this year to buy basics such as bread, milk and cleaning products.

The Manurewa mother of three, who asked not to be identified, works three cleaning jobs, six days a week and her husband works three days a week as a carpenter when work is available.

She did not qualify for assistance from Winz.


"Our rent is $400 a week, which doesn't leave much especially when you have three boys who eat a lot, and you have to get some money from somewhere."

The woman said the interest rates on the short-term loans were "not like those loan sharks" and she had paid back all of the money she had borrowed.

Some supermarkets spoken to by the Weekend Herald are reporting that basic food items are on the hit-list for thieves ahead of traditional targets such as batteries and razor blades.

A South Auckland supermarket owner said his store had prosecuted "dozens" of people this year, many caught shoplifting essentials such as butter, bread, milk and flour.

"It is sad and probably an indication of how tough things are for some," said the store owner.

Hamilton's Pak'n Save Clarence St owner Tony Rider said thieves were now after food items - in particular meat - as the recession continued to bite.