Ipsos Cost of Living Monitor: Kiwis pessimistic despite economy improving

• The Ipsos Cost of Living Monitor, released to the Herald, shows how pessimistic Kiwis feel about household costs, inflation and the cost of living in the coming months.
• Inflation sat at 2.2% for the latter half of last year, while GDP grew 0.7% in the December quarter.
• Last week, the Reserve Bank cut the Official Cash Rate to 3.5%.

A significant portion of New Zealanders remain pessimistic about their finances, a quarter struggling financially and 41% expecting their disposable income to shrink in the coming year.

Those on low incomes are particularly struggling, according to the latest Ipsos Cost of Living Monitor, and increasingly so: 38% said they are having difficulty managing financially, up from 25% in May 2022, when inflation peaked at 7.3%.

This represents a 52% increase in just under three years of those on low incomes who are struggling.

The survey, released to the Herald exclusively, found 26% of New Zealanders overall were struggling financially, up from 20% when inflation peaked.

And while 18% expect their disposable incomes to rise in the coming year, more than twice as many - 41% - expect them to shrink, while 37% believe they will stay about the same.

These numbers are more pessimistic compared to nine months ago, but more optimistic compared to two years ago.

Politicians will take notice; the cost of living remains at the top of voters’ most important issues, as it was on election day a year and a half ago.

The Government is preparing for the release of Budget 2025 next month amid yo-yoing global markets, and uncertainty over US President Donald Trump’s tariffs. Meanwhile, Labour is honing its attack on the Government in terms of whether people are feeling better off.

An increase in financial struggles comes as the economy grew by 0.7% in the December quarter, inflation was steady at 2.2%, and falling interest rates should be helping to increase the disposable incomes for those re-fixing their home loan repayments.

Last week the Official Cash Rate continued to drop, falling 25 basis points to 3.5%.

The Ipsos Cost of Living Monitor shows 38% of those on low incomes are in financial difficulty.

But this has not translated to people feeling like they will have more money.

The low expectations for improving disposable income may be related to the 47% who were worried about job security, including 54% of women. Most (83%) of those worried about job security said they were spending less.

Perception versus reality

The pessimistic outlook may not materialise, given the survey’s findings about New Zealanders’ beliefs about the economy and inflation - and how wrong they appear to be.

Even though the economy climbed out of a recession in the December 2024 quarter, 70% of respondents said New Zealand was “currently” in a recession.

The cost of living remains the most important issue among voters, as it was during the election campaign in 2023.

Almost two-thirds didn’t think inflation would return “to normal” in the next year, including 15% who said it would never return to normal.

Only 7% said inflation had already turned to normal, even though it has been within the 1-3% target range since mid-2024.

“This report gives us some insight as to why New Zealanders still see inflation as the most important issue facing New Zealand,” Ipsos NZ country manager Carin Hercock said.

“New Zealanders are not making the connection between reductions in the Official Cash Rate to an improvement in living costs. Instead, the majority believe that major household costs like groceries, power and insurance will continue to increase in the next six months.”

Four out of five expect household costs to rise for food, as well as for utilities, while 73% expect costs to increase for insurance.

More than twice as many (35%) expect their mortgage or rent to increase (35%) than decrease (15%).

For the coming year, the survey showed:

• 65% believe the number of unemployed people will rise;
• 52% believe inflation will rise;
• 27% said their standard of living will fall, compared to 22% saying it will rise;
• 25% believe interest rates will rise, compared to 45% saying they will fall.

Asked about factors contributing to the cost of living, the most common response was the state of the global economy (from 80% of respondents), followed by interest rate levels (73%), the Government’s policies (73%), and businesses making excessive profits (70%).

Only 20% ticked “reduce Government spending further” when asked what should be done to improve the economy. The most popular answer (39%) was infrastructure investment to create jobs, followed by investing in education and training (33%).

The results are from an online survey of 1002 New Zealanders aged at least 18. It was conducted between February 24 and March 2. Quotas were used to ensure representativeness. The credibility interval is 3.5 percentage points.

It follows the Ipsos Housing Monitor earlier this year, which found young New Zealanders feeling increasingly unable to afford a home of their own.

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Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery team and is a former deputy political editor.