The rising cost of food and housing has some in Rotorua struggling to afford expenses such as dental work or school uniforms, budget services say.
Statistics New Zealand reported annual inflation for the September quarter was the highest since 2008 at 4.9 per cent. The consumer price index rose 2.2 per cent, the biggest quarterly rise in more than a decade.
The main drivers were housing-related costs such as the construction of new houses and local authority rates, Stats NZ said.
Rising prices of vegetables and petrol were also contributors.
Rotorua Salvation Army corps officer Kylie Overbye said there had "definitely" been a shift in thinking around affordability.
"There is a sense of needing to tighten the belt on spending, particularly on food.
People were missing out on health, dental and eye care because they were not easily affordable for those who did not have savings or insurance, she said.
The Salvation Army was seeing people who had "increased anxiety" about the security of their futures, as they struggled to save while living paycheck to paycheck.
"People who have been saving a bit with the hope of owning a home one day are disheartened as the goalpost seems to be getting further and further away."
Renters were unsure if they could find a home in the future if rent prices became unaffordable or if their tenancy ended, she said.
"So there is this tension that hovers in the background of people's lives these days."
Inflation was also affecting people who had taken out loans at a time when their income could repay them, she said.
"With the shifting cost of living, these loans appear to be becoming harder to pay as they don't have spare funds to keep up with inflation."
Rotorua Budget Advisory manager Pakanui Tuhura said some clients were telling them prices were "going through the roof", particularly groceries.
Budget advice was dependent on an individual's income, Tuhura said.
"[Some households] might not have enough income to cover [food] and now we're asking them to make decisions on things like, do you keep your kids in uniforms?"
Local Government New Zealand president Stuart Crosby said he had "no doubt" council rating requirements were a contributing factor to inflation, as were electricity, gas and food.
People could manage "modest rates" of inflation but it became challenging when it spiked, he said.
Crosby, a Bay of Plenty regional councillor and former Tauranga mayor, said rating requirements had gone up "well above what would be the norm".
During the first Covid outbreak, councils were under "tremendous" pressure not to put the rates up and many did not, he said.
"That had a flow-on effect to the year we've just started now.
"Nobody likes paying more rates. They do look for value for their rates."
Fruit Monster greengrocer store manager Surinder Pal said the prices of green vegetables such as cauliflower and cabbage were "very high" this season.
"Last year it was not like that."
Pal attributed price increases to Covid-19 and a labour shortage on farms.
Classic Builders director Peter Cooney said construction prices were escalating at a rate that was "getting quite scary".
"It's certainly pushing the price of houses up."
"Land is going up at dramatic rates as well so everything bodes poorly for the poor old first-home owner," he said.
"Often when you see escalation go up like this, it's going to drive interest rates up.
"It puts a lot of pressure on those people who have already purchased or are about to purchase – housing becomes out of their reach," he said.
"It also puts a lot of strain and pressure on those who are trying to finance mortgages where they've got low-interest rates but those interest rates are looking to climb up.
"The question is going to be how far are they going to climb."
What is inflation?
Inflation is the general increase in prices of the goods and services we buy, Kiwibank chief economist Jarrod Kerr says.
"Rapid inflation is like a tax on savings.
"Inflation does not impact us equally. Lower-income households get hit harder by rising inflation."