Despite controlled inflation, New Zealanders still feel financial pressure
Despite inflation meeting Reserve Bank targets, New Zealanders still face high costs for essentials like food and insurance, straining household budgets.
In February, the OCR was reduced to 3.75%, leading banks to lower interest rates and potentially easing some financial pressures. Despite this, the economic climate remains challenging, with financial hardship peaking since June 2020.
Even with stabilising inflation, the persistent rise in costs for essential goods continues to burden budgets, underscoring the impact of sharp price increases in specific sectors.
Stark increases in food prices
Food costs have seen dramatic increases, with items like olive oil and eggs rising by 85% and 90% respectively since 2019, Stuff reported.
Infometrics chief forecaster Gareth Kiernan (pictured) attributed these spikes to global supply issues and changes in farming practices in New Zealand.
Temporary weather disruptions have also caused price fluctuations, although these tend to be short-lived.
For instance, Kiernan noted, “kumara prices were back to normal at the end of 2024, down 55% from the end of 2023 after the crop got wiped out by the floods at the start of 2023.”
Insurance costs skyrocket
The cost of insurance has soared due to increased risks from natural disasters and global climate concerns. Contents, house, vehicle, and health insurance premiums have risen significantly, with contents insurance up by 62% since late 2019.
“Reinsurers have significantly increased the risk rating associated with New Zealand due to several natural disasters, like the Auckland floods and Cyclone Gabrielle,” Kiernan told Stuff.
Fuel costs remain high
Fuel prices have also increased, with premium petrol now costing significantly more per litre than in 2020.
Although global oil prices have been somewhat moderated by increased North American output, geopolitical tensions and trade uncertainties continue to cause fluctuations.
Electricity and power prices on the rise
Household electricity costs have increased by 12% since 2019 and are expected to climb further. The combination of higher wholesale electricity prices and upcoming increases in Transpower and lines company charges are set to push retail prices even higher.
“Bigger increases in electricity prices look likely in the next year,” Kiernan said.
Local rates and services
Local government rates have risen by 46% in the past five years, driven by higher service provision costs, previous underinvestment, and increased responsibilities.
“The outlook remains for rates to increase significantly faster than headline inflation,” Kiernan told Stuff, suggesting continued financial pressures for households utilising council-funded services.
