Soaring food prices are pushing costs up.Photos / files
Rising costs for housing, petrol, food and clothing have pushed the average family’s living expenses in New Zealand’s largest city by more than $ 100 a week-and experts predict that cost.
Will continue to increase.
Herald’s analysis, estimated using inflation data over the last two years, based on Inland Revenue Department household spending figures, shows that many kiwis have to spend more than they did before Covid. I am.
Auckland families with two adults and two children paying mortgages are paying an average of more than $ 1,600 a week, starting at $ 1,509 in mid-2019. The lessee had to find an extra charge of $ 70 a week.
Single parents, on the other hand, have to spend an extra $ 47 a week to find $ 962 if they are renting. If they are paying a mortgage, they need to find an additional $ 60 a week, for a total of $ 959.
Even those without a mortgage need to find more, families need an extra $ 37 a week, and single parents need an extra $ 22.
Fin Robinson, an economist at ANZ, said Covid played a significant role in boosting costs. “Many of them are supply disruptions, transportation disruptions around the world, cargo delays, and port inability to operate at full capacity.”
Robinson said the fact that New Zealand was a smaller economy meant it was much more expensive and it took longer to bring items into the country.
“I’ve seen fares rise exponentially in recent months, which is one of the reasons for pushing prices up.”
This means that all imported items, such as food, clothing and other commodities, are costly.
Finn said the turmoil would last much longer than people expected and would probably last until 2022.
Housing is one side of it, Robinson said, and the underlying inflationary pressures on the domestic economy.
“The price of raw materials has risen significantly. We couldn’t bring the builder into the country and the builder is now flat.”
House prices have risen sharply, forcing them to add more homes, but bringing building materials into the country was costly and companies had to pay the highest amount to their workers.
Finn said New Zealand’s unemployment rate has already dropped to 4.7%, supplying a tight labor market. This is higher than before Covid, but much lower than this time last year.
“Workers are much scarce, they can order higher wages, everything leads to higher prices. Supermarkets have to pay more to workers, which also affects prices.”
ANZ forecasts inflation to rise further, from 3.3% annually through June to 4.2% by the third quarter of this year.
According to Finn, the supply turmoil will not go away immediately, and as Covid’s delta spread around the world, it can worsen before it gets better, potentially pushing up prices further.
He does not expect high levels of inflation to last long, as the Reserve Bank is expected to respond by raising the discount rate.
Unfortunately, for mortgage holders who have enjoyed record low interest rates over the past few years, that means higher borrowing costs.
“For those who have a mortgage, that will definitely make this more difficult,” Finn also said, allowing people to borrow so much to get a mortgage or buy a business. It means it’s gone, and it means less disposable income for mortgage holders, he said.
According to Statistics New Zealand data this week, people’s net disposable income (the amount a household can spend after paying taxes) increased by 3.1% in the March quarter.
However, household spending also increased by 6.1%, and household savings fell sharply. Kiwi’s savings have fallen to their lowest levels in two years, after rising sharply last year due to the blockade of Covid restricting people’s outings and spending.
Median household income for Auckland citizens was $ 104,821 or $ 2015 per week for the year to June 2020, an increase of 4.4% over the previous year. Median disposable income was $ 87,210, an increase of 4.9% over the previous year. The figures for the year to June 2021 will not be announced until next month.
Tom Hartman, personal finance officer of the Government’s Financial Ability Commission, the government’s financial education department, said that if people are worried about rising costs, the best thing they can do to prepare is to plan their spending. Said that.
“The best case is trying to find money from somewhere by coordinating behavior. It’s the visibility that really empowers you. Knowledge is power and see what your position is. And see how all these categories fit your situation. “
According to Hartman, people can start by calculating all their income and expenses, both regularly and irregularly, and putting them in a spreadsheet like the one on the Commission’s sorted website.
“Then you start taking pictures, and you start seeing where you are and whether it’s realistic to spend money on what you really want to do.”
Hartman said the key is to be in the black. “Obviously it affects our savings rate as more go to groceries and groceries when these categories are on the rise.
“This basically means that people have to be prepared to spend a larger percentage of their budget.”
Hartman said it would be interesting to see how reserve banks react to rising inflation and whether it will raise interest rates.
“There are concerns about inflation.
“When there is a great deal of fear, it’s really good to ask if it’s really legitimate or if people are afraid of what happened in the past or elsewhere.
“Maybe I remember that. People may have spent time abroad in a country where they had to be shaken by a currency wheelbarrow to buy something ordinary when they saw the currency devaluated. You may hear such a story. We know that when we are based on fear, we do not make good financial decisions. Fear-based decisions should be avoided. “
But he said people should also keep their eyes wide open. “They should think about what they can adjust.”
Hartman said inflation has been so low for a long time that it will be a new experience for many.
“For many, it is outside the scope of their experience and they can only be reached elsewhere or by what has been seen in the past.”
Rising Living Expenses: What You Can Do to Prepare
SourceRising Living Expenses: What You Can Do to Prepare