Inflation Hits Vulnerable NZ Households Hardest Since GFC

The cost-of-living gap in New Zealand has reached its widest since the Global Financial Crisis (GFC), affecting poor and elderly households more than middle-class families, according to Stats NZ's quarterly household living-costs price indexes.

The Household Living-Cost Index (HLPI) includes mortgage interest payments and reflects actual cash outflows, whereas the Consumer Price Index (CPI) excludes these costs. The HLPI showed a 3.2% increase over the past 12 months, while CPI rose by 4.1%. However, superannuitants' cost of living increased by 4.5%, and low-expenditure/low-income households saw a 4.3% rise.

The widening gap is attributed to high energy prices affecting older homes, which are often less well-insulated. Additionally, low-income households spend a larger proportion of their income on necessities like food, rates, electricity, and petrol, which have seen significant price hikes.

High-income households, on the other hand, have enjoyed declining interest rates, allowing them to refinance mortgages at lower rates and offset rising costs. The Reserve Bank's decision to keep raising interest rates will eventually impact these homeowners, but for now, they are less affected by inflation pressures.