We’re in the midst of a cost of living crisis, and household expenses have increased by 6.2% over the year to March 2024. You can probably feel it every time you go to the supermarket, fill up the car, pay rent, bills or your mortgage.
With that in mind, we’re asking - why is everything so expensive? And when will things get better?
Why is everything so expensive right now?
The initial inflationary surge in 2021 was driven by excess demand and supply constraints. In other words, we were all sitting at home buying stuff online and because of restrictions it was more difficult to produce products and get them into New Zealand - therefore prices increased.
In 2024, the drivers of inflation are a little different:
- Rent is increasing at the fastest rate it has since Stats NZ started recording average rents in 1999. It was up 4.7% in the March 2024 quarter.
- Interest rates are also much higher than they were a year or two ago. The average household experienced a 28% increase in interest costs in the last year (Stats NZ).
- Insurance is also increasing fast. Households experienced a 17.9% increase in insurance costs in the last year.
- Cultural services (things like your Netflix subscription, movie tickets and entry to Rainbow's End) increased by 9.7% in the last year.
Food has been a huge contributor to household costs too - it went up by 12.3% in the year to June 2023. Thankfully food price increases have slowed down and the price of food or kai barely increased in the last year.
When are things going to get better?
The good news is things may start to get better in the near future. The most recent inflation figures showed that these price increases were slowing down, and economists expect that inflation should return to the 1-3% band between late 2024 and mid 2025.
Things will still be far more expensive than they were back in early 2021, but eventually wages increases should start to make everything more affordable again.
New Zealand average hourly earnings increased by 6.9% in 2023 and they are expected to continue increasing in 2024. When inflation finally slows down, wage growth continues and interest rates decrease, life should hopefully start to feel a little easier for Kiwis.
When this may happen is anybody’s guess - it could be late 2024 or sometime in 2025. Fingers crossed it’s as soon as possible!
Disclaimer:
This ‘Cost of living - when's it going to get better?’ blog is general information only. The views and opinions expressed do not necessarily reflect those of the FSC. It is not intended to constitute legal or financial advice and does not take your individual circumstances and financial situation into account. We encourage you to seek assistance from a trusted registered financial adviser, legal or other professional advice.
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April 2024.
