Claims that an increase in inflation would be short-lived are being discounted, as economists now warn that rising prices are here to stay.
Inflation has reached its highest level in a decade and consumer prices rose 2.2 percent in the three months through September.
The annual rate, 4.9 percent, far exceeded analysts’ forecasts.
Food prices rose 3.1 percent and transportation 13 percent in the three months to the end of September compared to the same quarter last year.
The median price for a liter of 91 gasoline was $ 2.27 compared to $ 1.86 in the same quarter last year.
Infometrics chief economist Brad Olsen said inflation was affecting all aspects of household budgets and that that was unlikely to change in the near future.
“Households will have to look at all of their household budgets to try to figure out how to try to pay these increasing costs,” he said.
The cost of building a new home increased 12 percent during the year.
Construction Industry Council Executive Director Graham Burke said rising costs meant companies and customers were concerned about signing fixed-cost contracts.
For those who already had contracts of this type, it was even more problematic.
“It’s putting really incredible pressure on margins and when you look at some of the increases that we are seeing, there’s just no way that those margins will be incorporated into the jobs.
“Some of the consequences could be that jobs can’t be completed, businesses run at a loss and it just depends on the size and quantity of those contracts in terms of how many people can deal with them,” he said.
Those most affected by the price increases are low-income families.
He Korowai Trust CEO Ricky Houghton said there were families in the Far North living on just $ 21,000 a year.
Their location places them at a particular disadvantage.
“There is no public transport here, so we have to depend on gasoline, it is a basic good, there is the fact that rents are going up, everything is going up and there is no cushioning, there is no more space for families,” he said. said.
You want an additional tax refund for low-income households.
When asked what the government would do to protect low-income families, Prime Minister Jacinda Ardern said that work was already underway to increase incomes.
“Either through the levers that we have: minimum wage, as an employer ourselves, through some of the specific tax credit regimes that we have and we will continue to do so because we are very focused on our cost of living for low-income households. . “
Factors such as international shipping and oil prices were outside the government’s control, he added.
All eyes will now turn to the Reserve Bank, which has already indicated a slow increase in the Official Cash Rate to try to keep inflation at bay.
This will affect interest rates and therefore mortgage repayments, and will affect the back pockets of New Zealanders either way.