Cost of living falls but still higher than a year ago - survey

Prices dropped 0.6 percent in the June quarter but were up 1.1 percent year-on-year.
Prices dropped 0.6 percent in the June quarter but were up 1.1 percent year-on-year. Photo credit: Getty.

Household living costs fell in the June quarter, largely due to falling petrol prices, a Statistics New Zealand survey shows.

But on an annual basis, price inflation rose, driven by rising food and rent prices.  

The survey on household living costs measured price changes in expenses such as food, rent and petrol, and how they affect different types of households.    

In the last quarter to June 2020, price inflation fell 0.6 percent across all households. For beneficiaries, it was down 0.4 percent and for māori and superannuitant households, it was down 0.5 percent. Statistics New Zealand consumer prices manager Sarah Johnson, said this was the first price drop in over four years.

"Inflation for all households as a group fell 0.6 percent this quarter, the first fall since December 2015," she said.

As the price of crude oil fell, petrol was cheaper.  The drop was particularly beneficial to lower-to-middle income households who typically spent more on fuel, with quarterly inflation down 0.5 percent and 0.7 percent respectively.

"Lower transport prices were the biggest driver for this quarterly fall, with big drops in petrol prices and free public transport in many parts of the country. With a lack of demand for crude oil around the world during the COVID-19 lockdown, crude oil prices on international markets fell sharply in March and April," Johnson added.

On an annual basis, price inflation across all households rose 1.1 percent, largely driven by food and rent prices.  

Over the year, the average household spent 11.4 percent of their income on rent. For beneficiaries, rent accounted for almost a third (32.7 percent) of household expenses, making them most vulnerable to rent increases. 

"Annual inflation for beneficiaries increased 2 percent for the year ended June 2020, compared with a 1.6 percent increase for māori and superannuitant households and a 1.1 percent increase for all households," Johnson said.

"The main two drivers of these annual increases are rents and food."

Food prices increased 3.8 percent over the year.  The average household spent almost 20 percent (19.9 percent) of their income on food, with other household groups spending a similar portion.

On March 23, the Government announced a six-month freeze on rent increases, stopping landlords from increasing rent on existing tenancies. This had some impact on lowering the rental price index in June, however as it didn't apply to new tenancies, the figures were difficult to estimate.

"Excluding the full impact of the rental freeze, quarterly CPI rent prices rose 0.6 percent over the June 2020 quarter. This is lower than the 1.2 percent rise in the March 2020 quarter," Johnson said.

Trade Me rental data for May showed that nationwide, the weekly median rent was $510, up 2 percent on May 2019.  In Auckland and Wellington, it was $550.

Property spokesperson Aaron Clancy said the residential rent freeze hadn't stopped the nationwide median weekly rent from increasing year-on-year, although this could be due to the fact it didn't apply when houses were relisted.

"If demand does drop off, or there is oversupply, we could see prices slow down," Clancy said.