By the numbers: The groups struggling the most during the cost of living crisis

Household living costs jumped 7.2% for an “average household” in the year to June 2023, Stats NZ revealed on Thursday.

Infometrics chief forecaster Gareth Kiernan said the biggest difference between the Consumer Price Index and the household living-cost figures was the inclusion of mortgage interest in the calculation.

Higher prices for interest payments and grocery food were the biggest contributors to the increase – so who are the groups most affected by the cost of living jump?

Higher-income and higher-expenditure households

Kiernan said the data showed households with a higher income and higher expenditure were most heavily affected by the rise in interest rates over the past one to two years.

The highest-spending households out of the 10 income groups Stats NZ tracked experienced a 7.8% jump in the past year, primarily because of higher interest rates.

“This outcome is unsurprising because, given high house prices and the costs associated with servicing a mortgage, these households will typically have higher incomes and outgoings,” he said.

Interest payments increased 28.3% in the year June 2022 to 2023 for high-income households.

Low-income households

Despite having only a 6.9% cost of living increase, those in low-income households were still heavily affected by the cost of living.

The main contributors to this increase were food groceries, rent, fruit and vegetables, and interest payments. These were partly offset by lower prices for private transport supplies and services.

“Given that food price increases have also been a major contributor to rising living costs, and that low-income households will have less wriggle room in their budget to cope with rising costs, the effects of these cost pressures for low-income households are also significant,” Kiernan said.

Between June 2022 and June 2023 the price of grocery food for low-income households increased 13.5%, while rent increased 5.1% and interest payments increased 29.8%.

Those who entered the housing market in 2020 and 2021

With respect to the higher mortgage payments associated with rising interest rates, this effect is going to be most critical for people who entered the housing market in 2020 or 2021, Kiernan said.

In May’s Financial Stability Report, the Reserve Bank found households that borrowed during the period of very low interest rates between late-2020 and late-2021 were stress-tested at rates below what they are today.

This meant borrowers with high debt-to-income levels may begin to struggle to meet their repayment obligations as they reprice onto the higher rate.

But for households who have had a mortgage for longer, say since 2015, the higher living costs caused by rising interest rates now were essentially a reversal of the trend of more muted increases in living costs they enjoyed between 2015 and 2021 as interest rates fell, he said.

Māori households

The cost of living for Māori households increased at the highest rate behind high-income households, increasing 7.1% in the 12 months to June 2023.

The main contributors to higher living costs for Māori households were interest payments, rent and grocery food but were once again partly offset by lower prices for private transport supplies and services, which decreased 10.3%.

Interest payments had increased 30.1%, grocery food increased 13.2% and fruit and vegetables increased 22.1%.