Yesterday’s Price is Not 2024's Price

The cost-of-living crisis in numbers

Most Kiwis are feeling the pinch right now, even the high-income earners. As we noted in a previous blog post, the middle class are truly getting smashed. Inflation is sky high when compared with the last decade, sitting at 7.2% according to Stats NZ. Doing a simple supermarket shop can leave people shaking their heads, as food prices rose at the fastest annual rate in more than 30 years. Throw in the mix a few natural disasters and you can guarantee food prices won’t be settling down any time soon.

It can be hard to stay positive in an economic climate that makes us feel constantly on the back foot, yet it pays to remember it isn’t your fault – money simply isn’t stretching as far these days. We did some digging to find out the true difference in costs, and one thing is for sure – yesterday’s price is not today’s price.

Then and Now

Median Household Income

In 2012, the median household income in New Zealand was $60,521, data from Stats NZ shows. The most recent data shows that figure sitting at $96,001 at the end of 2022. Salaries certainly haven’t been stagnant, but they aren’t matching the increasing costs of living.

Housing

In December 2013, the national average house price was $382,000. Nearly 10 years later it now sits at $762,000 according to REINZ data. That’s a 7.1% annual average increase, though it’s important to note we are currently experiencing a dip in the housing market, with prices peaking in November 2021 after rising almost 40% in two years according to Reuters.

Housing prices really have risen at an unprecedented rate, leaving many people struggling to get into the market and creating an “assetocracy” of types in this country as the divide between the Haves and Have-nots widens.

Car Costs

Anyone who is serious about building wealth knows that cars are an asset sinkhole. Unfortunately, they are necessary and unless you live in a city with reliable public transport (which realistically only Wellington would fit the bill for), then using a car for your daily commute is standard procedure.

Costs associated with owning and running a car include, maintenance, insurance, parking, Warrant of Fitness (WOF), registration and of course, petrol. These sneaky costs can really stack up, putting Kiwis out of pocket by thousands of dollars a year.

New cars prices have remained surprisingly stable since 2012. According to Stats NZ the cost of the average new car decreased by 12% between the end of 2012 and the end of 2022. In June 2021, the cost of a small car in New Zealand was $18,000 according to Stats NZ data. A medium car cost $25,000, and a large car was averaging $40,000.

The story is not the same for second hand options as they have increased by 11.6% over the same period. Vehicle parts have increased by 20.7% and servicing and repairs a whopping 24.4%. Going to the mechanic can leave one’s wallet feeling much lighter.

Petrol Costs

Petrol accounts for a huge chunk of the weekly bills for the majority of Kiwis. Prices are volatile jumping from week to week due to an array of geopolitical factors. Ministry of Economic Development data shows the average price of premium petrol sitting at $2.19 in 2012.

Petrol prices have trended upwards in recent years, accommodating a large spike in 2022 due to political unrest and contributing factors worldwide. The average petrol price for 2022 was $2.80, although this has come down in recent months sitting at $2.48 at the end of March. However the government introduced a Fuel Excise Duty (FED) in March 2022, when petrol prices soared to over $3 per litre. The FED ensures a 25 cent per litre reduction in price and applies until June 2023. If the FED is not extended, we can expect to see a sharp rise in the weekly gas bill then.

Food Costs

Food certainly isn’t cheap right now. In fact, a recent Canstar survey has revealed the cost of food is now a bigger concern than housing in New Zealand. Post-Covid inflation and wild weather are the culprits for soaring supermarket staples.

Stats NZ figures show food prices rose 12% in the previous 12 months, and fruit and vegetables jumped a whopping 23%. A family of four living in New Zealand would spend around $427 a week on groceries in 2022. Add on 12% inflation and that’s another $50 to match 2023 prices.

Comparable data is tough to find, though an article from the Otago Daily Times reported the average weekly grocery bill for a household was $193 in 2014. It seems in a decade or so food prices have more than doubled.

The Big Mac Index

You may have heard of the famous Big Mac index. It has become a tool to track the purchasing power of nations across the globe against the US dollar. A Big Mac will currently see Kiwis $7.50 out of pocket, while in January 2013 it cost only $5.20.

The Bottom Line: The Grocery Bill Is the Real Culprit

The good news is, you’re not alone if you’re feeling the pinch – the bad news is it is highly unlikely the prices of much will drop.

Whilst it’s true salaries have risen in the past decade; food prices have absolutely soared. If you’re feeling the pinch in today’s economy, the grocery bill is the real villain. Sure, other expenses are costly too. Housing prices have lurched in the last decade - yet they are currently trending down. Petrol prices have not risen drastically, but we can expect to feel a pinch soon if the FED is removed in June.

What you can do to ease the financial strain is take charge of your financial wellbeing and the things you can control.