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Kiwis advised to spend wisely amid inflation and rising cost of living

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Investor contributions are on the rise, but there are concerns that the cost of living will change the amount people are willing to contribute to their KiwiSavers. Video / NZ Herald

New Zealanders are advised to spend wisely, budget and save as the cost of living continues to rise.

New data released earlier this month showed the consumer price index rose 7.2% in the year to the September quarter – well above Bank expectations reserve and market of 6.4 and 6.5%.

There are also forecasts that the official exchange rate (OCR) could reach 5.25%, compared to 3.5% currently.

Economists warned that borrowers would face a difficult period with interest rates likely to be raised more than expected and said there was an increased risk of a “hard landing” – the tightening of monetary conditions by the Reserve Bank bringing the economy to a screeching halt, leaving people jobless.

Finance Minister Grant Robertson.  Photo/Mark Mitchell
Finance Minister Grant Robertson. Photo/Mark Mitchell

Despite the headwinds, Finance Minister Grant Robertson said the government has no plans to extend the temporary fuel tax cut, provide another iteration of the cost of living payment or d income tax changes to support low-income people.

Bay Financial Mentors Tau Awhi Ora director Shirley McCombe said inflation would hit accommodation, food and fuel costs the hardest.

“Whānau who only makes ends meet will slip under the line.

“The cost of housing in Tauranga is huge and the supply is low, families will go without food to pay the rent.”

McCombe said if the situation worsens, customers will increasingly turn to credit.

“They will borrow but then be unable to make the repayments. Escalating debt only adds to the weekly pressures to make ends meet.

“The other concern is for those who have purchased and then are unable to repay due to rising interest rates.”

McCombe advised families to take control of their finances.

“Know what you have each week and plan for those larger expenses that often push you over the edge.

“Talk to a mentor and find out what support is available to you. If you’re struggling with debt, come see us. This is a really tough time for many, many people, but you don’t have to try to handle it on your own.”

Shirley McCombe, Head of Bay Financial Mentors, Tau Awhi Ora.  Photo / Provided
Shirley McCombe, Head of Bay Financial Mentors, Tau Awhi Ora. Photo / Provided

Tauranga Business Chamber chief executive Matt Cowley said most business owners were worried about negative net migration from New Zealand, high inflation and global uncertainties as 2023.

“Businesses understand that increasing New Zealand’s official exchange rate to fight inflation is a necessary evil, but it’s difficult for businesses to get commercial loans.”

Cowley said the cash rate increase also suppresses consumer discretionary spending.

“Companies are hoping the government’s fiscal policy works with, not against, the Royal Bank of New Zealand’s monetary policy.”

Matt Cowley, Managing Director of the Tauranga Chamber of Commerce.  Photo / Mead Norton
Matt Cowley, Managing Director of the Tauranga Chamber of Commerce. Photo / Mead Norton

Gray Power Tauranga President Jennifer Custins has said over the past month that everyone in the older age group is talking about supermarket and petrol prices.

“People who I thought would not be financially affected are running out of budget in advance.

“At the moment it wouldn’t be people living off the super, but interest on savings is inconsequential unless you have millions.”

Custins said the elderly and single and paying rent would be hit the hardest if prices continued to rise.

“If you’re paying $450 a week on a benefit that earns you $500, I don’t know how you’d cope. Even if things stay the way they are and don’t get worse, it’s going to be tough.”

Custins feared there would be a lack of dialogue and conversation about the needs of older people if economic problems worsened.

Jennifer Custins, President of Gray Power Tauranga.  Picture/file
Jennifer Custins, President of Gray Power Tauranga. Picture/file

Rotorua-based first-time home buyer Raj Nakura has expressed concern about how much money he might end up spending on groceries.

“Nowadays $200 can get you frozen food and fruit. Inflation is going up and not matching what people are earning.”

Nakura paid the down payment on his first home in September, after two years of working multiple shifts and saving whatever he could.

“Basically, I only spend on what I really need.”

Nakura said avoiding eating out and cooking at home definitely helped. Limiting take-out coffee purchases has also been a big saving.

“Coffee is $5.50 to $6 now and that’s without the alternative milks.”

Dr. Murat Ungor, Lecturer in the Department of Economics at the University of Otago.  Photo / Provided
Dr. Murat Ungor, Lecturer in the Department of Economics at the University of Otago. Photo / Provided

Senior Professor in the Department of Economics at the University of Otago, Dr Murat Ungor, said that especially for low-income households, the focus would be on survival over the coming months.

“Inflation is going to be with us for a while.”

Ungor said the fallout from “global shocks” caused by the Russia-Ukraine crisis, global supply chain issues exacerbated by China’s pursuit of zero-Covid policies were still being felt in the neo-economy. zeelandic.

“One of the biggest price increases in New Zealand has been in the construction industry, where most materials are imported.”

Ungor said these uncertainties in the global economy have influenced New Zealand’s inflation rate, which in turn has affected food prices, the rental market and transport.

“In a low-income household, the majority of their income will go towards food, rent and transportation and if you see inflation in those categories, that’s a very big issue for those people.”

READ MORE:
• Government rules out further inflation relief as cost of living for Kiwis soars
• Homebuyers potentially pay $500 more per week in interest payments
• Recession, mortgage shock, inflation: how badly will the storm of 2023 hit Kiwi families?

Ungor said New Zealanders should spend very carefully.

“We can’t have luxuries. If, as a family, you used to go out to dinner twice, it would have to be once or not at all.”

Ungor said his advice would be to spend carefully on the essentials and then hold on to what’s left.

“The focus is on survival.”

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