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Is the cost of living going up?

Saturday, January 30, 2010
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By Allison Tait
MSN NZ Money writer

Do you feel like the cost of living is rising? Here's how to take charge.

Ask anyone about the cost of living and they'll tell you it's going up. Groceries are more expensive. Electricity is more expensive. Everything's more expensive. Except it's not.

According to the experts, the cost of living in New Zealand has fallen in the last six months.

"Food prices have been falling since August 2009," says Dr Stephen Burnell, a senior lecturer in the school of economics and finance at Victoria University of Wellington. "From September to December, food fell by 2.4 percent, with fruit and vegetables down by nearly 12 percent — and also down by over 5 percent compared to December 2008. The CPI fell by 0.2 percent from September to December."

The cost of living is officially measured by the consumer price index (CPI), and it's determined by the current market value of a basket of goods (and services) deemed to be "average". Mortgage expenses are not included.

So if an "average" basket of goods is going down in price, why do we all feel we're paying more?

"Perhaps the index is not doing a good job," Dr Burnell says. "If they look at the cheapest price for a product in one store and then average that over all stores sampled, it may be providing misleading data."

But there are other possibilities: "Maybe there's an anecdote bias," Dr Burnell says. "People talk about prices going up, but they don't talk about prices going down. Or perhaps it's a perception bias; people only notice the bad news [prices going up], but not the good news."

Whatever the reason, New Zealanders are still finding there's less money to spend on day-to-day items. "The current times do seem to have encouraged households to borrow less and save more," Dr Burnell says. "Therefore the amount allocated to food, petrol, etcetera, may have shrunk some. This could make it hard to buy what you used to, but not necessarily because prices are rising."

Liz Koh, financial advisor with Moneymax and author of Your Money Personality: Unlock the secret to a rich and happy life (AWA Press), believes that getting serious about managing your money is the best strategy, no matter what the cost of living.

"Kiwis are notoriously bad at managing their money," Koh says. "I advise setting clear financial goals, being proactive about setting money aside for medium- and longer-term goals, having an emergency fund to cover unexpected costs, and setting up good banking systems to manage money."

Banks are getting on board to help customers out. "While some would argue that banks are still focused on increasing the amount of money people borrow, they are beginning to balance this out with new services designed to help you reduce the amount of interest you pay," Koh says.

The ASB, for instance, offers a series of "how to" guides on setting a budget, managing your mortgage, dealing with debt, saving and investment. Find them on their website under the heading "Your Money Explained".

BNZ's Total Money system, on the other hand, allows you to setup up to 10 different accounts for a small monthly fee, which is ideal if you're trying to budget, or save for a number of specific goals. In the same spirit, Kiwibank has a Bill Blaster account that lets you set (automatically if you wish) money aside for your bills. Whether the cost of living is going down (like the experts tell us) or up (like most of us feel), the fact is that it will always feel too high if you're not in charge of your finances.

User comments
Yes and Yes.Prices of everything is flying sky high.I cant even fill my car up with $30 now adays.
Where have you been. Living in coocoo land, of course the prices have gone up everywhere. Food is the hardest hit, then everyday costs for kids, clothing, rent, rates, where have you been. I agree with the persons above you need to come shopping with the average person. All the replies above are spot on. I can't believe that you don't know whats happening, or maybe you think no one will reply to your idiotic remarks. I'm a nans and we sympathise with all, as we are feeling the PINCH as well. Stop with the lies, stop giving our money to useless projects, give back to the people in hospitals, schools and wage packets. Also stop bringing in the sick from other countries and the first few weekls of their arrival we pay over 3million for hospital treatment, I'm not against other races coming here just play it fair to us New Zealanders first and tell the TRUTH.
So the CPI has fallen??? Is this in relation to the so called "average" income? Try living on the equivalent of a basic benefit or the basic Superannuation. Even the minimum wage, which many are on, is much less than the "average". All I know is that my shopping patterns have been "budget" for many years and I'm paying more and more on a fairly regular basis. Phone line rents going up, power gone and going up, groceries (even house brands) gone and going up. The list goes on. Perhaps the indexing should be more across the board and in comparison with minimum, not average, income and take in the annual Consumer supermarket price surveys on a standard basket of groceries. Should be intersting.
Well, there seems to be consensus that costs are RISING. The basics are outrageously expensive and as someone above said, cheaper if one flies to Oz and buys ours goods there - tires for example are cheaper in Oz that the same ones we buy here! How can that happen, if not through greed and use of NZ communities to pay higher than export prices. ALL basic commodities must be cheap and we must have the best of what is made, produced here. It aught to be the other way around - exports in Japan and Europe and America etc should be DEARER than the same goods here. So, what can we do about it - the quality of our lives is being eroded as I speak! People power - do the following - write to your politician - email - ask them to do something about capping costs, bank loan interest, changing the law to support the little guy rather than the greedy business folks who add hundreds of % profit - at our expense - this must be capped! Banks have caused three serious recessions in the past 30 years!
10 years ago $30 used to fill my car with gas, now it doesn't fill half of it. Im a vegetarian so naturally my food is cheaper then a meat eaters, but still, the cost of feeding myself and my partner has risen, almost doubled. we both have to go with out breakfast and lunches most days because of rent and water rates and power. and why is it that water rates out west are at least half of water rates in central Auckland? is that fair?
Is it not easy for a person on an over inflated wage to tell every one that the cost of living has not gone up, of course first don't count in rates , mortgage and take a view of one area (not all people have the opportunity to get around to purchase the goods at the cheapest price ) don't forget the extra petrol to get round the areas to get that cheapest price. This would not be calculated into it. I have travelled to Australia have friends in England and I still can not understand why our goods (butter cheese meat etc are cheaper to purchase there) we are being ripped off by companies with their cock and bull explainations in the papers and on TV don't hold water as stated in one of the earlier comments we need to take some form of action eg only get our petrol from one station say BP or Shell for a month don't buy any of Fontera's products thus forcing competition by people power. There is no competition in NZ , these companies work together to keep prices up come on.
Are you nuts, high prices for everything everywhere in NZ. Can you disclose what shops and what goods were in the study so others can know what silly conclusion you guys got to.Better still run down to the dairy shop and meet the vultures I am sure you'll return with fewer things for the money, no price cap for them $1 mineral water is sold for $3.50 plus wake up you Dreamers.
i'll take you shopping once a week for 2 months.wake up you idiot...where do you shop.every week consumer goods are going up.
I am a uni student living in Auckland and I live on $12,000 a year , $200 a week out of that $130 goes on rent, the rest is a mixture of food, internet, petrol, bus fare, beer and anything else I need. I have learnt to cook great tasting meals for under $5 per person and some cheaper still. Living isn't expensive if you 'shop smarter new zealand' and buy from local markets and stores. Even in the supermarket you can get great deals, One article i read said that instead of complaining about the price of petrol, spend the same amount each week just drive less, walk when able (its summer), plus gull is always cheap than mobile etc , but also mobile etc are cheaper if they are near a gull, Companies can charge more because of their brand no matter what the quality , market the product well and people will pay for it. The cheaper stuff tastes the same and is made in New Zealand so buy it!
Rubbish ...prices are on the up in all , gas , bills..the list goes on ! Milk and meat though supplied in plethora are just too exorbitant ...why ? As a tax payer we need to get some answers as it is getting harder by the day to meet both ends..wage freeze in most jobs doesn't help for that matter to keep up with the rapidly growing expenses !!!!

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