High inflation is causing stress and some people are struggling to make ends meet. Photo / Mead Norton
Some struggling families are having to sell off their possessions to make ends meet as living costs soar.
Others are spending their wages before payday and borrowing money or using AfterPay, Bay of Plenty budget advisers say.
It comes as community leaders warn that social agencies need to prepare for the impact of a looming recession, or worse still, stagflation where the economy is suffering from high inflation and recession - the worst of both worlds.
A research analyst says inflationary pressures have not tipped the country into recession but, for many low-income families, it might feel like it has because they are hardest hit during economic downturns.
At a recent hui organised by Ngāi Te Rangi, leaders said many families felt they were already grappling with the impact of a recession and expressed concern the country was only one economic indicator away from stagflation.
Their concerns come as the latest Quarterly Survey of Business Opinion (QSBO) conducted by the NZ Institute of Economic Research (NZIER) shows overall confidence is now at its lowest since March 2020, when the pandemic first hit.
It prompted ASB economist Mark Smith to warn that stagflation may be on the horizon.
The QSBO for the June quarter made grim reading and offered "little to cheer optimists", Smith said.
"[It] depicted stagflation-like conditions for the business sector, with shrinking economic activity, still intense capacity pressures and soaring prices and costs."
The risks of a hard landing for the economy continued to increase, although he noted that recession was still not ASB's base case.
Infometrics economist Rob Heyes told the hui the impact of inflation across all sectors was severe.
In the Bay of Plenty, figures showed the number of job seekers had jumped by more than 20 per cent in the first quarter of this year compared to the same timeframes in 2020, while sole parents climbed by 25 per cent.
''Most concerning is the people who have been out of work for more than a year. The longer you are out of work the harder it is to get back.''
Last year, rents in Tauranga were up 9.4 per cent, house price affordability was out of control, food prices had risen 7.4 per cent ahead of inflation at 6.9 per cent, he said.
Heyes told the hui he had stopped taking his children on weekend trips due to the hike in petrol prices.
He also warned power prices were likely to increase further as companies looked to become carbon neutral and move away from low-cost power plans that they could no longer sustain.
Ngāi Te Rangi deputy chief executive Roimata Ah Sam said she was being asked by those who would be impacted the most what a recession would mean for them.
She said in her mind that indicated ''we are escalating through this faster than anyone comprehended''.
''A recession for you means the stew on your table tonight is probably going to be vegetarian tomorrow. We need to be upfront that a recession is here and our families who are impacted the most are battling it today whether we know it or not.
''No amount of forecasting and no amount of number crunching is going to change that.''
Ah Sam said some whānau she was aware of were struggling to pay their bills and buy food and petrol.
''They are ashamed to talk about it and becoming isolated.''
Stagflation could also lead to fewer jobs and wage wars for people to work for lower incomes.
In her view, the solution would take a community effort and partnerships. Ngāi Te Rangi was already focused on micro-credentialling programmes to upskill its people and included forklift driving which was a well-paid, sought-after job.
Wallace Development national manager Tyler Tabak told the hui the country had hit two of the three indicators for stagflation.
''We have low growth and high inflation. All we are waiting for is high unemployment.''
Tabak said, in his opinion, if interest rates kept on tracking upward the economy would enter a period of stagflation.
''It's a self-fulfilling prophecy. In some ways, I feel sorry for the Reserve Bank because they have one blunt instrument to deal with this. We have got people sitting around and pulling levers and we are in unchartered territory.
''When was the last time the whole world shut down and everyone was locked in their houses.''
Lawyer Graeme Elvin said he was luckily in a comfortable position and sympathised with others who were less advantaged and ''this stuff is real''.
He had cut back on his own spending and it was starting to become tough, which had knock-on effects on businesses.
The market was slowing and in the last downturn (the global financial crisis) Mackenzie Elvin Law did not put any staff off, he said.
However, that came at a price to partnership profit and the size of the overdraft.
He had listened to some people ''and they have all been unfailingly positive saying this is going to be okay but I am sitting there listening to them and I smell burning flesh and smoke and I turn around and my a*** is burning''.
Tauranga Business Chamber chief executive Matt Cowley said it was not necessarily a bad thing if some businesses folded as some people were not set up to run businesses.
''On balance, it is probably a positive thing for the economy.''
He acknowledged several construction companies had collapsed this year and that opened an opportunity for those employees to get stable employment with firms less likely to go into liquidation.
Rotorua Budget Advice manager Pakanui Tuhura told NZME more and more people who would normally be able to ride things out were now struggling to make ends meet. Some were selling off items in their homes.
''They are financially stretched ... and using food money to pay for rent and power, then seeking food parcels. Some are getting even more creative when the usual methods of stretching their dollar don't cover their costs. Others have stopped paying things like extracurricular school fees.''
The only positive was family were coming closer together to support each other.
Bay Financial Mentors manager Shirley McCombe said the increasing cost of housing, food and petrol was pushing families to the limit and more were borrowing to live.
''Many people are trying to withdraw funds from their KiwiSaver to get on top of debt.
"The rising popularity of Afterpay is a recipe for disaster in this environment. Once a person has exhausted all their avenues to find additional money, they have nowhere to go and that is often when they come to see us.''
Craigs Investment Partners head of private wealth research Mark Lister said high inflation had flow-on effects and he could understand why people felt like they were living in a recession.
''When inflation has been driven by the necessities of life the lower parts of society are hit the hardest.''
However, at the moment New Zealand was far away from a recession as the economy was still tracking okay.
''Could we go into recession at some point over the next year? Absolutely, I would say it's probably a 50/50 chance that we have a proper recession when the whole economy contracts and stumbles.''
Stagflation was a pretty ugly combination for everyone and was bad for business and investors and the economy as a whole.
''I don't think a stagflation is likely but it's a watch this space. It all depends on the inflation rate and if the Reserve Bank can get it to fall to the degree it wants.''
