Retired kiwis experience worst inflation

Beach better have my money. Superannuitants experience the highest rates of inflation but are likely to be homeowners with mortgages. Photo / 123rf

Figures released from Statistics NZ today show superannuitants have experienced the highest inflation over the past 8 years, with their overall costs up 19 per cent on their typical spending habits.

While house ownership is higher for superannuitants and most have paid their mortgages, they typically spend more on insurance, council rates, and energy bills.

The rates on inflation they experience are double that of New Zealand's highest spenders which are up 9.1 per cent.

The main offenders in price rises were tobacco, cigarettes, rent, and household energy.

Maori household living-costs rose at almost exactly the same rate as the average household over the last eight years.

The numbers come from a new series of statistics on inflation which focus on household living-costs price index rather than the typical Consumer Price Index (CPI).

Reflecting on the change to recording inflation, consumer prices manager Matt Haigh said: "We're often told that CPI does not reflect people's own experience of inflation. These new series should be more meaningful to individual households as they reflect the typical expenditure patterns of different groups in our society."

The CPI is designed primarily as a macro-economic tool for the Reserve Bank to base policy around, Haigh told the Herald last month.

That is why it doesn't include average house price data - one of the biggest criticisms of the data.

"It's not a value judgement that house prices aren't important," Haigh said.

But because Reserve Bank policy can directly influence house prices there was a risk that of a "circularity".

"You could end up chasing your tail," he said.

The Household Living-costs Price Index (HLPI) gets much less attention from economists, but has been designed over the past three years to reflect the fact that real world inflation varies greatly depending on your household wealth and expenditure, Haigh said.

It offers data for specific sub-sections of New Zealand such as beneficiaries, Maori, superannuitants, five different income groupings and five expenditure groups.

In doing so it captures inequalities of price inflation which the CPI does not.

For example rent, which was up 3.4 per cent for the year in Auckland, is factored into the CPI with a weighting of 10 per cent.

For many renters it is likely to be more like 40 per cent of total expenditure, Haigh said.

That weighting is more accurately reflected in the HLPI - especially in the lower income groups.

Conversely many of the goods and services which are experiencing the biggest price falls are those which people with more discretionary income spend their money on - electronic gadgets, big TVs and overseas holidays.

The HLPI also includes mortgage interest costs in its data set so does capture slightly more upward pressure for households borrowing more to meet house prices.