Cost of living spirals up

Shannon Tarawa with son Whare at Mount Albert Pak and Save. Photo / Doug Sherring

Prices of day-to-day food, groceries and accommodation are rising at almost their fastest rate in the past 20 years, according to an in-depth Herald on Sunday investigation.

But wage levels aren't keeping pace - meaning daily life is as expensive as it's ever been.

Prices for apples, carrots, mushrooms and potatoes have gone through the roof in the past 12 months, rising 50 per cent or more. Lamb and fish have also gone up more than 10 per cent, as have cheese, milk and fruit juice.

The newspaper conducted 750 price checks at retailers up and down New Zealand to determine the effects of inflation on food and other consumer items, as the country braces for the massive economic impact of the Christchurch earthquake.

Statistics NZ will publish official Food Price Index figures on Friday, but our survey reveals the price rises are not just in food: petrol has gone up 17 per cent, cigarettes 24 per cent, and the skyrocketing cost of renting a house in Auckland has been front-page news.

Yet statistics reveal wages and salaries increased only 1.7 per cent last year. And with unemployment also up, more people have to rely on a benefit to pay the bills.

In the mid-1980s, before the Black Monday sharemarket crash, inflation was just shy of 20 per cent, but salaries were rising just as fast, certainly for those on higher incomes.

Restaurateur Tony Astle recalls redrawing his menu on a regular basis to factor in the higher prices of crayfish, caviar and champagne. Now, caviar is off the menu at most restaurants.

For Shannon Tarawa, doing the family shopping at Pak'nSave Mt Albert with his 6-month-old son Whare, work has been slowing for the six years he has been in the building industry. Now, the Avondale dad is on unemployment benefit. "Last year my boss had financial problems, so we were in and out of business," he said. "We did have other workers. I'm the only one who stuck with my boss through it all."

His wages had been variable and now, on the benefit, it is worse. Rising grocery prices had a big impact. His family grocery bill was $195 this week. The same items would have cost only $183 a year ago.

Shamubeel Eaqub, principal economist with the New Zealand Institute of Economic Research, said New Zealand was back in recession and the pain was compounded by rising food and petrol prices.

"Unfortunately these prices are beyond our control," he said. "They are being set out in the global market and as they filter through to shops here, we are going to have less money for the discretionary things in life, like travel, furniture and appliances."

Eaqub said the price rises and last year's GST rise had been partly offset by personal tax cuts.

But wage levels had stayed stagnant because workers were competing for few jobs. "There are more people looking than people needed so wages haven't been rising."

He said New Zealand's economy was going through a period of uncertainty, especially since the earthquake in Christchurch.

"The total cost for the damage is between $15 and $20 billion. Even at peak capacity rebuilding may take seven to 10 years so extra spending will be spread over a long period of time. There may be an upward push in terms of inflation but we won't see much of that until next year or the year after."

TOP UP BEFORE HEADING TO MANGAWHAI

Take care where you pull in to fill up the tank: New Zealanders are paying up to $2.16 for a litre of 91 Unleaded petrol.

That price - the highest found by the Herald on Sunday yesterday - was being charged by Mangawhai petrol Alley Station.

petrol Alley owner Sheila Hassall admitted her prices were about 10c a litre higher than major cities because of the delivery cost. "We are only governed by our purchase price and we have to put our margin on that, which is only 4c, so we aren't making a fortune."

Local residents Mike and Jan Pivac, the managers of Mangawhai Park, said they refused to buy petrol at the local stations because they were too expensive.

"We go to Warkworth or Whangarei because it's a bit cheaper," Jan Pivac said.

But with no taxis or public transport in Mangawhai, there was little choice but to use a car - so one way or the other they had to fill up the tank.