Households told cut back despite boost in Budget

Photo / Herald on Sunday

Families are being advised to start planting vegetables, take in boarders and switch to cheaper power companies to cope with a raft of price increases.

Telecom is lifting phone rentals today by an average of 1.9 per cent, and off-peak calling charges for some fixed-line plans by 26 per cent.

The Treasury forecasts that overall consumer price inflation will peak at 5.9 per cent next March, the highest for 20 years, thanks to higher GST, tobacco taxes, ACC levies, petrol tax and the new emissions trading scheme, as well as "normal" underlying inflation.

Mangere budget adviser Darryl Evans said he was also seeing residential rent increases of $30 to $60 a week as landlords sold out because of the Budget crackdown on tax-avoiding property companies, leaving a shortage of homes to rent.

"And of course food is so much more expensive. Prices are definitely higher in the supermarkets," he said. "Everything has just gone up."

Mr Evans advises families to look for ways to boost their incomes and cut their costs.

"Very often we ask families if they have a spare room to take in a boarder or a foreign student. We look at cutting outlays and expenses. Often that is about renegotiating repayments to a lower amount for an extended period.

"Where people can, we encourage them to grow their own vegetables."

Although almost everyone will get income tax cuts on October 1 to compensate for the GST increase due on the same day, Mr Evans said his staff had an effective pay cut of about $13 a week on April 1 when the ACC wage-earners' levy rose from 1.7c to 2c in the dollar.

ACC levies will also put up the annual cost of car registration from $168.50 to $198.50 from July 1. On the same day, the new emissions trading scheme will push up petrol prices by 3c a litre and power prices from Mercury and Contact Energy by about 3 per cent.

But Molly Melhuish of the Domestic Energy Users Network said Contact and Mercury's owner Mighty River Power were effectively signalling domestic customers should switch to other suppliers so that the two firms could match their power consumption to the amount they generated.

She said there was no cost to use the PowerSwitch website to switch suppliers.

AA Petrolwatch spokesman Mark Stockdale said petrol prices would go up by a further 7c on October 1 because of a combination of the GST increase (about 4c) and the annual increase in fuel tax (3c).

The Department of Building and Housing said average rents rose by 4.1 per cent nationally, and by 5 per cent in Auckland, in the year to April, pushing up the average rent in Auckland by $18 to $381 a week. Barfoot and Thompson reported an increase in the same period of only $6, to $398 a week.

The consumers price index rose by 2 per cent in the year to March, with food prices up only 0.4 per cent in the year to April. But grocery food items rose by 10.3 per cent, while fresh fruit, vegetables and meat all fell.

Fonterra Brands managing director Peter McClure said the retail price of milk could rise by a further 10c a litre if the payout to dairy farmers reached $8 a kilogram by late next season.