Inflation puts pressure on basic needs

The CPI rose 0.1 per cent in the December 2013 quarter, during which there were significant hikes in air fares and dairy products - partly offset by drops in vegetable and petrol prices.

Basic needs "go out the window" for cash-strapped families amid new data showing a surprise jump in inflation, a Masterton budgeting adviser warns.

A jump last quarter had economists predicting the Reserve Bank could hike interest rates sooner than anticipated - adding even more to the cost of living.

The consumers price index (CPI) rose 0.1 per cent in the December 2013 quarter, despite Reserve Bank predictions prices would drop.

The quarter saw significant hikes in air fares and dairy products - partly offset by drops in vegetable and petrol prices.

Masterton Free Advisory Service advocate Grant Howard said price hikes meant many Wairarapa residents would forfeit "basics" such as fruit and vegetables.

"The majority of people expect [inflation rises] and have given up as they can't do anything about these sorts of things.

"It's going to happen regardless. We as New Zealanders are too complacent, we should be lobbying our government more," he said. Basic needs such as fruit and vegetables were "thrown out the window" when price hikes made them unaffordable.

The unexpected inflation rise came at a time when many locals were already struggling, Mr Howard said.

"With credit card interest, and mortgage interest going up ... I don't believe putting interest rates up is the answer."

Inflation increased 1.6 per cent in the 2013 year, the highest annual rise since early 2012, Statistics New Zealand said.

Prices for housing and household utilities rose 0.5 per cent, while milk, cheese and egg prices jumped 4.2 per cent, the highest quarterly rise since September 2010.

However, these spikes were partly offset by a significant fall (20 per cent) in vegetable prices, particularly tomatoes, lettuce, and cucumber, which dropped about 50 per cent.

Petrol prices fell 3.5 per cent, with the average December price about $2.09 per litre.

The increased cost of living is expected to put pressure on employers to provide staff with wage increases this year.

In response to the surprise rise in inflation, some economists have predicted an early hike in the official cash rate. Increased interest rates will hurt homeowners who will be forced to fork out even more in monthly mortgage repayments. APNZ