Cost of living survey

For the past three years, we’ve surveyed consumers about the issues that matter to them and the financial pressures they face. Results of this year’s survey show people are worrying more about day-to-day living costs and are cutting back on spending.

Many are also anxious about how they’ll pay for their retirement and what awaits them if they need care.

Environmental issues are looming larger on the horizon as well, topping the list of concerns for the future.

Living costs

Rising prices for petrol, housing, insurance, electricity and rates pushed up the cost of living in 2018.

Petrol alone jumped 19% in the year to September. While prices eased off later in the year, 85% of consumers named petrol as the household expense causing them the most concern.

For homeowners, local council rates – which jumped 5.1% last year – ranked as the second biggest cost concern, followed by food and groceries. Among renters, food and grocery costs ranked second.

Food prices rose just 0.6% last year but increases in other household costs are likely to be putting the squeeze on the grocery budget – especially for renters, who spend a much bigger slice of their income on housing compared with homeowners.

GUIDE TO THE GRAPHS OUR DATA are from a nationally representative survey of 1069 New Zealanders aged 18 years or over, carried out online in December 2018. Figures may add to +/-100% due to rounding.

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2018 price increases

Prices for goods and services, measured by the consumers price index (CPI), rose 1.9% in the year to December. But behind that figure, there were significant increases in major categories of household spending.

House prices, which aren’t captured in the CPI, also rose faster than general inflation. Median house prices climbed 5.7%, ahead of median weekly wages, which increased 4% in the year to June.

Going up ↑

• Home insurance: +15.2%
  
• Petrol: +11.1%
  
• Vehicle insurance: +7.2%
  
• Local authority rates: +5.1%
  
• Construction costs: +3.6%
  
• Property maintenance services: +3.5%
  
• Contents insurance: +3.3%
  
• Rent: +2.4%
  
• Electricity: +2.1%
  
• Vehicle repairs and servicing: +2.1%
  

Going down ↓

• Telco equipment: -21.4%
  
• Tertiary education: -16.0%
  
• Vegetables: -8.4%
  
• Computing equipment: -7.1%
  
• Fruit: -2.9%
  
• Used cars: -2.7%
  
• Garden tools: -1.9%
  
• Books: -1.7%
  
• Clothing: -1.4%
  
• Household appliances: -1.2%
  

Cutting back

More consumers cut back their spending in 2018.

Fifty-six percent said they’d reduced spending on non-essential purchases, such as holidays and entertainment. That’s up from 51% in our 2016 survey.

Thirty-eight percent also cut back spending on essentials. Thirty-six percent had delayed a major purchase while 35% had dipped into savings to cover the gap until payday.

One in five had lived off a credit card to cover a shortfall and 16% borrowed from friends or family.

Renters were more likely than homeowners to be tightening their belts. Nearly half of all renters had cut back spending on essentials. Twenty-nine percent had borrowed from family or friends

One in four renters had lived off their credit card to tide them over until payday. With credit card interest rates near 18%, it’s a quick way to rack up debt. Interest-bearing card debt stands at $4.1 billion.

Belt tightening is likely to be one of the factors behind the fall in the number of consumers who were optimistic about the state of the economy. Forty-six percent rated the economy in excellent or good condition, down from 54% in 2016.

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What’s ahead

Day-to-day financial pressures may be causing more of us to cut back on spending but it’s the state of the environment we’re most concerned about when we think of the future.

Seventy-seven percent of consumers named water quality at rivers and beaches as their top concern – the second year it’s been the number one issue in our survey.

Packaging waste (75%) and climate change (70%) were next, following a year of bad news on both fronts.

Retirement costs and the quality of aged care followed, rated as key concerns by 69% of consumers.

Despite rising house prices, concern about home ownership costs remained steady at 61%. However, renters were more likely to worry about escalating prices: 66% rated home ownership costs as a concern compared with 59% of homeowners.

Renters were also significantly more likely to worry about their level of savings: 73% were concerned about their savings compared with 60% of homeowners.

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Greener horizons?

As environmental concerns grow, more consumers are trying to reduce the impacts of their consumption.

Fifty-nine percent agreed environmental considerations were important to them and they looked for “greener” products, up from 46% in 2016. Seven out of 10 usually or always think about how long a product will last before they buy it and 55% look for energy-efficient products.

In the past year, the proportion of consumers regularly taking reusable bags to the supermarket has risen from 44% to 72%. More consumers are also trying to avoid products with too much packaging: 42% compared with 34% in 2017. Four out of 10 are willing to pay more for greener options.

But the desire to make better purchasing decisions continues to be stymied by business practices that aren’t delivering the goods.

About two-thirds of consumers (68%) believe companies aren’t doing enough to reduce their environmental impacts. The same proportion think it’s hard to find which products really are better environmental choices.

Trust in green claims isn’t high: just 51% of consumers think they can believe the environmental claims they see on products.

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Commentary

If you’re feeling chipper about your economic fortunes for the year ahead, count yourself in the lucky minority.

After another year of hikes in housing costs, it’s little surprise our survey found more consumers have tightened the purse strings and are feeling less cheery about the state of the economy.

While it got cheaper in 2018 to buy household appliances, mobile phones and used cars, rises in core costs – think petrol, insurance, rates, electricity – put the screws on the weekly budget, leaving less in the kitty for other purchases.

Who’s doing OK? No prizes for guessing you’re more likely to be coping well if you’re a homeowner or a high-income earner. If you’re stuck in the rental market without a spare half-million for a home, your outlook’s not so rosy.

But the big issue in this year’s survey? It’s the environment, stupid.

We’re worrying more about water quality, waste and climate change than the cost of housing – the issue that’s dominated the headlines for much of the past decade.

Environmental concerns are increasingly influencing what we buy. But there’s a spanner in the works. Despite worsening environmental statistics, too many businesses are still wedded to business-as-usual and genuine green options are hard to find.

For evidence of consumers’ willingness to change their own behaviour, look no further than the steep rise in people ditching plastic bags. In the past 12 months, the proportion of shoppers taking reusable bags to the supermarket has jumped from just 44% to 72%.

It’s a small step in the grand scheme of things. But it’s a sign of how quickly we can get action when the consumer voice gets cut through.