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Cost of living survey

Healthcare costs, home ownership and water quality have topped the list of consumers’ concerns for the future in our latest survey. 68% of consumers picked healthcare costs as their biggest worry with just half expressing confidence in the healthcare system.

Home ownership costs were close behind, identified by 66% as the most pressing issue. That was on par with the level of concern about water quality at beaches and rivers, highlighting the growing importance of the environment to consumers.

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Among renters, worries about home ownership were more pronounced. With house prices showing little sign of easing, 77% of renters picked home ownership costs as their biggest concern, along with worry about their level of savings and investments.

Consumer NZ head of market research Vaibhav Kawale says results show renters are also feeling day-to-day financial pressures more acutely.

24% of consumers in our survey were finding it difficult to get by on their household income.

"24% of consumers in our survey were finding it difficult to get by on their household income. But that figure jumped to 36% among renters,” he says.

Renters were also more likely to be cutting back on essentials, such as power: 50% had reduced spending on essentials in the past 12 months compared with the average of 34%.

The income effect

Not surprisingly, income had a major influence not only on whether consumers rented or owned their own home but also on how they were coping with everyday expenses.

Just over a third (35%) of consumers felt they were able to live comfortably on their household income. But among those earning more than $150,000, 76% were comfortably off. Money can’t buy happiness but it can significantly improve your economic outlook.

In comparison, middle-income earners were much less likely to feel they were comfortably off.

“Among consumers earning $40,001 to $60,000, just under a quarter were living comfortably. In the $60,001 to $80,000 income bracket, 41% were comfortable but the majority were either just getting by (33%) or finding it difficult to make ends meet (26%),” Vaibhav says.

Income also influenced how consumers perceived the state of the economy. High-income earners were significantly more likely to have a rosy view. 71% taking home $150,001+ felt the economy was in good shape, compared with the average of 54%.

Consumers aged 65 or older were also more likely to have a favourable view of the economy with nearly two-thirds rating it in good shape. “Consumers in this age group were significantly more likely to own their home mortgage-free and be coping well with day-to-day living costs,” Vaibhav says.

Doing it tough vs living comfortably[width=40%] [bar;width=40%]
Finding it very difficult on present income 7%
Finding it difficult on present income 17%
Getting by on present income 39%
Living comfortably on present income 28%
Living very comfortably on present income 7%
Unsure 1%

In the past 12 months, have you... [width=40%] [bar;width=40%]
Cut back spending on non-essential items (e.g. entertainment, holidays) 51%
Cut back spending on essentials (eg. groceries, power) 34%
Dipped into savings to cover the gap until payday 31%
Delayed a major expense or purchase of an expensive item 30%
Lived off a credit card to cover the gap until payday 17%
Borrowed money from friends or family 14%
Deliberately missed paying a bill by the due date 11%
Deliberately missed a rent or mortgage payment 3%
None of the above 29%

Cost of living pressures

It’s understandable renters are feeling the pinch. Headline inflation has been trailing below 1% but rents have been rising much faster. In the year to September, market rents rose 2.1%. The hike was 3.4% in Auckland where housing pressures have intensified.

Other household costs, such as power, have also been rising faster than inflation. Statistics NZ data show electricity prices rose 2.3% in the year to September while gas jumped 4.1%.

73% of consumers in our survey reported household bills had increased last year either a little (49%) or a lot (24%). Among all consumers, the price of power was the biggest cost of living concern: 63% were concerned about what they paid, with renters more likely to be very concerned.

Food and grocery costs were the second biggest cost of living concern, flagged by 62%, followed by home and contents insurance (60%).

Food prices rose slightly last year (0.6%) but increases for some products were more marked. Milk prices started to climb towards the end of the year, up 6.1%. Restaurant meals and ready-to-eat foods increased 1.8%.

Home insurance costs also rose, up 2.4%, although there was a small drop in the cost of contents insurance (-0.1%). Home insurance premiums have risen markedly in the wake of the Christchurch earthquakes. Last year’s rise comes on the back of significant annual increases for much of the past decade.

How concerned are you about the following issues? [width=40%] [bar;width=40%]
Healthcare costs 68%
Home ownership costs 66%
Water quality at beaches and rivers 66%
Retirement costs 65%
Your level of savings and investments 64%
Climate change 61%
Quality of aged care 61%
Employment 55%
Education costs (primary and secondary) 50%
University fees 48%
Your level of debt 47%
Childcare costs 43%
Food safety 43%
Public transport costs 39%

How concerned are you about the current costs of the following household expenses?[width=40%] [bar;width=40%]
Electricty and gas 63%
Food and groceries 62%
Home and contents insurance 60%
Rent 59%
Petrol 57%
Car insurance 51%
Mortgage 51%
Internet services 38%
Mobile phone services 31%

Consumer confidence

To gauge how consumers are faring in the marketplace, we asked them to rate how confident they felt in their day-to-day dealings with traders.

61% said they generally felt confident and were aware of their consumer rights. But one in five weren’t confident. One in three worried about dud products and being ripped off.

Overall, more than half (56%) had experienced some type of problem with a good or service in the past year.

The most common problem was paying for a product that didn’t work as expected: 24% had been in this situation. Almost as many (23%) had experienced a delay in delivery or non-delivery of a product.

16% had work done by a trader that wasn’t up to scratch. 15% felt they’d been given information by a retailer that was misleading or incorrect, which is a potential breach of the Fair Trading Act.

12% of consumers had difficulty getting a replacement or refund from a trader for a faulty product and 8% had ended up in a dispute with a store. 8% had also fallen victim to a scam in the past year.

In the past 12 months, have you experienced any of the following? [width=40%] [bar;width=40%]
A good or service you paid for did not work as it was supposed to 24%
A delay or non-delivery of a good or service 23%
Work done was below standard or was not done as promised 16%
You were given misleading or incorrect information by a retailer 16%
You had problems getting a replacement or refund 12%
You felt the conditions of a contract were unclear 11%
You felt the conditions of a contract were unfair 9%
You were scammed, either online, in person or by phone, post or email 8%
You had safety concerns about a product 8%
You complained about a product or service and ended up in a dispute with the vendor 8%
None of the above

Environmental concerns

Survey results show environmental considerations are a priority for many consumers. However, they also show companies are failing to meet consumers’ expectations for greener products.

A majority of consumers (59%) felt companies weren’t doing enough to reduce the environmental impacts of their products.

46% of consumers rated environmental considerations as important and said they looked for “greener” products. More than one in three (38%) were prepared to pay extra for them.

But there was also scepticism about environmental claims. Green claims were trusted by less than half of consumers (46%).

Older consumers (those 60 and over) were generally more likely to be sceptical of green claims and less willing to pay extra for goods making these claims.

Even though environmental considerations were just as important to them, low-income consumers were also less willing to pay more for green products.

Relying on credit

“Among all consumers, there’s general agreement household costs have gone up in the past 12 months. But it’s those on low incomes, who are also more likely to be renting, who feel it the worst. They’re also more likely to be getting into financial difficulties,” Consumer NZ head of market research Vaibhav Kawale says.

Our head of market research Vaibhav Kawale.
Our head of market research Vaibhav Kawale.

“In total, 17% of consumers had lived off their credit card to cover a gap until payday while one in 10 (11%) had deliberately missed paying a bill by the due date. Among renters, figures were higher: 22% had relied on their credit card until payday and 18% had deliberately missed paying a bill,” he says.

“With more people renting for longer, we also found consumers in their middle years experiencing financial pressures.

“43% of 40- to 44-year-olds reported dipping into savings to cover a gap until payday, 26% had relied on their credit card to cover a shortfall and 19% had deliberately missed paying a bill by the due date.

“More than a third of those aged 60 to 64, a time of life when you hope your finances are fairly well sorted, were also finding it difficult to manage on their present income.

“This age group was more likely to worry about retirement costs: 83% were concerned about costs compared with the average of 65%. They were also the most concerned about healthcare costs: 79% flagged this as an issue in comparison with the average of 68%.”

1024 people aged 18 and over took part in our nationally representative survey online in December 2016. Figures may add to +/- 100% due to rounding. The margin of error is +/-3.06%.