Why your shopping is cheaper in Oz

17:00, Apr 26 2014

New research proves what Kiwis already suspected - housing is expensive in New Zealand compared to the rest of the developed world.

Research by Victoria University public finance professor Norman Gemmel on the costs of goods and services in New Zealand compared to other OECD countries showed construction and investment prices were high here. This led to high rents and house prices.

Gemmel based the price comparisons on figures released by the World Bank in 2005, the most recent data available.

The figures showed rents in New Zealand were between 20 per cent and 25 per cent higher than the average for 30 other OECD countries.

Goods and services related to investment (such as property), construction and utilities (like water and electricity) were "relatively high" in New Zealand compared to other OECD countries, including Australia, the research showed.

Gemmel said capital was expensive in New Zealand due to a high exchange rate. This pushed up the price of investment-based goods and services. The lengthy resource consent process also had an effect on house and rent prices, he said.

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Private passenger transport services, alcohol and tobacco prices were also high compared to other OECD countries, due largely to tax, the paper said.

Some tradables, such as supermarket food, were expensive in New Zealand because costs of things like freight, fuel and storage had an "unfortunate knock-on effect", Gemmel said.

Only 11 out of 70 tradable goods compared were found to be cheaper in New Zealand. However, products New Zealand produced and exported, such as beef, veal, lamb, fish and dairy products were cheaper than in other countries.

Although Kiwis often complained about the cost of dairy products, considering the high quality of such produce, they were very cheap on a global basis.

Government-provided services, such as education, health and social protection, were cheaper than other OECD countries due to New Zealand's low average wages.

The World Bank's International Comparison Programme figures from 2005 were still "broadly representative" of price differences between New Zealand and other OECD countries, he said. If anything, the cost of goods and services would have increased since 2005 due to higher interest rates and exchange rates.

However, Kiwis did not necessarily have a higher cost of living because construction, utilities and tradables costs were balanced out by the low cost of government services and locally produced goods. But someone travelling to New Zealand might find the cost of living more expensive than back home due to the high kiwi exchange rate.

Sunday Star Times