Rising costs make times tough in Waikato
On paper the cost of living may have risen by less that 1 per cent in the past year, but Waikato people say times could not be tougher.
The rise in the cost of living has hit a 13-year low of just 0.8 per cent for the year to September 30, because of the high New Zealand dollar and slack domestic economy.
While cheaper transport, telecommunications and fresh milk dragged down overall price increases, the annual early spring leap in vegetable prices, higher local body rates, and the flow-on into rents and also rocketing insurance levies meant keeping a roof over your head and putting food on the table was not getting any easier.
Prices for housing and household utilities rose 0.8 percent, rates were on average up 3.6 percent, while the insurance component of the CPI measure leapt 17 percent in the aftermath of the Canterbury earthquake.
Mike Rolton, national retail development manager, Society of St Vincent de Paul, said times had never been tougher. "People simply don't have enough money to survive because everything is getting more and more expensive," he said.
"We offer Friday meals for the homeless and we used to feed 20 to 40 people. Now we do 90.
"Some things might have fallen in price but the basics like food and power are getting more and more expensive and I can't see it getting any better for the next five years."
And homeowners should not hold their breath for a cut to their mortgage rates despite the low inflation figure.
Westpac economists said the unexpectedly low rise in the cost of living was because of some quirks in the figures, meaning an interest rate cut by the Reserve Bank as a result was a risk, not a likelihood.
The Greens and the EMA have already called for an interest rate cut, saying the low figure means the Reserve Bank has plenty of scope to take the knife to its 2.5 per cent interest rate to help boost the economy.
The bank's Official Cash Rate heavily influences mortgage and deposit rates.
But when new Reserve Bank governor Graeme Wheeler releases his first interest rate review next Thursday, nobody is realistically picking a cut. In fact economists expect the next move to be up - some time next year.
That's because while the inflation figure was lower than expected, it covers the months and year already gone. Looking ahead, which is what the central bank does, inflation is picked to rise.
Consumer inflation is seen reaching about 2 per cent in the coming year.
The central bank has an agreement with the Government saying it will aim to keep inflation between 1 per cent and 3 per cent.
‘With the CPI under 1 per cent, and the economy stagnating, the Reserve Bank should be loosening monetary conditions in its announcement on Thursday," Council of Trade Unions economist Bill Rosenberg said.
He believed the bank should cut the OCR by 50 points to 2 per cent. With the bank's new policy targets agreement emphasising a "focus on keeping future average inflation near the 2 per cent target midpoint", rather than the previous 1 to 3 per cent band, a significant cut would be in order.