8 Nov 2016

Elderly and beneficiaries experience highest inflation

8:50 pm on 8 November 2016

The elderly and beneficiaries have been hardest hit by inflation, Statistics New Zealand has found.

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Retired people spent more on items that had risen rapidly in price such as insurance and energy bills. Photo: 123rf

Statistics New Zealand measured how inflation was felt by various households, and found superannuitants' costs increased 19 percent over the past eight years, and beneficiaries' costs rose by 16 percent.

That's double the rate of inflation experienced by the highest spenders and compared with an average 13 percent increase for all households.

Retired people spent more on items that have risen rapidly in price, such as insurance, local council rates and energy bills.

However, that was eased by the average weekly earnings used to index superannuation payments rising 27 percent over the same period.

Higher rents hit beneficiaries hard, while they also spent more than other groups on cigarettes and alcohol, which have doubled in price over the last eight years.

Inflation experienced by the lowest spending households stood at 18 percent, double that of the highest spenders.

"It's actually become very hard for beneficiaries. People are meeting those basic costs they have of rent, power and phone, and they're juggling those to keep them on. For some families, people are going without meals," Beneficiary Advocacy Federation of New Zealand spokesperson Kay Brereton said.

Council of Trade Unions economist Bill Rosenberg said the inequalities seen in people's incomes were reflected in the different types of prices that households faced.

"So basically the households with the lowest living standards face the highest price increases."

Mr Rosenberg said high-spending households had benefited from falls in interest payments, and the prices of TVs and smartphones.

Of those in the top 20 percent of spenders, 83 percent were homeowners, compared with 55 percent in the lowest spending group.

Only 25 percent of beneficiary households owned their own home.

"That why we have about $2 billion a year of accommodation subsidies to support people in paying for the cost of their housing," Finance Minister Bill English said.

Mr English said it highlighted the need for the government and councils to fix the housing shortage.

"While house prices going up has been a benefit for a lot of people, this is one of the costs. And we need to have council plans that allow for more supply of lower cost housing."

Mr Rosenberg said the new measures should be used to re-examine inequality measures, which have been based on the consumer price index (CPI).

"They may well show income inequality rising more quickly than previously thought."

Child Poverty Action Group economics spokesperson Susan St John also said the figures showed low-spending households were falling further behind in trying to make ends meet.

Ms St John called on the government to do more.

"Linking to changes in average wages, as New Zealand Super is, is a really good idea.

"But when we have to wait for ad hoc adjustments like the government putting $25 a week extra into the core benefit rate where there are children, that's a really poor policy because it doesn't give any certainty over time that living standards will be held up and maintained."

Divide between rich and poor growing - Greens

Greens Party co-leader James Shaw said rising rents and power bills had had a bigger effect on people on lower and fixed incomes.

He said there was a growing gap between rich and poor.

"The government keeps bandying around sort-of large headline number that paint a different picture.

"The Statistics [NZ] report that was out today is very helpful because it allows us to look behind those headline numbers to see what's really going on, and that is that the government has created a two-speed economy."

But Prime Minister John Key did not accept that the divide between the rich and the poor was getting wider.

He added that, while retirees spent more on insurance, council rates and energy, the average weekly earnings used to index Superannuation payments had risen 27 percent over the same period.

"If you look at the increase in the New Zealand Super over the time we've been in office, it's been quite dramatic relative to the overall inflation rate.

"So you can obviously always pick out one item but overall New Zealand Super is up dramatically over that time and inflation is low."