Families have to spend more on essentials

10 October 2011

Families have to spend more on essentials

The results of the review of the Consumer Price Index announced today by Statistics New Zealand shows that households are spending more on the unavoidable essentials – food, rent, electricity – while other important expenditure like transport and clothing has fallen as a proportion of the household budget.

The review re-estimates what is in the average “basket” of goods and services that a household buys, and what proportion is spent on each of them.

“Food, rent and electricity are all items that have even higher expenditure weights in low income households, while new cars and restaurant dining are weighted more heavily in higher income households,” says CTU Economist, Bill Rosenberg.

“The review adds weight to the evidence that low income households have been hit hardest over the last three years.”

“In addition, interest paid by households, which is not part of the standard CPI, has fallen, but interest is a much larger part of high income households’ spending. Rents, on the other hand, have risen over the period and are more significant for low income households, are now a larger part of household expenditure.”

Average weekly income reported by the New Zealand Income Survey increase 3.5 percent from June 2007 to June 2010 while CPI prices increased 8.5 percent according to Statistics New Zealand. Households increased the quantity of the goods and services they purchased by just 0.6 percent over that whole period.

ENDS

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