Rising inflation, pandemic making household budgets tighter

October 14, 2021

Rising inflation amid a global pandemic are making things tighter for household budgets, an economist says. 

Breakfast detailed how the International Monetary Fund was warning countries to be "very, very vigilant" over the rising global inflation risk.

John Campbell also outlined how Stats NZ figures for June had recorded the biggest jump in the consumer price index for almost a decade, how food prices in September had clocked up a sixth consecutive monthly rise and how the price of petrol was at all-time highs.

Amid this, ANZ chief economist Sharon Zollner detailed how the pandemic had dealt a "longer-lasting shock" to the supply side of the economy, while demand was over-stimulated. 

As a result, Zollner felt consumers were more "gung-ho" about debt. 

ANZ chief economist Sharon Zollner says although New Zealand has the luxury of being able to face into risks, it needs to do something.

She said the independence of central banks should kick in around "inflation targeting". She said half were going 'no, nothing to see here' quite determinedly and then changing their tune. 

Others, like New Zealand and Norway, had the "luxury of being able to face into risks" but still needed to do something about it, Zollner said. 

She said inflation was making it "tighter for household budgets for sure". 

Peter Cordtz, the Cause Collective NZ's community economic development lead, told Breakfast: "If Covid’s taught us anything, it’s everybody is just one major life event away from being financially vulnerable."

He said surviving high levels of debt was now "more of a grind" and said many of the people he worked with lived pay cheque to pay cheque. 

The Cause Collective NZ's Peter Cordtz says what is really required is "systems change across the system".

Cordtz said it often came down to whether people paid utility bills to keep the house warm or fed the kids. 

When asked if Government policies to address the issue were cohesive enough, he said that was the "real challenge". 

Cordtz said there was "no one fix" or "silver bullet" and it was "not just about tinkering" with inequities in the pre-retirement system — housing, employment, health, education, Kiwisaver. 

He said cohesive effort was needed across the entire policy system.

"Incomes are not keeping pace with housing costs, living costs, all those sorts of things. Overlay things like a few basic items like food and fuel and the struggle’s real. What’s really required is systems change across the system."

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