High costs: Perfect storm brewing for Kiwi consumers
Living in New Zealand has seemed to be at its costliest these days. Be it the price of essential groceries, fuel or housing; everything seems to be going up and up. A quick visit to a supermarket or petrol station is enough to provide evidence of the spiralling prices. It is not surprising that as of December 2021, NZ faces its highest annual inflation rate in 30 years: 5.9 per cent.
NZ is in a perfect storm of spiralling prices for consumers due to these factors. Take fuel, for example, according to fuel price tracking app Gaspy on Tuesday, Auckland prices for 91 octane start from $2.84 a litre. But prices have already past the $3 a litre mark at many petrol stations, their prices ranging going up to as high as $3.27 a litre.
Blame it on the Covid-19 pandemic, the supply chain issues, the staff shortages and people deciding to leave NZ for better opportunities in countries like Australia or Canada and most recently, the Russia-Ukraine conflict.
Kiri Hannifin, Director Corporate Affairs, Safety and Sustainability for Countdown, said that their team of 20,000 Kiwis is under immense pressure at the moment, and their focus is always to make sure they can help provide food and groceries to New Zealanders at this uncertain time.
She said, “Throughout NZ, we have around 1,800 of our team members away, either isolating as a positive case or as a household contact. With fewer people working right across the supply chain, including those of our suppliers, we are seeing impacts on the amount of stock we can get onto shelves at any one time. These disruptions aren’t unexpected, with Omicron impacting supply chains globally.”
She added, "Our focus remains on making sure we're getting as much stock as possible into our stores and looking after our team and customers. We're prioritising essentials where we can - particularly for our isolated stores - and working with our suppliers to deliver directly to stores as much as possible. For our stores, we're managing things as best we can by reducing the trading hours in some of our Auckland stores to reduce the pressures on our team and temporarily closing some deli and bakery service counters so the team can help out in other priority areas of the store including checkouts and online shopping.”
Responding to the findings of the Commerce Commission's final report into NZ's $22 billion supermarket industry, Commerce and Consumer Affairs Minister David Clark on Tuesday said that NZs retail grocery prices appear comparatively high by international standards.
He said, “New Zealanders are paying more at the checkout than most. Out of 38 OECD countries, we're the fifth-highest in terms of grocery prices. This report makes a serious case for change when it comes to competition in the sector, so kiwis don’t have to pay so much for the basics.”
Indian Weekender spoke to economists to know their take on the current situation.
‘NZ economy is going through a difficult time.’
Wellington-based economist Finn Robinson, who works at ANZ Bank, feels that the NZ economy is navigating some very challenging times.
He says, “With global and local supply chain disruptions, businesses having to shut down due to Covid-19 related staff shortages, and costs consequently going through the roof, the NZ economy is going through a difficult time. And that's not to mention the tragedy in Ukraine, which has seen key commodity prices, including oil go vertical in recent days.”
He points out that another uncertainty is what will happen to immigration as the border opens. He says, “Fully vaccinated Kiwis can currently come and go as they please – but as currently announced, the reopening process for all visa types won't conclude until October. With the Australian labour market expected to heat up significantly this year, there's a real risk that we will see a large net outflow of Kiwis before overseas arrivals can enter the country. And that could make the current labour shortage that much more challenging (and inflationary).”
‘Inflation will sap the budgets’
Independent economist Tony Alexander thinks inflation will sap the budgets of many Kiwi households. He says, “The household spending has boomed over the past two years as we have spent money no longer devoted to offshore travel, taken advantage of low borrowing costs, spent some of our paper wealth from higher house prices, and improved our home nests during uncertain pandemic times. But now we are set for a period of spending restraint as people pull back from unsustainable levels of spending on the likes of home electronics, furniture, and nice to haves such as new spas.”
He points out that there is a risk of more and more moving to Australia. He says, “The interest rates are also rising, and there is a risk of a net outflow of Kiwis to Australia for higher wages. House prices have so far fallen 2.6% on average with further declines likely, and the high rate of increase in the cost of inflation (inflation) at 5.9% and rising, will sap the budgets of many Kiwi households.”
So what should be the way out?
Robinson says, “All of these factors means that even as the economy is struggling to grow against Covid-19 disruption, inflation is surging ahead – and that means the Reserve Bank of New Zealand (RBNZ) needs to keep lifting interest rates. It sounds tough – tapping the economic brakes when we’re already battling, but ultimately the RBNZ can’t afford to let inflation get out of control. 2022 will be difficult – and it will be quite the challenge for the RBNZ to thread the need through all the economic headwinds we’re facing and steer us towards a soft landing.”
Alexander is of the view that there is little the government can do.
He says, “Given that the Reserve Bank is specifically raising interest rates to stem household spending, there is little that the government can do. Thus, were the government to take action such as cutting taxes, this would result in the Reserve Bank having to raise interest rates more than they are currently planning.”
Living in New Zealand has seemed to be at its costliest these days. Be it the price of essential groceries, fuel or housing; everything seems to be going up and up. A quick visit to a supermarket or petrol station is enough to provide evidence of the spiralling prices. It is not surprising that as...
Living in New Zealand has seemed to be at its costliest these days. Be it the price of essential groceries, fuel or housing; everything seems to be going up and up. A quick visit to a supermarket or petrol station is enough to provide evidence of the spiralling prices. It is not surprising that as of December 2021, NZ faces its highest annual inflation rate in 30 years: 5.9 per cent.
NZ is in a perfect storm of spiralling prices for consumers due to these factors. Take fuel, for example, according to fuel price tracking app Gaspy on Tuesday, Auckland prices for 91 octane start from $2.84 a litre. But prices have already past the $3 a litre mark at many petrol stations, their prices ranging going up to as high as $3.27 a litre.
Blame it on the Covid-19 pandemic, the supply chain issues, the staff shortages and people deciding to leave NZ for better opportunities in countries like Australia or Canada and most recently, the Russia-Ukraine conflict.
Kiri Hannifin, Director Corporate Affairs, Safety and Sustainability for Countdown, said that their team of 20,000 Kiwis is under immense pressure at the moment, and their focus is always to make sure they can help provide food and groceries to New Zealanders at this uncertain time.
She said, “Throughout NZ, we have around 1,800 of our team members away, either isolating as a positive case or as a household contact. With fewer people working right across the supply chain, including those of our suppliers, we are seeing impacts on the amount of stock we can get onto shelves at any one time. These disruptions aren’t unexpected, with Omicron impacting supply chains globally.”
She added, "Our focus remains on making sure we're getting as much stock as possible into our stores and looking after our team and customers. We're prioritising essentials where we can - particularly for our isolated stores - and working with our suppliers to deliver directly to stores as much as possible. For our stores, we're managing things as best we can by reducing the trading hours in some of our Auckland stores to reduce the pressures on our team and temporarily closing some deli and bakery service counters so the team can help out in other priority areas of the store including checkouts and online shopping.”
Responding to the findings of the Commerce Commission's final report into NZ's $22 billion supermarket industry, Commerce and Consumer Affairs Minister David Clark on Tuesday said that NZs retail grocery prices appear comparatively high by international standards.
He said, “New Zealanders are paying more at the checkout than most. Out of 38 OECD countries, we're the fifth-highest in terms of grocery prices. This report makes a serious case for change when it comes to competition in the sector, so kiwis don’t have to pay so much for the basics.”
Indian Weekender spoke to economists to know their take on the current situation.
‘NZ economy is going through a difficult time.’
Wellington-based economist Finn Robinson, who works at ANZ Bank, feels that the NZ economy is navigating some very challenging times.
He says, “With global and local supply chain disruptions, businesses having to shut down due to Covid-19 related staff shortages, and costs consequently going through the roof, the NZ economy is going through a difficult time. And that's not to mention the tragedy in Ukraine, which has seen key commodity prices, including oil go vertical in recent days.”
He points out that another uncertainty is what will happen to immigration as the border opens. He says, “Fully vaccinated Kiwis can currently come and go as they please – but as currently announced, the reopening process for all visa types won't conclude until October. With the Australian labour market expected to heat up significantly this year, there's a real risk that we will see a large net outflow of Kiwis before overseas arrivals can enter the country. And that could make the current labour shortage that much more challenging (and inflationary).”
‘Inflation will sap the budgets’
Independent economist Tony Alexander thinks inflation will sap the budgets of many Kiwi households. He says, “The household spending has boomed over the past two years as we have spent money no longer devoted to offshore travel, taken advantage of low borrowing costs, spent some of our paper wealth from higher house prices, and improved our home nests during uncertain pandemic times. But now we are set for a period of spending restraint as people pull back from unsustainable levels of spending on the likes of home electronics, furniture, and nice to haves such as new spas.”
He points out that there is a risk of more and more moving to Australia. He says, “The interest rates are also rising, and there is a risk of a net outflow of Kiwis to Australia for higher wages. House prices have so far fallen 2.6% on average with further declines likely, and the high rate of increase in the cost of inflation (inflation) at 5.9% and rising, will sap the budgets of many Kiwi households.”
So what should be the way out?
Robinson says, “All of these factors means that even as the economy is struggling to grow against Covid-19 disruption, inflation is surging ahead – and that means the Reserve Bank of New Zealand (RBNZ) needs to keep lifting interest rates. It sounds tough – tapping the economic brakes when we’re already battling, but ultimately the RBNZ can’t afford to let inflation get out of control. 2022 will be difficult – and it will be quite the challenge for the RBNZ to thread the need through all the economic headwinds we’re facing and steer us towards a soft landing.”
Alexander is of the view that there is little the government can do.
He says, “Given that the Reserve Bank is specifically raising interest rates to stem household spending, there is little that the government can do. Thus, were the government to take action such as cutting taxes, this would result in the Reserve Bank having to raise interest rates more than they are currently planning.”
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