Cost of Living Is ‘Number 1’ Priority, Newly Sworn in NZ PM Says as Inflation Remains at 7.2 Percent

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An increasing number of New Zealand families are feeling the pinch from the rising cost of living, as the inflation rate remained at a near three-decade high in the three months to December.

Stats NZ revealed the annual inflation rate in the December quarter remained stubbornly high at 7.2 percent.

This was driven by housing construction and rental costs, followed by increased costs of food.

“Higher prices for ready-to-eat food, vegetables, and meat and poultry drove the overall increase in food prices,” Stats NZ manager Nicola Growden said. In his first post-cabinet briefing as New Zealand prime minister, Chris Hipkins said he would be shifting the government’s focus towards “immediate priority issues,” particularly cost-of-living pressures.

“I’ve said it’s the number one issue that we’re facing as a country, and, therefore, it will be the number one priority area of focus for the government,” he told reporters on Jan. 25.

He added that the Labour government was already taking action to help households at the pump and supermarkets through fuel tax cuts and improving supermarket competition.

“I do want to acknowledge one of the pressures that New Zealand and Australia are both feeling around food prices at the moment is caused by the weather, and there’s a limited amount that the government can do,” he said.

“But we will continue to strive to look for everything that we can do in that space.”

New Zealand Prime Minister Chris Hipkins departs after a post-cabinet press conference at Parliament in Wellington, New Zealand, on Jan. 25, 2023. Chris Hipkins was sworn-in today as the new Prime Minister of New Zealand following the resignation of previous Prime Minister, Jacinda Ardern. (Hagen Hopkins/Getty Images)

Hipkins acknowledged the current level of inflation was not sustainable and said the government would do “everything we can bring inflation down in New Zealand.”

“But if you look at our overall rate of inflation—7.2 percent here in New Zealand, 7.8 percent in Australia, 10.5 percent in the United Kingdom, and the OECD average is 10.3 percent, the European Union is 11.1 percent—you know, New Zealand is not immune from those international pressures, and they will continue to have an impact on our rate of inflation,” he said.

National party’s finance spokesperson, Nicola Willis, said rates of inflation in the United States and global fuel prices had fallen, indicating that domestic, rather than international factors, were the major drivers of inflation in New Zealand.

“Inflation now has a tighter grip in New Zealand because of homegrown problems like worker shortages, higher costs for landlords being passed on to tenants, and Labour’s relentless commitment to yet more spending and borrowing,” she said.

“Tellingly, in the final part of last year, New Zealand’s non-tradeable (domestic) inflation rate was higher than the international factor.”

Willis criticised Labour’s cost of living payment scheme, which had been budgeted at over $800 million (US$520 million) and sparked controversy when it was revealed that deceased and overseas New Zealanders had also received payments.

“The government can’t keep applying band-aids to this festering sore. Instead, substantive solutions are needed,” she said.

Fresh produce is sold at the Wesley Market in Mt Roskill in Auckland, New Zealand, on Sept. 2, 2011. (Phil Walter/Getty Images)

Willis noted that while lower-income families were being “absolutely smashed” by inflation, increasing the minimum wage was no longer a viable option.

“The great shame is that Labour increased the minimum wage so much in previous years,” she told Radio NZ. “But what you’ve seen happen is that they have not been able to increase it as much in these inflationary years because they know it will be passed on.”

Under the former National party’s government, the adult minimum wage received increases of $0.25 to $0.50 each year. After former Prime Minister Jacinda Ardern’s Labour government won office, these annual hikes ranged between $0.75 to $1.20.

Meanwhile, Finance Minister Grant Robertson believes that inflation has passed its peak.

The quarterly inflation increase was 1.4 percent, lower than the previous quarter’s growth of 2.2 percent.

“The trend is there,” he told Newstalk ZB. “It’s still going to be challenging for a lot of Kiwi families over the next little while, and that’s why, as Chris Hipkins has said, we’ve got to redouble our efforts to make sure we support people through this time.”