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Falling interest rates slow up inflation for highest spenders - Stats NZ

Fuseworks Media
Fuseworks Media

Falling mortgage interest rates helped stabilise inflation for highest-spending households, while rising council rates have hit superannuitants the hardest, Stats NZ said today.

Each quarter, the household living-costs price indexes calculate how inflation affects 13 different groups, while the consumers price index calculates how inflation affects New Zealanders as a whole.

In the September 2019 quarter, highest-spending households faced the lowest quarterly inflation of 0.4 percent, compared with 0.7 percent for all households.

A fall in mortgage interest payments in the September 2019 quarter helped offset rising local authority rates for the highest spenders.

"Mortgage interest rates dropped this quarter, influenced by a cut in the Official Cash Rate," consumer prices manager Sarah Johnson said.

"Highest-spending households benefited the most from the drop in interest rates. Mortgage interest payments make up about one dollar in every ten of this household group’s spending," Mrs Johnson said.

As an indication of how much interest rates are falling, spending on mortgage interest payments by all household types fell 2.7 percent from the June 2019 to September 2019 quarters, and decreased 6.2 percent compared with a year ago.

The rate of annual inflation faced by the highest-spending households has been slowing down since September 2018, when it was 1.9 percent for the year.

"In the year to September 2019, inflation for the highest-spending households was 0.7 percent, about half the rate faced by all households," Mrs Johnson said.

"Annual inflation for the highest-spending households has been consistently the lowest of any household group for the past three years."

Rates and rents hit all households

Housing costs, especially local authority rates and rents, were key drivers for inflation for all households in the September 2019 quarter.

Across all household types, local authority rates and payments rose around 5.0 percent in the September 2019 quarter.

"More superannuitants tend to own their own homes, so this group is most affected by higher council rates than other groups who are more likely to rent," Ms Johnson said.

In the September 2019 quarter, inflation for superannuitants rose 1.0 percent.

While higher rates affected homeowners, rent rises affected beneficiaries the most, as this group tends to spend more of their money on rents than other households.

In the September 2019 quarter, rents rose 0.9 percent for beneficiaries.

Higher rents also affected the lowest-spending households and Mâori households, two groups which are more likely to rent housing.

Overall inflation for beneficiaries in the September 2019 quarter was up 0.6 percent.

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