Kiwis face rapid cost increases thanks to recent government decisions

As Sir Isaac Newton observed, all actions have an equal and opposite reaction.

As published in the Sunday Star-Times 25 April 2021

In New Zealand, we are yet to see the full impact of all the various decisions our government has made, but we are starting to see what’s coming. The cost of living in New Zealand – already a struggle for many – is about to increase dramatically.

In particular, we are going to see a profound effect on those Kiwis on low or fixed incomes.

One of the most fundamental needs, a roof over one’s head, is where we will see the most significant pressure on New Zealanders.

Average rents for housing have increased by approximately $120 per week over the past three years. Part of this increase has been driven by the median house price having increased by about $150,000 over the same period of time, but some rental price escalation relates to landlords seeking to recover the cost to meet new government standards.

As house prices continue to rise out of reach for most, Kiwis need every rental property we can get, and the move by the Government to remove the ability for landlords to deduct the cost of interest they pay on mortgages has not made buying a house more accessible, but it is bound to make renting more expensive.

As house prices continue to rise out of reach, Kiwis need every rental property we can get

There is a lot said about “speculators,” but about 600,000 rental properties are owned by ‘mum and dad’ landlords who chose to invest in an additional property. The extra costs they incur will put them in the position of choosing between raising rents or selling up.

Another chain reaction that government policies have set off is the connection between rising business costs and rising costs of living.

These significant new costs include the rapid increase of the minimum wage from $15.75 to $20.00 per hour since 2017, a new public holiday, and changes to leave entitlements.

Increasing minimum wage is important and should be done, but the rapid pace with which it has been implemented has created significant issues. These are all additional costs that many thousands of small businesses owners will have to find the cash to pay. It is estimated the recent changes have imposed a $2.8 billion cost on businesses.

If it were the Government picking up this bill it would be one thing, but these costs are a burden imposed on business owners at a time when they have already struggled through a pandemic and lockdowns.

Included in this are lots of small business owners who don’t have the ability to absorb big cost increases, and inevitably, the cost gets passed on instead to the consumer.

Cost pressures are building in other ways. Our shipping arrangements are under significant strain, which means it is increasingly difficult and expensive to import and export goods to and from New Zealand.

New Zealand’s shipping arrangements are under significant strain

Moving around our roads has become more expensive for Kiwis as well, with petrol prices rising by 7.2 per cent just this quarter.

Then there are energy costs. A dry summer paired with the decision to stop exploration for gas without an adequate transition plan has led to back-up power stations, such as Huntly, importing vast amounts of coal to produce power.

With little prospect of finding new gas supplies, energy prices have and will continue to rise rapidly.

While some measures taken by the Government were the right thing to do, the lack of transition period has led to sudden impacts which are bad news for those on low and fixed incomes.

It is also bad news for New Zealand, as increasingly our businesses are under financial pressure. More needs to be done to cut through these logistic supply chain issues.

We need to respect the fact that businesses are not cash cows for the Government to implement its social agenda at a time when many are struggling.