Inflation rate set to hit new 30-year high

Households who have had to squeeze their pennies more than usual will not be surprised if the inflation figures released later this morning show the largest annual increase in more than 30 years.

Economists forecast an increase of around 7% in the annual rate – the highest since June 1990.

Bay Financial Mentors managing director Shirley McCombe said the belt has been tightening for some time.

“A lot more people are eating vegetarian meals. I think a lot more people are trying to supplement meals with rice and pasta and as food banks will tell you, a lot more people are engaging with food banks just to do it week by week.

“And gasoline – people are choosing not to go out, trying to reduce the number of trips, unable to put more than a few dollars in the tank at a time.”

She said it was a misnomer that only recipients sought help, with a squeezed middle class increasingly in need.

“A classic [example] is a gentleman maybe in his 50s, whose kids are grown so they don’t get any support to work for the families or the family tax credits, maybe they earn a little too much for the help with the housing…there’s really very little to help them and the prices just go up and their ability to earn doesn’t necessarily change.”

Economist Shamubeel Eaqub said today’s figures for the first three months of the year would give the country a better understanding of how entrenched inflation is in the wider economy.

READ MORE: How to move forward as inflation continues to soar

“The big thing that we’re looking at, does this extend to other services? Does this affect things like haircuts and all these other things that we do for each other. So , if things like labor costs and service prices are going up, it gets a lot stickier and harder to undo.”

The Reserve Bank stepped up its fight against inflation last week with a 50 basis point increase in the official exchange rate – the fourth straight hike, with a clear signal of more to come.

rnz.co.nz