Household Living Costs Increase 2.1 Percent

The cost of living for the average New Zealand household increased 2.1 percent in the 12 months to the March 2026 quarter, according to figures released by Stats NZ today.

The 2.1 percent increase, measured by the household living-costs price indexes (HLPIs), follows a 2.2 percent increase in the 12 months to the December 2025 quarter.

Meanwhile, inflation - as measured by the consumers price index (CPI) - was 3.1 percent in the 12 months to the March 2026 quarter, following a 3.1 percent increase in the 12 months to the December 2025 quarter.

"Falling interest payments for households was the main reason for the lower increase in the cost of living compared to New Zealand's overall inflation rate," prices and deflators spokesperson Nicola Growden said.

The HLPIs measure how inflation affects 13 different household groups, plus an all-households group (an average household). In contrast, the CPI measures how inflation affects New Zealand as a whole.

HLPIs include interest payments (mortgage, credit cards, and other interest) while the CPI includes the cost of building a new home.

This was the fourth consecutive quarter in which a fall in interest payments was the main contributor to keeping the cost of living for the average household (as measured by the HLPI) lower than the overall inflation rate measured by the CPI.

"Interest payments fell nearly 20 percent for the average household over the past year, while the cost of building a new home increased 1.0 percent over the same period," Growden said.

"This is the largest annual fall recorded for interest payments since the series began 18 years ago."

A 20.9 percent decrease in mortgage interest payments had the most impact on highest-spending households, which recorded the lowest annual inflation rate of all household groups, 0.7 percent. Since highest-spending households spend a higher proportion of their expenditure on interest payments, particularly mortgage interest, falling interest rates have kept their living cost increases comparatively low.

The impact of falling mortgage interest payments was lower for superannuitant households as superannuitants are more likely to own their own homes and not have a mortgage.

The latest data for the March 2026 quarter shows how inflation has been experienced by various household groups.

Quarterly average household inflation at 0.8 percent

The household living-costs price index rose 0.8 percent in the March 2026 quarter, compared with the December 2025 quarter.

Rising prices for petrol (up 3.5 percent), pharmaceutical products (up 17.7 percent), and electricity (up 2.6 percent) were the main contributors to the quarterly average household inflation rate.

For an average household, petrol contributed 17.5 percent, pharmaceutical products contributed 16.4 percent, and electricity contributed 14.2 percent to their quarterly inflation rate.

The increase in petrol prices impacted each household group differently. Lower-spending households were most affected by higher petrol prices, as petrol makes up a larger proportion of their expenditure.

"Some lower-spending households allocate nearly 5 percent of their spending on petrol, whereas the average household spends less than 4 percent, and highest-spending households less than 3 percent," Growden said.

For highest-spending households, petrol contributed 33.2 percent to their quarterly inflation rate of 0.2 percent. Highest-spending households had the lowest quarterly inflation rate of all household groups. Lower mortgage interest payments had the biggest impact for highest-spending households, helping to keep their inflation rate lower.

For the average household, prices for pharmaceutical products increased in the March 2026 quarter - up 17.7 percent, driven by an increase in prescription charges. The prescription count for the prescription subsidy scheme reset on 1 February 2026, meaning households who had previously exceeded the 20-prescription threshold, and were receiving free prescriptions, now had to pay the prescription co-payment.

Higher prices for pharmaceutical products had more impact on superannuitant households, contributing 14.4 percent to their quarterly inflation rate of 1.1 percent. The impact was lower for beneficiary and Māori households. Superannuitant households spend relatively more on pharmaceutical products than beneficiary and Māori households.

Electricity prices for the average household increased 2.6 percent in the March 2026 quarter. For lowest-spending households higher electricity prices was one of the main contributors to their quarterly inflation rate of 1.1 percent. Electricity makes up 7.5 percent of their expenditure. This compares with 4.1 percent for the average household, and 2.1 percent for highest-spending households.

The decrease in prices for mortgage interest payments (down 4.8 percent), international air transport (down 6.9 percent), and overseas accommodation prepaid in New Zealand (down 4.1 percent) helped keep the quarterly inflation rate for an average household down to 0.8 percent.

"International travel became less expensive for the average household over the March 2026 quarter," Growden said. "Lower airfares to Europe, Australia, and the Pacific Islands, as well as lower prices for overseas accommodation, contributed to cheaper international holidays."