Household Living-costs Price Indexes Review: 2024

Household living-costs price indexes review: 2024 outlines changes made as a result of the review of the household living-costs price indexes (HLPIs).

These changes will be implemented in Household living-costs price indexes: September 2025 quarter, scheduled for release on 28 October 2025.

Stats NZ paused the household living-costs price indexes (HLPI) for the March 2025 and June 2025 quarter releases. The HLPI for the September 2025 quarter will include data for the March 2025 and June 2025 quarters.

About the household living-costs price indexes
Updating the expenditure weights
Modified process to calculate weights in the 2024 HLPI review
Comparing new expenditure weights for HLPIs
Upcoming CPI and HLPI work
Appendix A: Household groups characteristics
Appendix B: Income and expenditure quintile boundaries
Appendix C: Changes in HLPI expenditure weights by household group (graphs)

About the household living-costs price indexes

The household living-costs price indexes (HLPIs) provide insights into the inflation experienced by 13 different household groups:

• beneficiaries
• Māori
• superannuitants
• income quintiles (five groups)
• expenditure quintiles (five groups).

We publish an all-households HLPI for comparison.

The HLPIs are derived from the consumers price index (CPI) and household expenditure statistics collected as part of the Household Economic Survey (HES).

The CPI measures the change in prices of goods and services acquired by New Zealand-resident private households. It is an aggregate measure that represents the average price change that households experience. This makes it well suited for use as a national measure of inflation.

The expenditure weights for the CPI itself are largely derived from the HES, complemented with information from other sources. As well as collecting income and expenditure information from each household surveyed, the HES also collects demographic information. This enables deriving expenditure weights for the various household groups in the HLPI.

Table 1 defines the household groups used for the HLPI.

Table 1

Household group definitions

Appendix A gives an overview of household group characteristics and explains how household income and expenditure is equivalised. Appendix B shows income and expenditure quintile boundaries.

The conceptual design of the HLPI differs from the CPI in two important ways. The first is the treatment of owner-occupied housing, interest payments, and insurance. The HLPIs track the price change for goods and services when they were paid for, regardless of when they were acquired.

The HLPIs measure owner-occupied housing prices by measuring mortgage interest payments.

The CPI measures inflation of owner-occupied housing prices by measuring price change for the purchase of new housing, excluding land and interest payments. The primary purpose for CPI in New Zealand is to inform monetary policy. The Reserve Bank sets the Official Cash Rate (OCR) to influence interest rates. Given that the CPI helps the Reserve Bank set the OCR, including interest payments in the CPI would introduce a circularity.

With the payments approach for the HLPIs, gross insurance expenditure is used as opposed to net insurance expenditure (premiums less claims) in the CPI.

The second conceptual difference is the aggregation method used to combine household expenditure patterns. The CPI calculates expenditure patterns from aggregate household expenditure - that is, calculating total expenditure on each item in the CPI basket for the CPI reference population (all private New Zealand-resident households). Weighting proportions are derived from the aggregates. As a result, the expenditure patterns of high-spending households have more influence on the CPI.

For the HLPIs, expenditure shares are calculated for each participating household in the HES expenditure module. The expenditure shares for each household group are calculated as an average of these household expenditure shares (weighted by HES household sample weights). This way, the indexes are better aligned with the inflation experienced by a 'typical' household in each HLPI group.

Household living-costs price indexes: Background has more information on the conceptual design of the HLPI.

Updating the expenditure weights

The HLPI review and updating the HLPI expenditure weights are a consequence of the CPI review, which includes updating the CPI basket and expenditure weights.

The HLPIs are reviewed every three to five years following the CPI review to ensure they remain relevant. Household spending patterns change over time as tastes, lifestyles, and incomes change, and as the range of goods and services available to households changes.

The 2024 CPI review has reselected the basket of goods and services and updated the relative importance of the items within it. This is to reflect spending patterns for the year to June 2023, primarily based on data from Household expenditure statistics: Year ended June 2023. Previous weights were based on spending patterns for the year to June 2019. Typically, household expenditure data is collected every three years. The four-year gap is due to the postponement of HES data collection for the year ended June 2022 in response to COVID-19 restrictions.

The HES serves as the primary source of weighting information for the CPI review. HES estimates are used when they align closely with expenditure estimates from other data sources or when they provide the best available information for specific goods and services. Alternative data sources are used to calculate expenditure weights for items with known reporting bias in the survey, or to validate HES estimates for items with significant expenditure.

For the 2024 CPI (and this HLPI) review, the 'weight reference' period is the year to June 2023, aligning with the 2022/23 HES. Expenditure information from the 2022/23 HES and other sources has been 'price updated' to the 'price reference' period of the December 2024 quarter. The effect of price updating is to express the quantities underlying the 2022/23 expenditure values in the prices of the December 2024 quarter (the price reference period, or the base quarter). We use CPI indexes corresponding to the goods and services in the new basket to price-update the expenditure weights.

Consumers price index review: 2024 has more information on the changes resulting from the CPI review 2024 and the methods used to calculate the new weights.

As with the CPI, the HLPI expenditure weights are primarily derived from the Household Economic Survey (HES). However, these are based on household-group-specific expenditure patterns. They are calibrated to the CPI expenditure weights to incorporate adjustments based on other data sources ('independent estimates') in the CPI review. These other data sources generally don't include population-group-specific information.

Modified process to calculate weights in the 2024 HLPI review

Calculating expenditure weights for HLPIs requires a more data-intensive way of using HES compared with calculating CPI weights. Triggered by technical data processing issues, we modified the process to calculate HLPI expenditure weights for the 2024 review. We changed how we allocate and aggregate expenditure from HES to CPI/HLPI categories, which we summarise in this section.

In calculating expenditure weights for the CPI, HES expenditure items that cannot be directly allocated to a matching CPI item are pro-rated to similar CPI items. As a simple example, lemons are not in the CPI basket, but mandarins and oranges are. HES expenditure on lemons is then allocated to oranges and mandarins, in proportion to the aggregate expenditure on mandarins and on oranges.

For the HLPIs however, weights are calculated for each household participating in the expenditure survey (approximately 3,400 households in 2022/23). The percentage of households reporting expenditure on specific detailed items in HES is mostly low, with high relative sampling errors. In many cases, pro-rating expenditure would not work, as households may not have reported expenditure on similar items (like oranges and mandarins in the example above).

In the modified process to calculate HLPI weights, we no longer use pro-rating. Instead, we use equal proportions to assign expenditure to CPI categories. In the example above, expenditure on lemons reported in HES would be evenly split between mandarins and oranges in the HLPIs.

In the modified approach we also allocate detailed HES expenditure to CPI/HLPI (sub)item level, and then we aggregate this to class level. Expenditure on lemons reported in HES is now allocated to the Fruit category. Another example is the HES item 'Food not further defined'. In the calculation of CPI weights, expenditure on this item is pro-rated across 105 CPI items. In the calculation of HLPI weights, expenditure on 'Food not further defined' is equally distributed across these 105 items and then aggregated to 11 food-related classes. This illustrates that for the allocation of HES expenditure to CPI/HLPI classes we still use the most detailed expenditure data reported in HES.

The modified process is robust and efficient. We are confident that it is conceptually appropriate for HLPIs, and that the resulting expenditure weights and index series are very close to results obtained with the approach used in earlier HLPI reviews.

Comparing new expenditure weights for HLPIs

Figure 1 shows new relative expenditure weights for the December 2024 base quarter for selected household groups.

Expenditure on the housing and household utilities group has the largest weights, in particular for beneficiaries and Māori households, and the low-income and low-expenditure quintile groups. The high-income and high-expenditure quintiles have relatively lower weights for food compared with other household groups, and higher weights for transport, recreation and culture, and interest payments.

Figure 1

Across all HLPI household groups there are a few common trends for expenditure weight changes between the June 2020 and December 2024 quarters.

• The weight for the alcoholic beverages and tobacco group decreased for most household groups. Only superannuitant households and the lowest-income quintile had slight increases for this group.
• The relative weights for household energy decreased for all household groups, with stronger decreases for lower-income groups. While the CPI overall increased 21.7 percent between the June 2020 and December 2024 quarters, the price index for household energy increased 12.7 percent.
• Household contents and services had weight decreases for every household group, in particular for household appliances.
• Relative weights for the transport group have increased since 2020 and are now closer to 2017 weights. The weight increases were driven by private transport supplies and services (which includes petrol) for the lower-income household groups, and by international airfares for the higher-income households.
• Relative weights for vehicle servicing and repairs, and other private transport services classes increased for all household groups. Other private transport services include a variety of items, with the largest expenditure weight for road-user charges.
• Weights for the communication group decreased for all household groups, driven by telecommunication services.
• Accommodation services (part of the recreation and culture group) had weight increases for all household groups, except a small decrease for the lowest expenditure quintile.
• All household groups showed a weight increase for miscellaneous goods and services, mainly driven by insurance.
• The interest payments group was dominated by expenditure on mortgage interest. Low-income household groups had decreases, and the high-income groups saw large increases.

As above, the following commentary with the graphs for the 13 specific HLPI household groups relates to expenditure weight changes between 2020 and 2024.

Figure C2 Beneficiaries

The main contributor to the decrease for housing and household utilities was household energy. The relative weight for food increased, with expenditure up for meat and poultry, soft drinks, waters and juices, and ready-to-eat food. From all HLPI household groups, beneficiary households had the largest weight increase for clothing and footwear.

Figure C3 Māori

Cigarettes and tobacco had the largest expenditure weight decrease. All food subgroups had increases, except for a small decrease for restaurant meals and ready-to-eat food. The weight for household energy was down. This was offset by increases for actual rentals for housing, property maintenance, and local authority rates.

Figure C4 Superannuitants

The relative weight for food fell with lower expenditure for vegetables. The increase for housing and housing utilities, driven by local authority rates, was stronger than the decrease for household energy. The increase for miscellaneous goods and services was driven by expenditure on insurance. A decrease for newspapers, books, and stationery was the main cause of the lower weight for recreation and culture.

Figure C5 Income quintile 1

A key driver for the weight decrease for housing and household utilities was the larger number of superannuitant households in the low-income quintile in HES 2022/23, compared with the 2020 review (based on HES 2018/19). This resulted in a strong decrease for actual rentals for housing, as the home ownership proportion for superannuitant households was much higher compared with the average across all households . The weight for household energy was also lower, partially offset by an increase in local authority rates. Insurance drove the increase for miscellaneous goods and services.

Figure C6 Income quintile 2

In contrast to income quintile 1, the weight for housing and household utilities increased, driven by actual rents for housing. Income quintile 2 had a lower number of superannuitant households, compared with the 2020 review. Household contents and services decreased with less weight for furniture and furnishings.

Figure C7 Income quintile 3

Food increased with higher weights for ready-to-eat food and soft drinks. Weights for actual rentals for housing and household energy were down, partially offset by higher weights for property maintenance and local authority rates.

Figure C8 Income quintile 4

Mortgage interest payments increased strongly. Lower weights for actual rentals and household energy were partially offset by a higher weight for property maintenance. Food decreased due to lower weights for milk, cheese, and eggs, vegetables, and meat and poultry.

Figure C9 Income quintile 5

Mortgage interest payments increased strongly. Food decreased, with less expenditure for restaurant meals and ready-to-eat food. The health group decreased, mostly due to a lower weight for out-patient services.

Figure C10 Expenditure quintile 1

Housing and housing utilities was down due to lower weights for household energy and actual rentals, partially offset by property rates and related services. The increase in miscellaneous goods and services was driven by insurance.

Figure C11 Expenditure quintile 2

Food weights increased for almost all classes. Housing and household utilities' relative weight fell with both local authority rates and actual rentals down. In the miscellaneous goods and services group, insurance, personal care, and other miscellaneous goods and services increased.

Figure C12 Expenditure quintile 3

Food decreased, with the weights for vegetables, breads and cereals, and meat falling. The increase in actual rentals was slightly higher than the decrease in household energy. In the transport group, a lower weight for the purchase of vehicles was offset by increases for petrol and air transport services.

Figure C13 Expenditure quintile 4

International travel had a strong impact for this household group, with higher expenditure for international air fares and overseas accommodation increasing transport, and recreation and culture respectively. Education was down, with all classes falling in weight.

Figure C14 Expenditure quintile 5

Mortgage interest payments had a strong weight increase. The large increase in transport was driven by international air transport, fuel, and purchase of new cars. Overseas accommodation costs pre-paid in New Zealand were also up, resulting in the increase for recreation and culture. The relative weights for the food, alcoholic beverages and tobacco, health, and housing and household utilities groups fell across most classes.

ISBN 978-1-991307-84-2

Enquiries

[email protected]