What does inflation mean for me?


We’ve been hearing the word inflation used a lot over the past few months, but what does it actually mean and how does it affect you and me?  You might think that inflation just means things cost more, and in simple terms that is correct.  The problem arises when your income doesn’t rise in line with inflation, meaning we don’t have as much money to buy the things that we used to.


Definition of inflation

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.


Inflation rate in New Zealand

Since 2000 New Zealand’s Consumer Price Index (CPI) inflation has averaged around 2.15%.  Figures released by StatsNZ have shown annual inflation (the difference between Dec 2020 and Dec 2021) has hit 5.9%.  This is the biggest annual rise in over 30 years.  What that means is a bag of food that cost you $100 in Dec 2020 would have cost you $106 in Dec 2021.  That doesn’t sound so bad, does it?  If you’re having to add $6 onto every $100 you spend, it quickly adds up though, especially if your budget was already tight to begin with.  And the chances are your income hasn’t gone up at that same rate.

It’s not just food prices that keep creeping up.  Fuel prices are at record high levels, utility costs, rent, and goods purchased less regularly such as clothing and footwear are also cause of concern for price-conscious Kiwis, who are facing higher everyday costs.


What can you do?

If a pay rise isn’t in your near future, then, like most Kiwi’s, you’re going to have to take a hard look at your spending and see any ways in which you can adjust your budget for rising costs.  Check out our September 2021 blog for tips on how to refresh your budget.


Inflation calculator

Want to know how much $10 worth of food in 1950 would cost you today?  Check out this cool inflation calculator from the Reserve Bank.  Spoiler, it’s way more than you might think.


If you would like to talk to someone about how inflation is affecting your situation and get help building a new budget, then get in touch with the team here at Accountants Plus. We have years of experience in the financial world and can provide practical individual and business advice tailored to your needs. Contact us today.


International Monetary Fund

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