Families feel pinch as basic costs rise
By PAUL EASTON - The Dominion Post | Tuesday, 18 September 2007
Households are being squeezed by price increases on basic foods and petrol, even before higher power prices and a sliding Kiwi dollar begin to take effect.
Budgeting agencies fear the increase in staple food prices, including butter's 23 per cent increase yesterday and milk's increase by 12 per cent in two months, will bite into the average grocery bill.
The price increases come on the back of news that the Government's planned carbon emissions trading scheme will push power and petrol prices up further.
It is expected that the price of power will increase at least 4 per cent.
World oil prices hit a record high of $US80 ($NZ112) a barrel last week and motorists were told to expect higher prices at the pump.
Homeowners are also facing increased mortgage payments, despite the Reserve Bank opting against lifting the official cash rate last week.
The jump in the price of butter came as Fonterra, which exports most of its milk, reacted to rising international prices.
Overall, food prices increased by 3.4 per cent in the year to August, with meat, poultry and fish up 8.4 per cent, according to Statistics New Zealand.
The price of tomatoes increased by 18.3 per cent and bananas 24.7 per cent.
The Federation of Family Budgeting Services chief executive, Raewyn Fox, said staple foods were becoming more expensive, which was going to hurt.
"Our concern is that these are the basics for people, a cheap source of nutrition."
Food and Grocery Council commercial director Lindsay Davidson said New Zealand was starting to see the effects of international food price rises.
The price of cocoa, sugar, corn, wheat, barley, soy and coffee had all risen sharply in recent months.
Increasing flood damage and the use of crops for biofuels were behind the trends, Mr Davidson said.
The price of wheat has almost doubled on the world market since April.
Prime Minister Helen Clark has said the Government's emissions trading scheme will include compensation for low-income households to help them cope with the price rises.
But Ms Fox said middle-income families were also struggling, hit by rising mortgage rates and high childcare charges, and it was unclear if they would qualify for compensation.
Bank of New Zealand chief economist Tony Alexander said the high New Zealand dollar had shielded the economy from rising global food prices.
But with the dollar taking a dive, he said it was likely inflation would hit 3 per cent this year.
With the economy cooling and inflation picking up, the Reserve Bank was now likely to leave interest rates untouched "for some time".
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