- What Is Inflation?
- What Causes Inflation in New Zealand?
- How Is Inflation Calculated?
- How Much Is Inflation in New Zealand?
- What Is Your Personal Rate of Inflation?
- How to Cope with Inflation in New Zealand?
- How to Protect Your Money from Inflation?
Inflation affects everyone—from rising grocery prices to higher rent and fuel costs. Over time, the purchasing power of your money decreases, meaning you need more dollars to buy the same goods and services.
But what exactly is inflation? How does it impact your daily life in New Zealand? And most importantly, how can you prepare for it and minimise its effects on your finances?
Find all the answers in our detailed guide below.
To help you understand inflation better, we’ve also built a free New Zealand Inflation Calculator, allowing you to calculate the value of money over time based on historical inflation rates.
What Is Inflation?
Inflation is the gradual increase in the prices of goods and services over time, reducing the value of money. As inflation rises, the same amount of money buys fewer goods.
For example
- If a litre of milk cost $2 last year but now costs $2.40, that’s a 20% increase due to inflation.
- Inflation affects everything from groceries and fuel to housing and wages, playing a key role in New Zealand’s economy.
What Causes Inflation in New Zealand?
Several factors contribute to inflation in New Zealand:
- Demand-Pull Inflation – When demand for goods and services exceeds supply, businesses raise prices. For example, if more people want to buy new houses but there’s a housing shortage, property prices go up.
- Cost-Push Inflation – When production costs rise (e.g., wages, raw materials, transport), businesses pass the cost onto consumers by increasing prices.
- Supply Chain Disruptions – Events like COVID-19, cyclones, or global conflicts can cause shortages, making products more expensive.
- Government & Monetary Policies – Low interest rates, economic stimulus payments, and government spending can increase the money supply, driving inflation.
- Energy & Fuel Prices – Rising petrol, electricity, and gas costs increase transportation and production expenses, affecting everything from groceries to flights.
How Is Inflation Calculated?
The inflation rate measures the percentage increase in the prices of goods and services over a certain period.
New Zealand’s Inflation Measure: The Consumer Price Index (CPI)
Inflation in New Zealand is measured using the Consumer Price Index (CPI), which tracks price changes for a basket of essential goods and services (e.g., food, housing, fuel, transport).
Formula for Inflation Rate
Inflation Rate = ((CPI in Current Year - CPI in Previous Year) ÷ CPI in Previous Year) × 100
For example
If the CPI was 125 last year and 130 this year:
((130 - 125) ÷ 125) × 100 = 4% Inflation Rate
This means the inflation rate is 4% for the year.
To make things easier, we’ve created a free New Zealand Inflation Calculator, allowing you to track inflation and see how it affects the value of your money.
How Much Is Inflation in New Zealand?
Inflation in New Zealand is monitored by Stats NZ, which releases quarterly CPI reports.
New Zealand’s Annual Inflation Rates (Past Decade)
| Year | Inflation Rate (%) |
|---|---|
| 2023 | 4.7% |
| 2022 | 7.2% |
| 2021 | 5.9% |
| 2020 | 1.4% |
| 2019 | 1.9% |
| 2018 | 1.9% |
| 2017 | 1.6% |
| 2016 | 0.4% |
| 2015 | 0.3% |
| 2014 | 1.1% |
Good to know
Inflation in New Zealand peaked at 7.2% in 2022, the highest level in over three decades, before gradually decreasing.
What Is Your Personal Rate of Inflation?
While the national inflation rate provides an average, your personal inflation rate depends on what you actually spend money on.
For example
If your weekly grocery bill was $200 last year but is now $230, your personal grocery inflation rate is:
((230 - 200) ÷ 200) × 100 = 15%
This means your grocery costs have increased by 15%, even if the national inflation rate is lower.
Tip: Tracking your personal expenses helps you see how inflation affects your specific lifestyle.
How to Cope with Inflation in New Zealand?
Inflation can put pressure on household budgets, but these practical tips can help you manage rising costs:
- Cut Unnecessary Expenses – Review your subscriptions, dining out, and impulse purchases to free up extra cash.
- Buy in Bulk & Use Discounts – Stock up on non-perishable groceries when prices are lower. Use loyalty programs, cashback offers, and discount apps to save money.
- Negotiate Bills – Call your internet, power, and insurance providers to ask for better deals.
- Use Public Transport – With fuel prices rising, using public transport, carpooling, or cycling can help cut transport costs.
- Consider Generic Brands – Supermarket house brands often cost 20-30% less than name brands but offer similar quality.
How to Protect Your Money from Inflation?
Investing is one of the best ways to preserve your wealth against inflation. Here’s how New Zealanders can beat inflation:
- Shares & ETFs – Investing in NZX-listed companies helps your money grow faster than inflation. Historically, the New Zealand stock market has returned 7-10% annually.
- Real Estate – Property values in Auckland, Wellington, and Christchurch tend to rise over time, providing a hedge against inflation.
- High-Interest Savings Accounts & Term Deposits – With interest rates rising, high-yield savings accounts and term deposits offer safer returns.
- Commodities & Gold – Investing in gold, silver, or commodities can protect against inflation during economic uncertainty.
- Government & Inflation-Linked Bonds – New Zealand Government Bonds and Inflation-Indexed Bonds adjust for inflation, ensuring your money retains its value.
Inflation isn’t just a global issue—it directly impacts your cost of living in New Zealand. By understanding how inflation works and adapting your spending, saving, and investing strategies, you can minimise its effects on your finances.
To help you track inflation and plan better, try our free New Zealand Inflation Calculator and stay informed about how inflation affects your money over time.
