The cost of living for the average household increased 2.2% in the 12 months to the December 2025 quarter, according to the latest figures from Stats NZ.
That annual rise was lower than the 2.4% recorded in the September 2025 quarter and well down from the recent peak of 8.2% in the December 2022 quarter, highlighting how price pressures have eased over the past three years.
Interestingly, the household living-costs measure is now sitting below the headline inflation rate, which was 3.1% in the December 2025 quarter.
Why the numbers are different
The gap between the two figures largely comes down to housing costs. The household living-costs price indexes include interest payments on mortgages and credit cards, whereas the better-known inflation reading does not.
In the latest data, a fall in interest payments was the main contributor keeping the average household’s cost of living lower than overall inflation. In other words, declining borrowing costs have provided some relief, even as prices for other goods and services remain elevated.
For homeowners with mortgages, this reflects the impact of lower interest rates filtering through to repayments. However, households without debt or those renting may not feel the same benefit, as their spending patterns differ from the ‘average’ household captured in the index.
What this means for household budgets
While the pace of cost increases has slowed significantly since 2022, living expenses are still rising overall. That means careful budgeting remains important.
Practical steps households can take include:
- Reviewing your mortgage structure. Check whether your fixed term remains suitable in the current rate environment.
- Paying down higher-interest debt. Credit card balances can erode savings quickly.
- Building a buffer. Setting aside even small amounts regularly can create financial resilience.
With interest costs now playing a key role in living-cost changes, it is more important than ever to ensure your lending is structured efficiently. If you would like to review your mortgage or discuss ways to manage your household budget more effectively, reach out and we can work through your options together.
