WELLINGTON –
Average New Zealand household living‑cost inflation slowed sharply in the year to December 2025, but the relief has been uneven: falling interest payments depressed headline household inflation while pensioners, beneficiaries and low‑spending cohorts continued to face above‑average price pressure.
The Household Living‑Costs Price Indexes (HLPIs) published by Statistics New Zealand for the period to December show an all‑households HLPI rise of 2.2% over the 12 months to December 2025, notably below the Consumers Price Index (CPI) increase of 3.1% for the same period. The divergence reflects accounting differences between the two series: HLPIs include household interest payments, while the CPI includes the cost of building a new home, which rose 1.2% over the year.
The numbers indicate a regime change in the distribution of inflation’s impact. A large fall in interest costs delivered measurable relief for mortgage‑bearing, higher‑spending households even as price increases for utilities, rates and insurance continued to push up living costs for older and lower‑income cohorts. The pattern matters for policy because a growing share of New Zealand’s population is either retired or reliant on government transfers indexed to CPI rather than to the more targeted household‑group measures captured in the HLPIs.
Numbers and distribution
| Indicator | Change (12 months to Dec 2025) |
|---|---|
| All‑households HLPI | +2.2% |
| CPI (headline) | +3.1% |
| Average household interest payments | -17.3% |
| Cost of building a new home | +1.2% |
| Superannuitant households HLPI | +3.8% |
| Rent (all households) | +1.9% |
| Highest‑spending households HLPI | +0.8% |
The data show interest payments fell 17.3% for the average household, which materially reduced measured household inflation in the HLPI series. That decline in financing costs is the principal reason the HLPI (2.2%) sits below the CPI (3.1%). In other words, the official CPI over the year to December 2025 is telling a tougher inflation story than the average household actually experienced once falling mortgage costs are taken into account.
The HLPI series also shows significant heterogeneity: superannuitant households recorded the highest HLPI at 3.8%, fuelled by sharp increases in rates, electricity and private health insurance; by contrast, the highest‑spending households recorded a HLPI rise of just 0.8%, largely because an 18.6% fall in mortgage interest payments reduced their measured living‑cost inflation.
“Interest payments fell 17.3% for the average household over the past year, while the cost of building a new home increased 1.2% over the same period.” – Nicola Growden, Stats NZ prices and deflators spokesperson
Detailed line items in the HLPI help explain the divergence in outcomes between household groups. For superannuitant households, local authority rates increased 8.8% and electricity rose 12.1%; health insurance costs were up 20.3%. Rent rose 1.9% over the year and was the primary contributor to rising living costs for beneficiary households, accounting for 18.4% of their annual inflation; rent contributed 17.3% of the annual inflation faced by Māori households.
Ownership and debt profiles amplify those differences. The HLPI breakdown shows 85.7% of superannuitant households own their home while only 8.5% have a mortgage, meaning they did not share materially in the decline in interest payments that cushioned higher‑debt households. Among the highest‑spending households, 82.3% own their home and 57.2% have a mortgage – a profile that made them the main beneficiaries of lower interest expense.
Market and policy implications
The fall in household interest payments recorded in the HLPI is consistent with a period of declining borrowing costs from recent peaks; for leveraged households, that reduction has worked as a de facto transfer from lenders to borrowers in measured living‑cost terms. The contrasting experience of pensioners and benefit recipients – groups with high exposure to utilities, rates and rents and low exposure to mortgage interest relief – highlights the distributional limits of lower nominal borrowing costs as a broad‑based cost‑of‑living remedy.
For firms and financial institutions, the HLPI divergence alters demand patterns and credit risk profiles. Lower interest burdens on mortgage holders can support consumer spending and reduce mortgage stress metrics, while sustained increases in essential service costs for non‑borrower cohorts can suppress discretionary spending and increase demand for concessional support channels. Mortgage advisers and lenders face a bifurcated client base: borrowers enjoying lower servicing costs and non‑borrowers exposed to higher essential costs.
The divergent indexes also carry implications for public policy design and monetary policy communication. Because the HLPI incorporates household interest payments, it offers a different lens on living‑cost pressures than the CPI; policymakers and regulators using CPI‑linked instruments or indexation formulas should account for that compositional difference when assessing real purchasing‑power outcomes for discrete household groups. That is particularly relevant for settings such as New Zealand Superannuation and main working‑age benefits, which are indexed under the Social Security Act 2018 and typically reference aggregate inflation and wage measures rather than group‑specific living‑costs data.
For readers seeking the HLPI series and methodology documentation, see the Household Living‑Costs Price Indexes published by Statistics New Zealand, while the Reserve Bank’s monetary policy framework – set out in the Monetary Policy Committee’s remit under the Reserve Bank of New Zealand Act – provides the backdrop for how interest‑rate changes transmit into household borrowing costs and, in turn, the HLPIs.
The HLPI release referenced here covers the 12 months to December 2025, published by Statistics New Zealand on 2 February 2026.
Average household living‑cost inflation: 2.2% (12 months to Dec 2025).
Regulatory/data definition: HLPIs include household interest payments while the CPI includes the cost of building a new home.
Market condition: Interest payments for the average household fell 17.3% over the year to December 2025.
Confirmed procedural step: Statistics New Zealand published the Household Living‑Costs Price Indexes for the period to December on 2 February 2026.
