Rising food prices look set to have a wide effect throughout the community as households reassess spending priorities - with predictions of worse to come.
Statistics New Zealand figures released yesterday showed food prices rose 6% in the year ended March. The most significant contribution to the rise came from the grocery food subgroup, up 9%.
Higher prices for cheese (up 44.2%), fresh milk (up 21.7%), bread (up 12.2%), butter (up 82.2%) and ready-to-eat meals (up 5.8%) stood out as the major contributors to the annual rise in food prices.
The news is not likely to get better, with fruit and vegetables rising 3.1% in March.
Food, housing and transport costs were the major drivers of inflation, rising to 3.4% for the year ended March, up from 3.2% in December. Food contributed 1.8% to inflation, housing 1%, petrol 4% and education 3.9%.
Oil hit a high yesterday of more than $US110 ($NZ138.50) a barrel, which could see a rise at the pumps this week.
Bank of New Zealand senior economist Craig Ebert predicted worse was to come.
‘‘Food prices are rising despite the strength of our dollar. We can thank our lucky stars we are not in the less developed nations where rising food prices have become a huge political issue.
‘‘Rice prices doubling, or even tripling, have caused food riots. This reinforces there is a lot of inflationary pressure in the world and we are not immune.''
As the New Zealand dollar fell, food prices would go up, putting further pressure on household budgets, he said from Wellington.
Because supermarket margins were already tight, increased prices for imported goods would be passed on to shoppers rather than be absorbed.
Unfortunately, all the price rises were coming in staple household spending, something most people could not opt out of, Mr Ebert said.
‘‘The only areas prices are falling are in discretionary items, such as your computers, electronic gear and travel.''
Family First New Zealand repeated its call for an urgent assessment of the price rises on low and middle-income families.
National director Bob McCoskrie said financial pressure on families placed pressure on relationships and the health and wellbeing of children.
Dunedin financial planner Craig Myles said the higher living costs could start to hurt the take-up rate for KiwiSaver.
‘‘As the economy starts to tighten, as it has done in the past few months, people will want more money in the hand rather than considering long-term saving.''
