The latest CPI figures show that New Zealand household costs are more than $31 a week higher than they were a year ago, National's Finance spokesman Bill English said today.

A 1.2% rise during the December quarter has pushed the annual rate of inflation to 4%, well in excess of the Reserve Bank's 0-3% target band.

Applying the CPI increases over the course of 2000 to the average weekly expenditure of a Kiwi family indicates that during the calendar year 2000 household costs rose by around $31.50 a week *.

"Wage increases have failed to keep pace with inflation and that has caused a real decline in spending power," Mr English said.

"Much of this can be directly sheeted home to the Government. Excise increases and price increases due to the low exchange rate have hit Kiwi families hard.

"In real terms, the average Kiwi worker was 1.5% worse off in December 2000 than they were in December 1999. Compare that with the recessionary period during the Asian financial crisis and successive droughts when real incomes continued to rise.

"The last time real wages fell was during 1995 when the housing market was booming. At that time households were compensated by rising house prices. This time around households are suffering the added pressure of falling house prices.

"The Reserve Bank has a difficult balancing act to perform. In any future interest rate decisions they need to weigh up the fledgling domestic economic recovery, inflation that is becoming more generalised, likely future wage demands as households attempt to restore their spending power and the weakening external environment which has already prompted the US Federal Reserve to cut interest rates," Bill English concluded.

Ends

* calculated using data from the Household Expenditure Survey and CPI including interest rate changes.

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