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Tobacco tax hike drives up cost of living for beneficiaries, Maori

Monday 29th April 2019

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The government's annual 10 percent hike on cigarettes and tobacco was most keenly felt among the country's poorest, resulting in a higher cost of living for beneficiaries and Maori. 

Stats NZ figures show the cost of living for beneficiaries rose 0.6 percent in the three months through March, and rose 0.4 percent for Maori. The national average increase in the cost of living for the period was 0.1 percent.

The government department said that was primarily due to more expensive cigarettes and tobacco, which typically account for 4.1 percent of a beneficiary's household spending, 4.8 percent of spending in a Maori household and 2.5 percent across all households. 

"One cigarette cost about $1.50 in the March 2019 quarter, up from about 54 cents a decade ago, partly a result of regular excise tax increases over the past 10 years,” consumer prices manager Gael Price said in a statement. 

Tobacco excise has increased annually since by 10 percent plus inflation since the previous government introduced the Smokefree Aotearoa 2025 target in 2011. In December, officials cited their impact on Maori and Pacific households when advising the government not to extend the legislated increases when they end in 2020.

Crown financial statements showed the government's tobacco excise revenue was tracking $179 million ahead of forecast at $1.63 billion for the eight months through February, though that was still down from the $2.68 billion it received in the year-earlier period. 

Government data last month showed March-quarter consumer inflation came in below expectations at an annual pace of 1.5 percent and would have been even lower had it not been for the annual tobacco tax hike. 

Cheaper petrol and international airfares benefitted the higher-spending households in the March quarter, with the fourth and fifth quintiles registering a 0.2 percent decline in their cost of living in the March quarter. Similarly, the fourth and fifth quintiles by income saw no change in their cost of living. 

Price said international airfares accounted for about 2.8 percent of spending by top-quintile households, compared to 1.5 percent for all households. 

On an annual basis, the cost of living for all households was up 1.4 percent in the March quarter, slowing from the 2.1 percent pace in the December quarter. Beneficiaries and superannuitants faced the biggest increases at 1.8 percent, while the highest spending households registered a 1.1 percent increase in their cost of living. 

Labour data out later this week is expected to show a 0.5 percent quarterly pace of wage growth in the three months through March, for an annual increase of 2 percent. 


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