Seven things that got cheaper while prices rose

Source: Radio New Zealand

Sometimes it seems as though everything is just continually getting more expensive – especially when war in the Middle East sparks major inflation warnings.

But some things have become cheaper over the past 10 years, according to Stats NZ.

In comparison, general inflation as measured by the consumer price index, was up about 35 percent over the period.

Here are seven.

Audio-visual equipment – down 77 percent, telecommunication equipment – down 67 percent, computing equipment – down 51 percent

Economist Shamubeel Eaqub said it was not surprising that technology-related items topped the list.

“The way it’s recorded in the consumer price index (CPI) is it’s quality adjusted … there are two things going on. One is the actual price of the product, and the other is the improvement of quality of the product. Both of those things are happening at a great pace, particularly in things like technology.

“Computer equipment, telecommunications, audiovisual, those things are getting better over time and they have been relatively constant or falling in price so it’s the twin force that comes through.”

Infometrics chief executive Brad Olsen agreed.

“It’s not that the actual price of a computer has halved it’s more that what you get from the computer is a whole lot better. On a quality adjusted basis a decade ago your computer could do a lot but it wasn’t as smart, it didn’t have as many tips and tricks and everything else in it. Now, for probably relatively the same dollar price, you’re getting quite a bit more in terms of what it can achieve.

“It’s similar with telecommunications equipment – the clear example there is mobile phones. The quality adjustment there is enormous.

“Every year phones get a better camera, they get faster processing. In recent times, they’ve had AI interactions and a whole lot of other stuff besides.”

Direct credit service charges – down 30 percent

Olsen said banks had cut a number of fees in recent years.

“Effectively, the overall aggregate average for those direct credit fees are becoming smaller.

“A lot of people don’t pay the various fees at their bank unless they’re in a very particular type of account.

“Those that do … banks do try to lower those over time. So you’re not having to pay $5 every time you log into your bank account just to see your balance or anything.

“Effectively you are seeing those various banking transaction fees more generally pull back over time.”

Pharmaceutical products – down 10 percent

The removal of the prescription fee was cited as a big driver of the drop in pharmaceutical product prices.

“We don’t pay a lot for medicines in New Zealand,” Eaqub said.

Olsen said Pharmac’s suite of drugs was also expanding.

“You’d probably expect that to broadly continue … there’s a lot of expensive drugs around the world that New Zealanders are looking for. Government doesn’t have an endless bucket of money, but Pharmac does drive pretty good value in those areas, which is important, I think, for the overall costs that households might have to cope with.”

Purchase of new cars – down 4 percent

Eaqub said cars could be affected by a lack of demand.

Olsen said there was also a compositional shift and quality shift reflected in the data. “You’re getting much more efficient vehicles over time, their technology is of a higher standard and there are more safety features.

“Over time as well we have seen, certainly in the last couple of years, a bit of a focus around some of those cheaper entry models that are coming through.

“Some of the prices have been lower particularly over the last couple of years when you look at how many vehicles are being pumped out around the world and that sort of oversupply, particularly coming out of China, has been limiting price increases to a degree.

Early childhood education – down 3 percent

The introduction of the Family Boost policy, which covers a portion of many households’ childcare costs, may have been responsible for this drop.

Olsen said, overall, the data showed that it was unusual to see an outright fall in sticker prices.

“The closest example would be if Stats NZ was still looking at the price of, say, DVD players, they would probably have fallen 90-plus percent because there’s no demand.

“If you want an old vintage one you are probably getting it for $2 at the op shop or something … compared to what it might have originally retailed for. A lot of the time those that fall out of favour and which would have implicitly have had a big price plunge because there is no demand for them anymore, we just don’t collect the prices because they aren’t something that people buy.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand