Economists fear inflation will push already struggling families over the edge as soaring prices barely budged in the latest Statistics NZ figures.
Despite ongoing efforts to bring inflation under control, the consumer price index figures released on Tuesday showed it remained at more than 7 percent year on year.
Infometrics principal economist Brad Olsen told AM Early the cost of living crisis was hitting people where it hurt.
"What concerns us is that very broad base of inflation," he told host Oriini Kaipara. "We knew that food prices, rent prices [and] building costs were all higher but it was the other areas where we saw the fastest rise in property rates since 1990 [and] quite large gains for early childhood education, for example."
Tuesday's yearly inflation figure of 7.2 percent was the second-highest it had been since 1990, only behind this year's June figure of 7.3 percent.
In a bid to cool inflation, the Reserve Bank (RBNZ) has raised the official cash rate (OCR) to 3.5 percent from 0.25 percent in August last year - the last five moves being strong 50 basis point hikes.
"When we looked through the numbers yesterday, there were no signs of relief on the horizon and that does cause alarm bells, given how hot inflation is but also how much work has already been done to bring inflation under control - with no real signs we're getting any bang for our buck their yet," Olsen said on Wednesday.
"There is now a likelihood that inflation could push even higher than it is at the moment, prices will rise and we're seeing some really challenging concerns over, 'How do we get this under control?'"
Olsen also had a stark warning for borrowers, saying the Reserve Bank was likely to further ramp up its OCR hikes.
"We've changed our expectation now for the Reserve Bank to make an unprecedented 75 basis point increase to the official cash rate when they meet in November - that'd be the first time they've raised by 75 basis points in New Zealand's official cash rate history.
"The view now is that if you push up that high now, you're also going to have to continue to push higher into 2023 - and expectations now [are] for the official cash rate may be to end with… some sort of peak later next year."
With the OCR tipped to rise further, Olsen believed mortgage holders were facing one-year fixed interest rates of 7 percent or more.
"What we do know, and what we are concerned about, of course, is that a lot of buyers who have purchased over the last few years when interest rates were incredibly low are now going to have to be servicing substantially higher mortgage repayments in the order of thousands, if not tens of thousands of dollars, a year," he said.
"It is those who've got in most recently - those young first home buyers - who are most at risk."
Tony Alexander, an independent economist, said inflation would drop eventually - but when remained unclear.
"We know inflation is going to go down but with every tightening cycle like this, we never know how quickly it's going to happen," he told Newshub Late on Tuesday.
He said domestic inflation was still "much too high".
"While we can attribute a lot of what is happening to the international oil prices [and] food prices going up, with our economy short of resources - labour in particular… there's a definitely a too large domestic item behind the increases.
"The light, I think, is mainly in about 12 to 18 months' time that we can anticipate interest rates coming back down again. The thing we know, as economists, is central banks will always crush inflation in the end - it's a matter of, 'How high will interest rates have to go?'"
