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Prices Are Going Up. But Not Always for the Reason You Think · Making Cents

• 0:02
  Hey team, it's Francis.
• 0:03
  The cost of living has been going up again.
• 0:06
  Power prices, beef mints, even all these things that are costing us more and more money.
• 0:12
  And the problem is when all the headlines are screaming about inflation, you also end up with something called excuseflation, which is when a tough economy gets used as cover for other businesses to also hike their prices, even if
• 0:28
  they don't need to.
• 0:29
  Now I did do an episode on this a few weeks ago, but the TVNZ breakfast team were intrigued and wanted to know a bit more about it.
• 0:37
  So I went on and had a chat to them about it, including where I've been seeing this happening and also what we can do about it.
• 0:45
  I think it made for a good little chat and they also said that I could share it here with you.
• 0:50
  So enjoy and keep an eye out.
• 0:58
  As the cost of living climbs again, consumers everywhere are looking for ways to save a few dollars.
• 1:03
  But there's another trend you might want to keep an eagle eye on.
• 1:07
  Excuseflation, what exactly is it?
• 1:09
  Well, here to explain is independent financial journalist Francis Cook.
• 1:12
  Good morning.
• 1:13
  Good morning.
• 1:13
  Excuseflation.
• 1:14
  Explain please.
• 1:15
  Yeah, something that makes me a little bit annoyed frankly.
• 1:18
  I have to calm myself down every time before I start talking about it.
• 1:20
  But it's basically, you see, wall to wall headline inflation, right?
• 1:24
  And it's all true that inflation is going up and oil prices are all over the place.
• 1:28
  It sends prices for everything else up.
• 1:30
  But then there are some businesses that are not impacted by that and they look at this wall to wall coverage of inflation and cost of living and prices going up and think, oh well, if I put my prices
• 1:41
  up, this all just looks totally normal.
• 1:43
  Everyone knows prices are going up and so they have this perfect cover to keep on jacking those prices to things that are totally unbelievable.
• 1:50
  So everyone's just jumping on the bandwagon.
• 1:51
  We've got inflation going up already and what sort of ex are we seeing in terms of companies that are trying to do this?
• 1:57
  Oh, I have seen so many ads around recently and that's what triggered me to write about it.
• 2:02
  I was driving to a meeting, I heard one on the radio, I fell into a scroll hole later and I saw another one on my phone and it's things like when they say, you know, prices are only going
• 2:11
  one way, so quick buy this before prices go up even more.
• 2:16
  Or you see, you know, a gym advertising that, you know, cost of living is going up and quick get in because our prices are going up really soon.
• 2:24
  They're not using oil, they're Actually using.
• 2:26
  That sort of language to sell their products.
• 2:28
  Yeah, it's using fear as a sales tactic.
• 2:31
  Rather than saying anything good about what you're selling, it's just saying, oh, quick prices are going up soon.
• 2:35
  Get them while you can.
• 2:36
  Sort of feels like the equivalent of the Black Friday sales when it's got little things saying quick stocks limited or.
• 2:42
  Exactly.
• 2:43
  The countdown timers.
• 2:44
  How effective is this for actually preying on people's insecurities and fears?
• 2:48
  Unfortunately, fear is one of the best selling tactics they've got.
• 2:51
  It works very well, but it's a really tricky one because the Reserve bank has been been looking at all this and they've been tracking a lot of data that gives us a good idea of what's going on.
• 3:00
  They've been doing it since the 60s, so they've got a really good idea of trends.
• 3:04
  And they've found that businesses are more likely to put up prices quite quickly and not bring them down when costs go down again.
• 3:13
  And economists even have a name for that, rockets and feathers, that prices tend to go up like a rocket, float back down like a feather.
• 3:22
  So even when there is a reason to put prices up, they're very fast to put them up and very slow to bring them back down if anything changes.
• 3:30
  And are they working off the basis that they know that we know now that butter costs a lot, olive oil costs a lot, mince costs $30 a kilo and we're just basically all working off those metrics now?
• 3:42
  Yeah.
• 3:42
  It sort of becomes the new normal and it gives perfect cover for actually increasing it past what is justifiable.
• 3:50
  So an unfortunate thing is one of the best ways to fight back about this.
• 3:55
  It's going to sound too small, but please stick with me.
• 3:57
  It actually does work.
• 3:58
  Is shopping around.
• 4:00
  It sounds too small to work.
• 4:01
  It actually really does.
• 4:03
  And if you think I won't save that much, I won't bother.
• 4:06
  Congratulations.
• 4:08
  You've just played the game exactly how they want you to play it.
• 4:12
  Another thing that the Reserve bank has tracked is how businesses set their prices.
• 4:16
  The classic way to set price is undercutting your competitor.
• 4:19
  That's now not the main way anymore.
• 4:21
  They now watch customers and price tolerance as the number one thing rather than competitors.
• 4:27
  So how frustrating is it then that the advice is shop around and it's not something more powerful maybe influencing how this happens?
• 4:35
  I know, I know.
• 4:36
  I wish I had a better thing to give you.
• 4:39
  But basically, as individuals, it's shopping around, price comparing, using apps like Grocer and Price Pulse or Gatsby or whatever, and then maybe get in touch with your local MP and remind them that there's an election coming up and
• 4:52
  maybe you want this to be kept a bit of a closer eye on.
• 4:54
  Yeah.
• 4:54
  All right.
• 4:55
  Francis Cook, independent financial journalist.
• 4:56
  Always a pleasure to have you in the studio.
• 4:59
  This podcast can only give you general information about how things work.
• 5:02
  In most situations.
• 5:04
  It's not individual financial advice.
• 5:06
  If you're after that, a financial advisor is always the best bet.