Kiwis struggle as Reserve Bank outlines plan to cool inflation

Kiwis are continuing to do it tough amid the cost of living crisis, as the Reserve Bank today outlined its plan to get inflation under control.

Chocolate maker Le Petite Chocolat is among the many retailers finding the recession hitting hard.

"Business has slowed down obviously, especially the foot traffic and the retail spending overall is affecting us," La Petite Chocolat's Selcuk Gider told 1News.

He said while customers popping in for a sweet treat for themselves "has dropped a bit more", gifting for others "is still going".

Secondo Boutique in Thorndon has also seen a drop in customers.

"Foot traffic is a lot smaller than before — up and down but definitely a lot slower," owner Megumi Woolford said.

As prices increase, shoppers have cut back.

"Normally I would go for something a bit nicer," one shopper said.

"I shop for less items, try to mix and match a bit more," another added.

Deputy Reserve Bank Governor Paul Conway outlined the challenges faced by Kiwis as the central bank announced its plans to reduce inflation.

"Good progress is being made in bringing inflation back to target but increasing spare capacity in the economy is likely to further reduce inflation pressures," he said.

The unemployment rate would need to increase to bring inflation back down to 2%.

Westpac economist Satish Ranchod said while the number of people losing their jobs "has picked up", it's "still only around average levels".

"That's going to be tough for a lot of families, but it could be even worse if we don't get inflation down," he said.

"That erodes everybody's living standards."

Businesses have also been told by the central bank to stop hiking prices.

It comes as Kiwis will learn if the country will officially remain in a recession following the release of the latest GDP figures tomorrow.

While the economic mood appears grim, there are some glimmers of hope.

The country has seen its smallest rise in food prices in five years, increasing by just 0.2%.

There's also more than $120 billion worth of infrastructure spend in the pipeline.

"Infrastructure has been ramping up, but cost increases have been massive," Ranchod said.

"I think there'll be a big focus now on cost control. That'll be a tough balancing act."

Ranchod said the "big issue now is how much further we can see it drop back".

"In areas like groceries, people are actually choosing to maintain their spending but they're shifting out of those 'nice to haves' and focussing more on value for money."

Woolford said she's had to make some changes to ensure her business stays afloat.

"It's almost like surviving, really. I decided to start taking more menswear as well and try to do more social media," she said.

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