Labour's deputy leader Carmel Sepuloni says the government is blaming local councils for the rising cost of living, after Finance Minister Nicola Willis announced a plan to stop councils from raising rates by more than 4 percent a year.

"The government are being overly simplistic," Sepuloni said. "They can't address the cost-of-living pressures, so they're trying to put the blame on council" (RNZ).

Rates are the regular charges councils collect from property owners to pay for local services like rubbish collection, libraries, roads, and water. If you own a home or rent, rates are part of what you pay — directly or through your rent.

The argument comes after StatsNZ figures showed the cost of living rose 4.1 percent over the past year, the biggest jump in more than two years. Electricity prices went up 12 percent and rates went up 9 percent, both pushing that number higher. Willis called it a "Trump spike" — meaning an international oil price shock she said the government could not control.

Willis said the rates cap was a direct response to council increases. "We have seen excessive rate increases, and we're not prepared to tolerate that," she said. She also pointed to other changes the government is working on, including restructuring councils to cut bureaucracy and rewriting the Resource Management Act (the main law that governs how land is used and developed in New Zealand) to reduce council costs.

Sepuloni fired back that councils raised rates because their own costs were going up. She pointed to Auckland Council's recent rates rise of nearly 8 percent, which she said was partly driven by the rising cost of the City Rail Link project. "Where would they have ended up if they couldn't increase their rates?" Sepuloni said.

The broader context here is a political fight over who is responsible for the cost of living. Willis is saying the government's hands are tied by global factors, and that councils are spending too much locally. The rates cap turns that view into actual policy. Sepuloni is trying to show that council costs are connected to things the government has not dealt with.

For people who work in politics and local government, this dispute signals the rates cap will be a hot topic heading into the 2026 election. Councils dealing with expensive infrastructure projects will argue that a 4 percent limit does not match what it actually costs to build big things like transport networks. The government says its law changes will save councils money, but it is not yet clear whether those savings will arrive in time to help.

The Labour Party has made the cost of living a priority, with a "Real action on the cost of living" page on its website (Labour Party). Sepuloni's 2026 candidate profile page is also live on the party's site (Labour Party), and she gave a speech to the Labour Party Conference 2025 (Labour Party).

The Reserve Bank of New Zealand released its price data on 13 July 2026 (Reserve Bank), giving the economic backdrop to this political argument.

The divide is now clear: the government says council rates are pushing up household costs and wants to cap them. The Opposition says councils are passing on costs the government has failed to manage, and that capping rates without fixing the underlying problems would leave local infrastructure short of money.