Photo: 123RF
- Consumer prices was up 0.6% in December quarter
- The annual inflation rate was at 3.1% from 3.0%, the highest since June 2024
- Quarterly growth driven by fuel, airfares and telco services, offsetting cheaper food
- Higher food, electricity, rates and rents have driven an annual increase
- Underlying inflation remains about 2.5%, which backs the RBNZ keeping rates steady.
Inflation has edged higher on the back of higher fuel, travel, and telecommunication costs backing the view the Reserve Bank will hold interest rates steady for the medium term at least.
Stats NZ data showed the consumer price index rose 0.6 percent in the three months ended December, raising the annual inflation rate 3.1 percent from 3.0 percent, the highest since June last year.
"While the annual inflation rate has slowed considerably since its most recent peak of 7.3 percent in the June 2022 quarter, it has increased each quarter since the December 2024 quarter, when it was 2.2 percent," senior manager of prices Nicola Growden said.
She said price increases were widespread.
"More than 80 percent of the CPI basket increased in price over the past year - the highest proportion of increases recorded in 8 months."
Speaking at Rātana on Friday afternoon, Finance Minister Nicola Willis said the latest inflation figures backed restrained spending.
"We were right last year to resist the calls from some political parties to be spending a lot more money. That would have put a lot more pressure on inflation and we could have seen this figure go even higher."
Domestic pressures easing
Domestic prices - non-tradables - such as power, rents and rates remained the dominant factors for inflation, rising 0.6 percent for the quarter and by 3.5 percent for the year, but that was the slowest increase in more than four years.
The 12.2 percent rise in electricity prices was the single biggest contributor to the annual increase, followed by an 8.8 percent rise in rates, and then rentals rising 1.9 percent for the year.
Growden said annual electricity prices were at their highest since the late 1980s.
The costs of purchasing a new house rose 1.2 percent for the year because of competitive pricing and cheaper fit out costs.
The price of imported goods and services - tradables - rose 0.7 percent for the quarter and by 3 percent for the year, the highest since the end of 2023.
The imported inflation rise reflected the high prices of fuel, the seasonal increase in international airfares, as well the high prices being gained for export food such as dairy and meat, and more expensive overseas accommodation.
The inflation numbers were just above economists' expectations, and more than double the Reserve Bank's (RBNZ) dated 0.2 percent quarterly and 2.7 percent annual forecasts, which were made in November.
Various measures of underlying inflation pointed to an annual rate remaining steady at around 2.5 percent.
Expectations are the RBNZ has finished cutting the official cash rate, and the governor Anna Breman reaffirmed that was the most likely course, but emphasised the door would remain open for further cuts if the economy needed it.
The consensus among analysts has been the RBNZ will hold the official cash rate (OCR) at 2.25 percent until early next year.
However, there is a growing view that if inflation pressures are slow in falling, and a recovering economy threatens to add to them that the RBNZ may be forced to start raising the OCR as early as September this year.
New Zealand's inflation rate was lower than Australia, the UK and the OECD's average of 3.9 percent, but above the sub-3 percent levels of the US and the European Union.
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