Key Facts
- New Zealand’s annual inflation rate dropped to 4% in March, down from 4.7% in December.
- The Consumer Price Index (CPI) rose by 0.6% in the March quarter, slightly up from 0.5% in the previous quarter.
- Rents, house construction costs and council rates continued to rise in Q1 2023.
- The increase in the CPI identified for March was the smallest since June 2021, but still above the Reserve Bank of New Zealand’s target range.
- The largest contributors to inflation for the year were housing and household utility costs, followed by recreation and culture.
- Annual non-tradable inflation was at 5.8% in the March quarter.
- Annual, tradable inflation, was recorded at 1.6% in March.
- The RBNZ has been combating inflation by gradually increasing interest rates since October 2021; the Official Cash Rate (OCR) is currently at 5.50%.
Article Summary
New Zealand’s annual inflation rate has taken a dip, falling to 4% in March from 4.7% in December, according to Statistics NZ. However, despite this overall downward trend, prices continue to rise in some key areas including rents, house construction costs, and council rates. The March increase in CPI is the smallest since June 2021, though it remains high above the Reserve Bank of New Zealand’s (RBNZ) 1% to 3% target range.
The most significant contributors to inflation included housing and household utility costs. Rent prices experienced a notable increase of 4.7% in the 12-month period to March, a rate increase cited as the highest since September 1999. Other significant price surges were seen within the recreation and culture sector, primarily due to a sharp increase in accommodation costs and cultural services like cinema tickets, events, and subscriptions. Furthermore, the average price of cigarettes saw a significant increase, with a packet of 25 costing $54.27 in March 2024.
The RBNZ’s forecast has been exceeded by the annual non-tradable or domestically driven inflation, which was at 5.8% in the March quarter. This increase is due to the higher costs from rent, construction, and cigarettes and tobacco. Meanwhile, annual tradable or largely imported inflation was significantly lower at 1.6% in March. Despite the lower figure, the RBNZ’s forecast was slightly overtaken due to the higher prices of petrol and international accommodation.
In an effort to combat these inflationary pressures, the RBNZ has been steadily raising interest rates since October 2021. The Official Cash Rate (OCR) stands currently at 5.50%. The RBNZ projects that headline inflation will fall below 3% in September 2023.
