New Zealand’s headline inflation rate fell to 2.2% in the September quarter, landing comfortably within the Reserve Bank's target range for the first time since March 2021.
Statistics NZ said the consumer price index rose 0.6% during the quarter, bringing annual inflation from 3.3% to 2.2% after more than a dozen quarters above the Reserve Bank's 1%-to-3% target range.
“Prices are still rising, but not as much as previously recorded,” Stats NZ consumer prices manager Nicola Growden said.
Weaker headline inflation has been driven largely by declining prices among imported products. These ‘tradable’ prices dropped 1.6% in the past year, and 0.2% in September.
Prices for goods and services that do not face international competition continued to climb at a relatively fast pace. These ‘non-tradable’ prices were up 4.9% annually, and 1.3% during the past three months.
More than half of the quarterly inflation number was made up of an increase in local authority rates, which rose more than 12% — the largest increase since 1990.
Rate hikes are captured once a year in the consumer price index, when ratepayers see the increase, and results in an elevated data print in the September quarter.
Other large contributors to the quarterly result were food prices which rose 1.3%, tobacco and alcohol up 0.6% due to tax indexation, and actual rents which rose 0.9%.
Meanwhile, petrol prices almost offset the increase in rates with a 6.5% drop—helped by the Auckland fuel tax being scrapped—and early childhood education costs falling 22.8%.
Stats NZ has measured the price of early childhood assuming parents received the full tax rebate offered by the Coalition Government in Budget 2024. However, not all families have actually applied for the rebate.
If the FamilyBoost scheme was not included in the data, the quarterly price of early childhood education would have increased 6.9% and non-tradable inflation would have been up 1.5%.
Another policy change impacting the quarterly data was the re-introduction of a $5 charge for prescription medicines, which pushed pharmaceutical prices up 17% and added to inflation.
From last year
Annual inflation had a slightly different mix of key drivers. Almost 60% of the increase was due to housing costs, with rents up 4.5%, energy costs up 6%, and property rates 12% higher.
Alcohol and tobacco prices were up 6.3%, making up almost 20% of all headline inflation, due to indexed tax increases. Health costs were up 8.7% but not just due to the co-payment.
Insurance was the other large driver of annual inflation. Premiums rose 12.9% and contributed 17% of the overall inflation number.
In a note written prior to the data release, ASB economist Mark Smith said many of these price increases were “cost shocks in specific sectors” and underlying inflation was likely already running below 2%.
This should support the case for the central bank continuing rate cuts, although it would not provide any obvious reason to pick up the pace.
ANZ economists said getting inflation into the target band was good news for monetary policymakers, but warned it would still be too early to crack open the champagne.
“We hate to be party-poopers, but non-tradables inflation is still way too high, meaning if the sound of corks popping does resonate through the RBNZ building next week, they’ll be celebrating global disinflation progress just as much as their own,” they said.
82 Comments
Yeap that at times quite murky with one off costs and exceptions.
But I read that summary as 'core' inflation is already well under two. You only have to strip out that inflated rates hit and it is, let alone others.
I think we could really be looking at minimum 150 bps cut across next two OCR announcements.
These are tiny sums compared to what even fixing the water pipes is. To say nothing of all the other infrastructure that Wellingtonian's have swept under the carpet for many years to keep their rates low.
A Rookie distraction. And a silly one.
Question for you all: Does government pay rates in Wellington?
Good question. I looked into this a while ago and found that the Crown is exempt under the Local Government (Rating) Act 2002.
Most of the office spaces occupied by public sector agencies/ministries are privately owned and leased to those occupants, so I suppose rates will apply. Buildings on Parliament ground, MBIE office, courts, etc. are exempt from paying council rates. These are prime properties occupying several hundred hectares of land.
I would think that provision alone puts WCC and GWRC out of pocket by millions of dollars each year.
Yup. It's millions and millions each year.
And it's been going on at least 2002 (and before if memory serves).
If our government thinks this is a good thing, Wellingtonians (and everyone else!) should be asking why this government was handing out tax cuts to private landlords ... Just saying.
@ Chrisofnofame - Well you certainly don't get cheaper rents by continuing to add constant costs to a landlords pockets that's for sure. That's how a charity works. Rents increased over 60% under the last government, at a rate of 2.5x faster than the government prior to them....Just saying.
Hmmm ... If central government had to pay rates (and I think they should as they consume the services provided by Wellington Council, which are in turn paid for by Wellingtonian rate payers) then the cost - to say nothing of the massive continuity risks - of having central government in Wellington would need to be re-examined. They could, as most other countries have done, move central government to a lower cost city or province.
Chances of that happening under this government? Zero!
Or maybe not - let's not forget Luxon sold his Wellington digs. Maybe he knows something we don't?
@GV - I don't know the answer here and I don't really like to wish ill on anyone especially not anyone in Wellington - part of me think intervention.... part of me think make your bed and lie in it after all it was democratically voted for - this might be example of ideology that has gone wrong and a case study of how we can improve the capital and NZ.
Someone posted on here a week or so back that any central government intervention is motivated by being anti a “Green Council”being put in power in Wellington. Does that mean in turn that it is acceptable for any council or similar body, to be inept, spendthrift and incompetent so long as it is “Green?”
On NewStalk ZB this morning Chris Hipkins bet Nick Mills $ 1000 that he'd still be Labour leader in 2026 when he wins the General Election ...
... I nearly spat my weetbix all over the radio ... before I fell on the floor and rolled around larfing my Gummy butt off ...
Hey Foxy : A glorious day here in the Waimak ... the finest remedy for an incompetent mayor is to do absolutely nothing ... let the people who voted them in / or the ratepayers who couldn't be bothered to vote ... let them suffer the consequences of their actions ... it's called " tough love " , but its 100 % necessary to kick ratepayers up the butt to make smarter choices next time ...
@ Gummy Bear Hero - "Tory Whanau is all over it , Gareth ... sitting at home , clacking away on her PC ... possibly battling her 6'th reported Covid19 infection ..."
Impossible. The experts all told us if we got our two shots for summer that you couldn't get Covid19. The CEO of Pfizer Anthony Fauci & our very own government at the time all told us so. We've not heard anything different since? No public apology saying they got it all wrong? So it can't be Covid that she's got, especially not 6 times. Statistically impossible the experts say lol.
Ah, two shots for summer. The good old days when thats all it was going to take to make all our problems go away ...
Yes the experts were spouting baseless dictates based on nothing.... Quelle surprise
Anway, Knighthoods asap!! For all of them ! And lets get them on a leadership speaking circuit!
We would love to listen to how they oversaw all the division, fearmongering and in helping bring the country to its knees firsthand!
Who will pay for all the bursting pipes and more. At some point, and it is hardly an unusual situation in Wellington, ratepayers are going to have to react to the fact that if they elect councillors that are lacking in both acumen and commonsense their municipalities are going to be stricken with policy that is implemented to the same tune. Exacerbating that there are inevitably likeminded factions within the bureaucracy that bond in a typical birds of the feather flock together manner. The people are responsible for their own democracy but if they are apathetic, the majority don’t even vote at all, then one way or another they will have to pay for what they get.
So 'real' inflation still just under 5%...most of the reduction in 'getting lucky' items..imported fuel costs & favourable growing conditions for food etc.Are road user charges part of the basket?Removing the fuel tax decreases fuel costs,but the RUC's transfer the cost elsewhere.
"If the FamilyBoost scheme was not included in the data, the quarterly price of early childhood education would have increased 6.9% and non-tradable inflation would have been up 1.5%."
Its designed to promote a lack of claims. No reminders or publicity that it was live and available.
It Needs you to have time to sit a at a PC and you have to download and then upload weekly invoices from last three months. All for about 250 bucks.
You watch - the middle classes will claim the cash to give themselves a wee treat while those poor tired people that can barely afford nappies will miss out.
To top it off, miserable keyboard warriors with heaps of time on their hands will then blame them for being lazy.
https://www.nzherald.co.nz/nz/early-childhood-council-ceo-simon-laube-o… Hosking running intereference on any criticism here. Man basically leads the scheme's boss into three questions of 'Aren't you and the scheme great'. No depth, no balance, no nuance. Staggers me how he gets away with it.
It's a bit perplexing how they reached those figures for childcare costs. Family Boost only allows for people who meet a certain criteria for early childcare. If anything, Family Boost by offering a percentage rebate will be *driving* ECE costs higher as providers are able to now charge more and will likely increase their prices at a higher rate than they would have if the government rebate was not being offered.
All I'm saying is I can't avoid paying rates,insurance etc.The OCR should be reduced heavily,but my point is,this allows the pollies,local government & other monopoly suppliers in NZ to hide behind the "inflation war is over' rubbish when they are still gouging us.Inflation is a measure of increase in prices,the increses of the last few years are now baked in,the baseline costs for Joe & Mary Bloggs now have a new floor.
Like I said,all for lower OCR,just need to keep a lid on house prices,so we don't start the cycle all over again.
@ Vman - Well people now have less to spend, have burnt through most savings buffers, and will take much longer to recover.
So a dropping in OCR will take a while to filter through to people's pockets. The interest rates then have to drop, & people have to come off their fixed rates first. Even then, the additional money will likely be spent on recovering from harsh economic times first, before people start lining up to buy large ticket items like houses. A small dropping of the OCR is highly unlikely to suddenly see bucket loads of high end spenders all out in force buying up houses like there's no tomorrow. That's typical scare tactics. People are generally poorer now than they were over half a decade ago.
There's been articles plastered all over showing cases like more people having to take on an additional job just to pay bills, people have had to take out personal loans just to cover the power & internet, a majority of people have no burnt through their post Covid savings ect. Each time we come out of a recession we get poorer, not richer, & it takes longer each time to recover. Its not a sudden spring back. Hence the investment saying "The bull comes up the stairs while the bear goes out the window". Our markets fall faster than they rise, but they rise further than they fall.
If we were getting richer with everyone buying up houses like some lolly scramble, then our home ownership rates in this country would be rising, because it would be so easy to access a mortgage. But our home ownership rates are at the lowest in over 70 years.
Jeez…way to ruin the good vibes 😕
I’m not saying you’re wrong…but I’ve read on here that the latest OCR cuts are inflationary so that means there is overwhelming demand out there (somewhere) so surely no risk of a depression…shit, with this demand being grunty enough to get inflation roaring back to life how could we even have a recession 😉
In terms of what I "feel" is more expensive for my household, it's really just council rates (and Chch isn't as bad as some) and insurance.
Insurance I'm responding by changing policies to 3rd party for lower value vehicles (my wife's car was approaching 40% of the vehicle's realistic private sale value for comprehensive) and shopping around for other policies.
This is a better place to repost the comment below from almost exactly two years ago:
by Yvil | 13th Oct 22, 12:38pm
DELAY, it's all-out delay and few seem to understand this point.
Delay between the RB raising the OCR and mortgages coming to their term, people re-fixing and then, after a few months realising how much less money is left on lattes. Yes people know the squeeze is coming, but many only adjust their spending when they are really forced to. The squeeze on spending from the increasing OCR is only going to start being felt in 2023
Delay between the rising OCR and the CPI stopping rising. Remember, the CPI is being measured year-on-year, meaning that any inflation from the last 9 months and there's plenty, is also included in the latest CPI figure. In conclusion it will take even longer for the CPI to stop rising and it will only do so meaningful when the 2023 first quarter CPI rise drops out, in other words when the 2024 first quarter CPI will be released, which will be in... May 2024 !!! So it's pointless expecting a meaningful drop in CPI before May 2024.
In conclusion, because of the delay explained above, the OCR is going to get raised far too high (most likely 5%), NZ will be in recession in Q1 2023 but this will only be reported in the GDP in June 2023 (we're so slow in NZ) by then CPI will be lower but not yet in the target range of 1-3%, the next set of data will be Q2 GDP deeply negative reported in September 2023, inflation confirming its continued drop towards 1-3% reported in August 2024 and then, the RB will panic and drop the OCR back down aggressively.
So expect a much lower OCR by end of 2024 after a likely peak of 5% earlier in the year.
Interestingly - the new government was right they have taken measures to reduce inflation.
Notably the reduction in childcare costs (with the childcare rebate) and fuel costs with the removal of the fuel tax.
Now we just need to wait for local government and insurers to join the party.
The dysfunctional relationship between our central government & local councils is a big part of the nation's malaise ... if they can get on the same wavelength we'll see vast progress ...
... but , how on God's green earth can any government work with the series of incompetent twats Wellington votes in as it's mayor ...
Non tradeables at 4.9% and 5.2% annualised is concerning to say the least. Tradeables mainly driven by falling prices of oil and may be on the precipice due to the conflicts in the middle east.
Dropping OCR too much is likely to fuel the fire. The FED is not likely to drop much either on the back of their results so.... rock and a hard place RBNZ.
Non-tradables less central & local government charges is running at 4% YoY and the last two quarters at 2.4% annualized.
Trimmed means are about 2.5% YoY. Median is 2.8%. We'll see what the RBNZ core measurements look like at 3pm.
I think this is a good print that is consistent with the view that 'market based' prices have normalized and there are a few idiosyncratic hotspots that are not tightly coupled to monetary policy.
Israel has announced it will not strike Irans crude oil facilities, which is why we are seeing oil prices tank in the last few days. Israel has also announced a USA warning for resolving the Gaza conflict within 30 days or face the repercussions of an arms embargo. De-escalation efforts are in force which would result in overall lower fuel prices. We’re currently entering deflationary settings , and Canada’s new CPI print is a good predictor of what could come for other countries in the next few months. I wouldn’t bet on inflation taking off again anytime soon.
I agree. Our economy is going down the sh*thole and I do believe the OCR is contractionary.
That being said, I don't think recovery is on the cards without major structural reforms requiring tens of billions. If we continue taking on cheaper debt from foreign lenders to buy houses from one another at higher prices, expect NZ living standards to slide down even further.
The bulk of what we buy and/or consume in NZ has a significant 'tradeable' component. (No doubt those with the numbers handy will help out here.) It is really damn hard to split a CPI measured product into either tradeable or non-tradeable. And yet they do it.
What does this mean? By way of demonstration, lets assume that 50% of what we buy and/or consume is tradeable. If 50% is going up by 1% per quarter, and non-tradeable - the other half - is going up by 4% what's the inflation rate?
Why do people, especially the RBNZ, fixate so much on this tradeable vs. non-tradeable split? Other countries don't. Maybe because they know such measures are largely so full of crap it's simply laughable to do it?
Oh ... And I should also mention that the non-tradeable measure is a lagging indicator. How many know that?
"We are yet to see the full impacts of tightening" ... True dat.
If the RBNZ slashed the OCR to 2.5% it may immediately help reduce the working capital costs for many businesses, which may in turn help some to survive. But they couldn't leave it at 2.5% without the herd rushing into inflationary purchases.
Slow and steady around the neutral rate is how the OCR should move - not the big lurches this RBNZ likes.
And now that the CPI has been tamed, it's time to control the main driver of financial stress in our economy, euphemistically called Capital Gains and not Inflation.
Drop the DTI Ratios down to 4 and LVR's to 50% for starters, and let's see how that goes. Hopefully we can all cheer as enthusiastically on that day as we are doing today. It's not the Price of Debt that matters so much, but what we do with it.
100% Agree.
The RBNZ must cut hard. To avoid re-igniting the Ponzi, they must also tighten LVRs and DTIs while ignoring the whining, squealing and howls of outrage from the Australian banks.
Will that be enough? Maybe in the very short term. But until our hopeless government rebalances the tax system we're basically screwed.
Should they also ignore the whining, squealing and howls of outrage from first home buyers who will have no chance of meeting strict LVRs and DTIs?
Those tools are terrible IMO. If there was a lack of bread, should we reduce bread demand and prices by saying only rich people may buy it? Or should we leave the high prices in place to encourage the market to make more bread?
There's little to no evidence of these sorts of measures making housing more affordable or attainable for the lower rungs.
Let's pump them anyway.
The only thing wrong with your bread example is there's less expensive caveats lifting the price of a load than for housing.
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