Inflation in New Zealand has hit a steeper-than-forecast 7.3%, its highest level in three decades, with households facing hefty jumps in food, petrol and housing costs.
Stats NZ has released its quarterly consumers price index for the three months leading up to June. Inflation rose from 6.9% in March to 7.3%, with food up 1.3% and 2.3% rises in transport as well as housing and household utilities.
Major banks, including ANZ and the Reserve Bank had predicted inflation would come in at 7% or 7.1%. Infometrics forecast the 7.3% rate, which is the highest since June 1990.
Housing and household utilities were the top contributors to both quarterly and annual inflation, Stats NZ reported, with the main drivers being an 18% jump in construction costs in the June 2022 quarter compared with same period last year, and rent increases.
“Supply-chain issues, labour costs, and higher demand have continued to push up the cost of building a new house,” said Jason Attewell, Stat’s NZ general manager.
The next largest contributor was transport, with an annual increase of 32% to petrol prices and a whopping 74% increase to diesel prices.
The rise in transport was partly offset by falling prices for road passenger transport, international air fares, rail passenger transport, secondhand cars, and other private transport services, which includes road user charges, Stats NZ said.
“Half-price bus and train fares came into effect from 1 April and prices for road user charges were reduced from 21 April. These price falls were reflected this quarter,” Attewell said.
Those measures could continue to help offset some transport costs, after the government announced on Sunday it would extend half-price fares and reductions in fuel excise duties and road user charges until 2023.
The reductions, initially designed to last three months, were announced in March to help combat cost-of-living pressures as global oil prices soared.
Food prices continue to rise, up 6.5% annually, and up 1.3% from the previous quarter.
Non-tradable inflation, which measures goods and services that do not face foreign competition and is considered a measure of domestic inflation, hit a record high of 6.3%.
The domestic figure was worrying, said Brad Olsen, an economist at Infometrics.
“The fact that you’ve got that … domestically based inflation figure now running at its fastest since records began in 2000 underscores just how much pressure the economy is in,” Olsen said, adding the push to build housing and a lack of rentals means “New Zealand’s economy is trying to do too much, with too little resources”.
Tradable inflation, which measures goods and services that are influenced by foreign markets, also hit a record high of 8.7%.
Economists expected food, fuel and housing costs to be higher, but what was unexpected was the broad increase in prices across other items.
“[That] culminated in 66% of all items that Stats NZ monitors having increased in price – the largest number of items recorded increasing in price since at least 2018,” Olsen said.
The broad consensus among economists is that New Zealand will now be nearing, if not hitting peak inflation, but the decline in prices will be slow.
“Realistically, I think it’s going to stay persistently and stubbornly at that higher level for a lot longer than people would want, or expect,” Olsen said.
The Reserve Bank is under pressure to cool the economy, including raising the official cash rate further at its next meeting, Olsen said.
“The strength of today’s inflation number does give us pause for thought over whether a 75 basis point increase – like the US and Canada have done recently – might be on the cards here in New Zealand.”