Inflation hits 5.9%, biggest movement since 1990

Source: 1News

Inflation has hit 5.9 per cent - the largest increase in three decades.

New Zealand bank notes (file picture).

The consumer price index - which measures the cost of goods - increase covered the December 2020 quarter to the December 2021 quarter.

“New Zealand is not alone, with many other OECD countries experiencing higher inflation than in recent decades,” Stats NZ's consumers prices senior manager from Aaron Beck said.

The Stats NZ report attributed the "main driver" for annual inflation to housing and household utilities as prices for construction and rental properties seeing steep increases.

Prices for construction of new dwellings rose 16 per cent in the December 2021 quarter compared with the December 2020 quarter.

“Construction firms have been experiencing supply chain issues, higher labour costs, and also higher demand, which have pushed up the cost of building new houses,” Beck said.

He added that the inflation rate for construction prices has been "much higher in 2021 than we have typically seen in previous years".

In addition, house rental prices were 3.8 per cent higher in the December 2021 quarter compared with the December 2020 quarter.

Regionally, rental prices rose 5.5 per cent in Wellington, 3.3 per cent in Canterbury and 2 per cent in Auckland.

The second largest contributor to annual inflation was transport as prices increased for petrol and second-hand cars.

Petrol prices saw a sharp 30 per cent increase in the year to December 2021 quarter, with the average cost of 1 litre of 91 octane petrol rising to $2.45 compared with $1.87 per litre in the December 2020 quarter.

”Global fuel prices fell in early 2020 as the Covid-19 pandemic first took hold,” Beck said.

“Fuel prices reached pre-Covid levels early in 2021 and have continued rising to record high prices.”

The purchase of second-hand motor cars, meanwhile, increased by 12 percent in the year to the December 2021 quarter.

Prime Minister Jacinda Ardern said New Zealand was not alone in experiencing high rates of inflation.

"Those are very much predicated on a global environment."

She said oil prices and international tensions that impacted oil prices was a factor.

When asked if Government had considered cutting fuel tax, Ardern said they were keeping an eye on the market, "but New Zealand is alongside every other country who is experiencing exactly this issue when it comes to oil prices".

ACT’s David Seymour said the record inflation meant New Zealanders needed a tax cut.

“The cost of living for New Zealand families is through the roof. Rents are up, mortgage rates are on the rise, the cost of food is up, petrol is up, but wages aren’t keeping up,” he said.

“Kiwi battlers are being squeezed from all directions and they need some tax relief.”

Annual domestic inflation at 5.3 per cent

Domestic, or non-tradable inflation - which measures goods and services which do not face foreign competition - was 5.3 per cent in the year to the December 2021 quarter.

The rise was influenced by higher prices for purchasing housing, house rentals and local authority rates, which was partly offset by telecommunication services.

Quarterly inflation at 1.4 per cent

The consumers price index rose 1.4 per cent in the December 2021 quarter following a 2.2 per cent rise in the September 2021 quarter.

The rise was mainly influenced by higher prices for housing and household utilities, which is up 2 per cent; transport, which is up 3.9 per cent; and recreation and culture, which is up 2.1 per cent.

It was partly offset by lower prices for food, which is down 0.7 per cent; and alcohol and tobacco, which is down by 0.3 per cent.