The inflation rate has continued to fall with the latest figures from Stats NZ revealing that the annual Consumer Price Index (CPI) increased by 4.7% for the December quarter, the smallest annual rise in over two years.
The CPI is an annual measure that reflects changes in the price of goods and services.
It's down from a 7.3% peak in June 2022.
The Consumer Price Index rose just 0.5 per cent in the three months to December. (Source: 1News)
“While this is the smallest annual rise in the CPI in over two years, it remains above the Reserve Bank of New Zealand’s target range of 1 to 3 percent,” consumers prices senior manager Nicola Growden said.
Despite the annual drop, the quarterly inflation rate was 0.5%.
The quarterly inflation for the previous quarter, which ended in September 2023, was 1.8%.
The largest contributor to the quarterly inflation rate was housing and household utilities, mainly driven by higher prices for rent, construction and rates.
Rent prices increased by 4.5%, while construction and rates increased by 3.6% and 9.8% respectively.
Growden said "while the price increase in building a new house has fallen to 3.6 percent, it is 41 percent more expensive than pre-pandemic."
The next largest contributor to the annual increase was food. This was because of increases in prices to ready-to-eat food and confectionery, nuts, and snacks.
Prices for ready-to-eat food increased by 7.3%, while confectionery, nuts, and snacks increased by 9.7%.
Alcoholic beverages and tobacco was the next-largest contributor, driven by rising prices for cigarettes and tobacco, and spirits and liqueurs.
Reactions to the data
Finance Minister Nicola Willis welcomed the decline in the inflation rate but said that there was still more to do.
"Rampant inflation in recent years has created a cost-of-living crisis for Kiwi households who have been pummelled by steep price increases."
She said the coalition Government is working hard to strengthen the economy, thereby reducing the cost of living and getting inflation back under 3%.
Actions such as restoring the Reserve Bank's single focus on price stability, reducing regulatory burden on businesses and restoring discipline to government spending would fight inflation, Willis said.
"The previous government had its foot on the spending accelerator while the Reserve Bank had its foot on the brake.
"Our Government understands that inflation is the thief that erodes the real values of people's incomes and savings."
Council of Trade Unions economist Craig Renney said that the new data should reinforce the need for the Government to support middle and low income families who have struggled with the cost of living crisis.
"Inflation was being driven by some costs that are hard to avoid for many. This includes rent, household energy, and local authority rates."
Promises to reduce current inflation by cutting government spending should be treated with a "high degree of caution", said Renney, as he believes inflation doesn’t appear to have been driven by government spending in "any significant way".
Taypayers’ Union policy adviser James Ross disagrees with this and said that “this inflation is driven by unsustainably high government spending, and this culture of waste in Wellington is working at loggerheads with efforts from the Reserve Bank to control spiralling costs".
He said that families are "being made to shoulder the burden of a government which isn’t willing to make the tough choices".
"Those same families won’t see any improvement until this Government gets serious about slashing the reckless and inflationary overspending it has inherited."
SHARE ME