Annual electricity price increases are at their highest since the late 1980s, as Stats NZ reveals inflation has risen to 3.0% — now sitting at the top of the target band.
The latest consumer price index figures show inflation to the September quarter sitting at the top of the Reserve Bank's target band after four quarters comfortably within it.
It's the biggest jump in 15 months, with electricity prices spiking in a way not seen for decades. Economists had picked the 3.0% figure in their forecasts for today's release.
Stats NZ prices and deflators spokesperson Nicola Growden said the largest contributors to inflation were "all in the housing and household utilities group".
"The 3.0% annual inflation rate in the September 2025 quarter is the highest since the June 2024 quarter, when it was 3.3%," she said in a media release.
The main contributors to higher costs were electricity, which was up 11%, and a 10.1% contribution to the annual increase. Rent and rates both contributed 9.2% to the annual increase, being a 2.6% and 8.8% rise, respectively.
The top three contributors make up around 17% of the "weight" in the inflation basket.
"Annual electricity increases are at their highest since the late 1980s, when there were several major reforms in the electricity market,” Growden said.
"The 11.3% annual increase in electricity prices is the largest since the March 1989 quarter when they rose 12.8%.”
Govt welcomes 'pleasing' inflation release
Acting Finance Minister Chris Bishop "welcomed" the news that annual inflation had only risen to 3% — at the very top of the Reserve Bank's target range.
"Stats NZ’s update highlights the importance of increasing electricity supply and competition, and the significant impact that local government rates have on New Zealanders’ wallets," he said in a media release.
He added: "This is the quarter in which most economists were expecting inflation to peak so it is pleasing to see it remain within the Reserve Bank’s target range of 1 to 3%.
"Expectations are that the rate will decline towards 2% in the first half of next year, easing pressure on households and businesses."
Petrol and pharmaceuticals fall in price
Meanwhile, the 2.6% increase in rents was the smallest annual increase in over four years.
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Rents have only increased 2.9% in the 12 months to June 2021.
Of the five broad regions measured by Stats NZ, rent prices in Canterbury and the rest of the South Island had the largest annual increases, while Wellington had the smallest.
Pharmaceutical products, telecommunications equipment, and petrol all fell in price over the year. Council rates and payments are measured once a year in the September quarter and have been one of the main drivers of annual inflation in recent years.
“The annual increase in rates in the September 2025 quarter was lower than the 12.2% increase in the September 2024 quarter, but higher than the average increase of around 7.3% observed between 2018 and 2025,” Growden said.
Inflation up ahead of OCR call next month
The Reserve Bank targets inflation between 1% and 3%, making the latest figure the upper threshold of what it considers acceptable price growth.
The rise comes as the central bank weighs up its final official cash rate decision this year, currently at 2.5% with many expecting a further cut in late November.
The quarterly inflation rate for the three months to September was 1%.
Despite sitting at the target band's upper limit, the latest figure shows inflation has cooled significantly from its peak of 7.3% in mid-2022.
At the last annual release for the June quarter, annual inflation sat at 2.7%.
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