Further proving that the economy is cooling, the annual inflation rate has dipped to 6%, down from 7.2% at the start of the year and registering the third consecutive drop in rates since the record peak achieved in the June quarter of 2022. The quarterly inflation rate has meanwhile reached 1.1%.
Domestic price pressures however appear to be stubborn, with Statistics NZ prices manager, Nicola Growden, confirming that though prices were still rising at a fast pace, it was still slower than what had been registered in the last few quarters.
Food prices were found to be the biggest contributor to the inflation rate. They rose by 12.3% for the year. When food prices are excluded, the annual inflation rate would be at just 4.6%. Construction costs and rents were also key contributors, rising by 7.8% and just over 4% for the year respectively. Non-tradables inflation, which had remained sticky having run at a record high of 6.8% in the March quarter, managed to drop to an annual rate of 6.6% for the June quarter.
ASB senior economist, Kim Mundy, noted that the non-tradable inflation was likely to keep the Reserve Bank on alert and likely desirous to keep monetary policy restrictive for the time being. ANZ senior economist, Miles Workman, however, had a more optimistic view, saying that inflation risks were firmly on the upside. He added that the RBNZ was likely to carry on with interest rate hikes, with a 25-basis point hike expected in November.
Economists estimate that with the June quarter results, the RBNZ is likely to hold the OCR at its current level, an action that should be enough to bring inflation under control. However, with public transport subsidies and government fuel tax cuts ending at the start of July, some inflationary pressure is expected.
National finance spokesperson, Nicola Willis, however, took a dimmer view, pointing out that other key nations had experienced larger falls in inflation. She highlighted Canada whose inflation dipped to 2.8%, the US which fell to 3%, and Australia which also managed to dip to 5.6% from a record high of over 8% in late 2022. She expressed disappointment that New Zealand was for the third year still having high inflation, a problem not seen since the early 1990s.
Finance minister, Grant Robertson, has said that the newly reported inflation fall was encouraging. He reiterated the government’s commitment to helping bring down the cost of living and providing support to those still struggling. He added that there were also other positive signs in the economy including improved business confidence, employment growth, increased tourism and migration, and lower public debt.
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