A report by Statistics New Zealand has found that the consumer price index (CPI) has risen 7.3% in the second quarter of the year, up from 6.9% in the first quarter. This is the fastest increase on record since June 1990 when the CPI rose by 7.6%. The CPI rose 1.7% quarter on quarter, which is just slightly slower than the 1.8% increase recorded in the first quarter.
This result is however higher than the 1.5% increase that economists predicted for the quarter which would have led to a 7% or 7.1% annual rise. This outcome means that the Reserve Bank of New Zealand (RBNZ) can be expected to further raise interest rates. The RBNZ has most recently raised interest rates to 2.5%, the highest level since March 2016.
According to the figures released, housing and housing utilities were the biggest contributors to the quarterly and annual inflation rates. This was principally driven by a rise in construction costs and rent increases. Statistics New Zealand’s General Manager, Jason Attewell, highlighted supply chain issues, higher demand and labour costs as key reasons for the increase in the cost of building new homes.
Transport costs were identified as the second largest contributor, driven by petrol prices that rose by 32% and diesel by 74%. This impact was however partially offset by a reduction in the cost of road passenger transport, rail passenger transport, second-hand vehicles, and international airfares. The government has already confirmed that it would be extending the half-price bus and train fares until 2023.
Food prices are however also still on the rise, having risen by 1.3% from the previous quarter to reach an annual rate of 6.5%. non-tradable inflation was also found to have reached a high of 6.3%, while tradable inflation hit 8.7%. Non-tradable is a measure of domestic inflation-related goods and services that do not experience foreign competition. Tradable inflation refers to goods and services that are impacted by foreign markets.
Despite the government’s assertions that high inflation is not just a New Zealand issue as uncertain global factors such as the pandemic, the war in Ukraine, and supply chain issues were affecting prices, there is still criticism from opposition parties. National’s finance spokesperson, Nicola Willis, has said the government could not keep blaming overseas factors and needed to front up and listen to the warning signs. ACT’s leader, David Seymour, also said it was no longer credible to claim that the rising cost of living was transitory and that there was clearly to some extent a domestic inflationary problem.
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