Despite the increase, inflation remains within the Reserve Bank of New Zealand’s (RBNZ) target range of 1 to 3 per cent. According to newly released figures from Stats NZ, the Consumer Price Index (CPI) rose 0.9 per cent in the March quarter. The annual inflation rate climbed from 2.2 per cent in December to 2.5 per cent in March, marking the highest level recorded since June of the previous year.
Domestic inflation continues to be the primary driver of the overall rise in prices. Key contributors include local authority rates, the cost of building and purchasing new homes, and rising rents. Non-tradables rose by 1.1 per cent in the quarter and by 4.0 per cent over the year, reflecting persistent pressure on housing and essential services.
Rents were the most influential component of the CPI increase, rising by 3.7 per cent over the past year. This marks the first time since 2021 that annual rent inflation has remained below 4 per cent. Tradable inflation rose by 0.8 per cent in the quarter and just 0.3 per cent annually. This modest growth reflects the ongoing trend of lower global fuel prices and has helped counterbalance some of the stronger domestic cost pressures.
Although the latest inflation data was slightly above the RBNZ’s February forecasts, most economists believe it will not deter the bank from easing monetary policy in the coming months. With inflation still within the target band and economic growth remaining moderate, speculation is growing that a cut to the official cash rate could be on the horizon.
In tandem with the CPI release, Stats NZ has also introduced a revamped basket of goods and services used to measure inflation. Outdated items such as DVDs, home phone lines, and electric fan heaters have been removed. Newer lifestyle items like smart watches, cocktails, delivered meal kits, and cruise holidays have been added.
Adjustments have also been made to the weighting of certain categories, giving slightly more emphasis to rents, insurance premiums, and the cost of purchasing housing. This change ensures the CPI better mirrors the real-world spending patterns of NZ households.
While inflation in New Zealand is rising modestly, it remains within manageable levels. Domestic costs, particularly in housing, are still the primary source of inflationary pressure, but falling global prices and shifting consumer trends are helping to moderate the broader impact.
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