Consumer prices rose 1.7 percent in the three months ended June — above expectations — as a result of more expensive fuel, food and housing costs.
Stats NZ released its quarterly consumer price index this morning. The increase is the highest since 1990 and was largely caused by rising rents and construction costs.
It follows a 6.9 percent annual increase in the March 2022 quarter, the previous largest annual move since a 7.6 percent increase in the June 1990 quarter that occurred shortly after the introduction of the Reserve Bank of New Zealand. Act 1989, according to Stats NZ.
The law came into effect in February 1990 to address the high inflation of the previous decade and to keep general price levels stable over the medium term.
Economists predicted that the annual rate would be more than 7 percent.
The official figures reflect rising fuel prices, more expensive food and higher construction and household costs. Stats NZ said consumer prices rose 1.7 percent in the three months ending June, pushing the annual rate up from 6.9 percent to 7.3 percent.
The main driver of the annual inflation rate of 7.3 percent up to the June 2022 quarter was the housing and household utilities group. New home construction prices rose 18 percent in the June 2022 quarter compared to the June 2021 quarter.
“Supply chain issues, labor costs and increased demand have continued to drive up the cost of building a new home,” said Jason Attewell, general manager of Stats NZ.
“The annual increase of 18 percent in the June quarter follows an 18 percent increase in March and a 16 percent increase in December 2021.”
The prices for building new houses in the CPI are obtained by researching construction companies that build houses with a standard plan. Existing house price sales are not included in the CPI as household-to-household transactions are out of scope. Land purchases are excluded as they are considered an investment, according to Stats NZ.
Prices for rental housing increased by 4.3 percent in the June 2022 quarter compared to the June 2021 quarter.
Food prices rose 1.3 percent in the quarter as a result of more expensive groceries and takeout.
Higher petrol and diesel
The second largest contributor to annual inflation came from the transportation group, driven by higher gasoline and diesel prices. Costs increased by 2.3 percent.
Gasoline prices rose 32 percent in the year to the June 2022 quarter — the largest annual increase since the June 1985 quarter. Diesel prices rose 74 percent over the same period, according to Stats NZ.
“The average price of 1 gallon of 91-octane gasoline increased 6.3 percent to $2.84 in the June 2022 quarter, compared to $2.67 in the March 2022 quarter,” Attewell said.
“The average price of 1 gallon of diesel increased 30 percent this quarter to $2.57, compared to $1.98 in the March quarter.”
The increase in transport was partly offset by falling prices for road passenger transport, international airline tickets, rail passenger transport, used cars and other private transport services, including road charges.
“From April 1, half-price bus and train fares have been introduced and from April 21, fares for road users have been reduced. These price declines were reflected this quarter,” Attewell said.
The Clean Car program had a small downward impact on used car prices. The used cars in our sample received more program discounts than fees paid.
Alert prices may rise
Sharon Zollner, ANZ’s chief economist, told RNZ this morning that there was a risk that prices could rise even higher following a surprise with inflation figures in the United States last week.
She said where the price hikes happened, it was making it difficult for consumers at the moment — but they continued to spend — and the question was how high the interest rate would need to be to cool that spending.
Transport Minister Michael Wood said the government could remove some of the pressure on prices but would not change the international factors he believes were driving inflation.
Yesterday, the government extended fuel tax and public transport measures until next January.
Wood said everyone was feeling the pressure of fuel costs and the government was closely monitoring suppliers’ profit margins.
The deputy leader of the National Party, Nicola Willis, said admitting more immigrants would help curb rising inflation.
She told RNZ this morning that the government should do more to tackle the domestic drivers of inflation, including curbing its own spending.
– ODT Online and RNZ