Stats NZ have released Consumer Price Index (CPI) data for the September Quarter. Inflation for the past 12 months is at 2.2%, which is in line with economists’ predictions and within the Reserve Bank’s target range of 1-3%.
The CPI rose by 0.6% in the September 2024 quarter, driven largely by increases in local authority rates, vegetable prices, and pharmaceutical products. The rise in the CPI, which measures the cost of goods and services purchased by households, reflects both domestic and global economic factors influencing pricing trends.
Key Contributors to Price Increases
Local authority rates surged 12.2% in the September quarter, accounting for over half of the total CPI rise, with a 51% contribution to the 0.6% increase. This annual adjustment to rates occurs in the September quarter, coinciding with the timing of changes set by local councils. Other notable price increases were seen in the vegetable category, which jumped by 8.4%, and pharmaceutical products, which rose by 17%. Together, these two categories contributed an additional 16.1% and 15.2%, respectively, to the overall quarterly CPI increase.
According to Stats NZ, the sharp increase in pharmaceutical costs is partly attributed to the reinstatement of the $5 prescription co-payment from 1 July 2024. The pharmaceutical products category reflects this policy change, and Stats NZ has introduced more frequent data collection on prescription fees to better capture the effect of the Prescription Subsidy Scheme.
Offsetting Declines in Fuel and Education Costs
Some price decreases helped mitigate the overall CPI rise. Petrol prices dropped significantly, down by 6.5%, which resulted in a -40.6% contribution to the CPI for all groups. Early childhood education also saw a notable decrease of 22.8%, driven by the introduction of the FamilyBoost rebate, a government initiative aimed at reducing household costs for childcare. This reduction in early childhood education prices contributed -18.4% to the CPI, further offsetting some of the increases in other areas.
Annual Inflation at 2.2%, Driven by Housing, Local Authority Rates, and Tobacco Prices
For the 12 months leading up to September 2024, consumer prices increased by 2.2%, with housing-related costs being a major driver. Actual rental prices rose by 4.5%, contributing 18.9% to the annual CPI increase. Local authority rates also surged by 12.2% over the year, accounting for 15.8% of the overall annual rise.
Cigarettes and tobacco prices continued their upward trajectory, rising 10% over the year, contributing 13.8% to the annual inflation figure. These increases, however, were partly offset by lower petrol prices, which fell by 8%, and vegetable prices, which decreased by 17.9% on an annual basis. Both items helped counterbalance the broader upward pressure on prices, contributing -14.8% and -14.1% to the annual CPI change, respectively.
Tradeable vs. Non-Tradeable Inflation
The data also highlighted the differing trends between tradeable and non-tradeable inflation, which reflect how much of the price changes are driven by domestic versus international factors. Non-tradeable inflation, representing prices of goods and services that are not subject to foreign competition, rose by 4.9% over the year. Key drivers included actual rental prices for housing, which increased by 4.5%, and local authority rates, up 12.2%. These were partially offset by a 22.8% decrease in early childhood education costs and an 11.2% decline in domestic air transport prices.
Tradeable inflation, influenced by international markets, saw a 1.6% decrease in the 12 months to September 2024. Falling petrol prices were the most significant contributor, with an 8% drop accounting for 51.5% of the tradeable inflation decline. Vegetables also saw a steep fall, down 17.9%, contributing 49.1% to the overall tradeable inflation reduction. These declines were slightly offset by rising costs in overseas accommodation, which increased by 5.1%, and oils and fats, up 24.9%.
International Comparisons
New Zealand’s annual inflation rate of 2.2% is in line with global trends, with similar figures reported in countries like the United Kingdom (2.2%) and the European Union (2.2%) for August 2024. Australia’s inflation rate was slightly higher at 2.7%, while the United States saw a 2.4% increase in consumer prices. The OECD average inflation rate, however, remains higher at 4.7%, reflecting ongoing inflationary pressures in many developed economies.
Outlook
The data provides a mixed picture of inflation in New Zealand, with both domestic and international factors influencing price trends. The sharp rise in local authority rates and ongoing housing costs suggests continued pressure on household budgets. However, declines in fuel and childcare costs offer some relief. As New Zealand heads into 2025, the ongoing impact of government policies such as the FamilyBoost scheme and international market conditions will play a crucial role in shaping inflationary trends.