Even as the world reels under high inflation in a post pandemic world marred by the Russia-Ukraine war, New Zealand is seeing some of the highest levels of inflation in Oceania despite the central bank raising interest rates to curb inflation.
Consumer price inflation in the country increased to 7.2% for the June 2022 quarter, a record high for the last 32 years, latest data from Stats NZ has revealed.
Prices of groceries, fuel and other essentials have skyrocketed in the island nation, making the government resort to installing a grocery commission which will regulate grocery prices in the country.
Petrol prices increased 19 percent in the year to the September 2022 quarter. Diesel prices increased 72 percent over the same period.
Construction Costs Soar 17%
Prices for the construction of a new house increased 17 percent in the September 2022 quarter compared with the September 2021 quarter.
“The cost to construct a new house has continued to rise with supply-chain issues, labour costs, and higher demand, all of which combine to push up prices,” Nicola Growden, senior manager at Stats NZ said.
“The 17 percent annual increase in construction of a new house in the September quarter follows 18 percent annual increases in both the June and March 2022 quarters.”
Veggie Prices Soar 24%
In the September 2022 quarter, compared with the June 2022 quarter, vegetable prices rose 24 percent.
“This is the largest quarterly rise in vegetable prices since the series began in September 1999,” Growden said.
“Tomatoes, lettuce, and broccoli drove this rise in vegetable prices.”
Transport was also a main driver of the quarterly rise driven by international airfares. This was partly offset by a fall in petrol prices.
International airfares rose 20 percent in the September 2022 quarter compared with the June 2022 quarter. Annually, they fell 8.4 percent in the September 2022 quarter compared with the September 2021 quarter.
Prices for petrol fell for the first time since the June 2020 quarter. In the September 2022 quarter the price of 1 litre of 91 octane petrol fell 4.2 percent to $2.72 compared with $2.84 in the June 2022 quarter.
Diesel prices rose 2.5 percent to $2.64 in September 2022, compared with $2.57 in the June 2022 quarter.
Silver Lining: Peak Could Have Reached
ASB Economist team predicts that inflation in the country will remain high compared to nearby Australia.
“Annual headline inflation rates in NZ and many OECD countries may generally be heading lower but are still around multi-decade highs and a virulent economic and social problem that needs to be rectified. Once up, it will prove difficult to push inflation back down,” said ASB’s senior economist Mark Smith.
“We note NZ looks to be past the peak in headline inflation, and there are some promising signs that headline inflation should head lower in future. Markets are becoming attuned to the risk of the RBNZ joining the Fed and hiking by 75bps in November, and with markets now looking at a 5% OCR by mid-2023 there is likely more upside to NZ yields,” ASB added in its review.