Higher petrol prices push inflation beyond limit

Consumer price inflation was up 1.1 per cent in the September quarter, fuelled mainly by higher petrol prices, in data released today.

Overall, inflation was up 3.4 per cent for the September year, according to Statistics New Zealand's latest index - a figure which is likely to cause alarm bells to sound at the Reserve Bank.

The Consumer Price Index's (CPI) quarterly rise was just under economists' expectations of a 1.2 per cent rise.

The annual rate breached the Reserve Bank's target band of 1 to 3 per cent for the first time since the June quarter of 2001 -- putting further pressure on the Reserve Bank to increase interest rates.

The Reserve Bank next meets on October 27 and is widely tipped to raise the official cash rate by 25 basis points to 7 per cent.

The CPI measures the average price change of a basket of consumer goods and services and is a key measure of inflation.

The annual CPI rise follows consecutive rises of 2.8 per cent in the June year and the March year.

The biggest annual increase was seen in petrol prices, which were up 20.3 per cent for the September year and 13.1 per cent for the September quarter.

Stats NZ said transportation prices rose 3.5 per cent in the September quarter, driven up by a 13.1 per cent hike in petrol prices and a 3 per cent rise in international air travel.

Stripping out the petrol price increases, the CPI would have risen just 0.7 per cent for the quarter.

Housing prices rose 1.6 per cent in the September quarter, with local authority rates rising 6.2 per cent and the purchase and construction of new dwellings up 1.0 per cent.

The only CPI group to decrease in the September quarter was apparel, which fell 0.3 per cent.

The non-tradable component of the CPI in the September quarter rose 1.1 per cent, following on from a 1.1 per cent rise in the June quarter. The tradable component rose 1.1 per cent, after a 0.6 per cent increase the previous quarter.

The 20.3 per cent annual rise in petrol prices was the biggest change over the year. The cost of international travel fell 5.1 per cent for the year, while fresh vegetable prices fell 11.8 per cent.

Stats NZ also released the Food Price Index today, which showed food prices fell 0.1 per cent in September. Grocery food, soft drinks and confectionery fell 0.2 per cent, as did meat, fish and poultry prices.

A 6.7 per cent decrease in the price of chicken was largely offset by a 5.0 per cent increase on the price of beef steak.

Fruit and vegetable prices also rose 0.2 per cent for the month, as did restaurant meals and ready-to-eat food prices.

Despite the monthly fall, food prices were still 0.9 per cent higher than the same time last year.

- NZPA