“The RBNZ won’t welcome slightly higher than forecast headline inflation, but a small downside miss on non-tradable inflation should trump the small upside miss on the tradable side, meaning a 50bp cut in February remains appropriate,” said ANZ senior economist Miles Workman.
Annual non-tradable inflation (largely domestic-driven) slowed 0.4% pts to 4.5%, weaker than the RBNZ’s expectation of 4.7%.
The CPI rose by 0.5% in the December 2024 quarter, compared with the September 2024 quarter.
Prices for international air transport, up 6.6%, were the largest contributor to the quarterly rise. Almost a quarter of the 0.5% quarterly rise in the CPI was due to international air transport.
Other significant contributors to CPI this quarter were:
- Second-hand cars – up 4.7% (19% contribution to the 0.5% rise);
- Rent – up 0.8% (15% contribution);
- Games, toys, and hobbies – up 8.5% (13% contribution);
- Domestic air transport – up 9.3% (12% contribution)
- Overseas accommodation – up 2.4% (11% contribution).
Lower prices for vegetables, down 11.5%, helped offset the quarterly rise.
“Seasonal falls for salad veggies like tomatoes, cucumbers, and capsicums contributed to the quarterly fall in vegetable prices,” prices and deflators spokesperson Nicola Growden said.
The 2.2% annual increase follows a 2.2% annual increase in the September 2024 quarter.
“This is the second consecutive quarter that the annual inflation rate has been within the Reserve Bank of New Zealand’s target band of 1 to 3%,” Growden said.
“Prices are still rising, but not as much as previously recorded. The most recent peak was in the June 2022 quarter when the annual inflation rate reached 7.3%.”
Between the June 2021 and June 2024 quarters annual inflation was above the target band.
“Annual rent inflation continues to grow at a consistent rate. Between the December 2023 and 2024 quarters, annual rent inflation ranged between 4.2% and 4.8%,” Growden said.
Local authority rates and payments increased by 12.2% in the 12 months to the December 2024 quarter (16% contribution to the 2.2% increase).
Cigarettes and tobacco prices also increased, up 7.6% in the 12 months to the December 2024 quarter (11% contribution to the 2.2% increase).
This increase was mainly due to the annual tobacco excise tax increase on January 1, 2024.
Lower petrol prices, down 9.2%, helped offset rising prices. This included the removal of the Auckland regional fuel tax of 10 cents per litre plus GST on June 30, 2024.
“Petrol makes up about 4% of the CPI basket. Its price fall made a significant contribution to the slower increase in the annual inflation rate in December 2024,” Growden said.
Between the December 2023 and December 2024 quarters, the weighted average price of 1 litre of 91 octane petrol fell by 26c from $2.81 to $2.55.
“If petrol was excluded, the CPI would have increased 2.7% in the 12 months to December 2024.”
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
