KEY POINTS:
Annual inflation hit an 18-year high of 5.1 per cent in the September quarter, pushed up by petrol, housing and electricity costs.
Releasing the data today, Statistics New Zealand (SNZ) said that for the three months to the end of September the consumers price index (CPI) was up
1.5 per cent, with petrol again a key factor.
Other major contributors to the third quarter increase included food and rates.
The latest figures are bang on economists' expectations, and follow a rise of 1.6 per cent in the June quarter, which took the annual inflation rate at that time to 4 per cent.
The CPI rise is well above the Reserve Bank's target of 1-3 per cent over the medium term.
But a sharp decline in world financial markets, triggering falls in commodity and energy prices, while raising fears of global recession, are expected to help bring inflation down.
ASB chief economist Nick Tuffley said that "underlying momentum in inflation has yet to show signs of softening. In more normal times the underlying picture would cause the RBNZ a lot of discomfort."
However, there were other issues at hand, said Tuffley.
"The financial and economic landscape has changed dramatically since late September and October. The credit crunch has escalated dramatically over the past six weeks and, while there are tentative signs of improvement, recovery is a long way off. "
The Reserve Bank needed to focus on borrowing costs and the downside risk to growth presented by the credit crunch.
" With the market expecting a 100 basis point cut on Thursday, we believe the RBNZ will be reluctant to disappoint (which would only cause unnecessary volatility). Bringing expected rate cuts forward will provide good insurance against considerable uncertainty."
"But, we should all remember that the RBNZ will still be keeping an eye on inflation. The starting point is a little disquieting and the RBNZ will be relying heavily on the weak domestic and global economies to contain pressure over time," said Tuffley.
SNZ said food prices rose 3.7 per cent in the September quarter, following increases of 2.2 per cent and 1.8 per cent in the June and March quarters.
Vegetables on their own were up 20 per cent, largely due to a 94.9 per cent rise in the price of lettuce, while more than half the fresh vegetable items monitored for the CPI recorded double-digit increases, influenced by unusually wet weather.
Transport costs were up 2 per cent in the third quarter, down on the 4.9 per cent rise in the three months to the end of June.
In the latest quarter petrol prices rose 4.6 per cent, reaching a high in July, followed by falls in August and September.
A 16.1 per cent rise in vehicle relicensing fees, along with a 3.7 per cent rise in international air transport, a 5.4 per cent rise in domestic air transport, and a 5.1 per cent rise in diesel, all added to the rise in transport costs, SNZ said.
The price for second-hand cars was down 8 per cent.
The 5.1 per cent annual increase in the CPI is the highest since a 7.6 per cent rise in the year to the June 1990 quarter, which incorporated an increase in GST from 10 per cent to 12.5 per cent.
For the latest year, petrol prices rose 29.3 per cent, accounting for just over a quarter of the annual movement. New house purchasing was up 4.6 per cent, electricity up 6.9 per cent, and housing rents up 3.1 per cent.
Audio-visual equipment was down 24.2 per cent for the year and second-hand cars down 5.6 per cent.
The tradeable component of the CPI, which show the effects of international price movements and exchange rates, rose 1.9 per cent in the September quarter and 6.3 per cent for the year.
Non-tradeable inflation, showing the impact of domestic demand and supply, was up 1.3 per cent in the quarter and 4.1 per cent annually.
For the September quarter CPI, the representative basket of goods and services has been re-selected and re-weighted.
The review was carried out to ensure the basket continued to reflect household spending patterns, SNZ said.
For just the month of September, food prices rose 0.6 per cent, with beef prices up 6.8 per cent, fresh chicken up 5.8 per cent, and pork up 11.9 per cent.
Fruit and vegetable prices were down 2.2 per cent in the month, with lettuce down 20.6 per cent and cucumber down 43.8 per cent, while tomatoes were up 16.3 per cent.
For the year to September food prices rose 10.8 per cent, the highest annual increase since April 1990.
Cheddar cheese rose 61.6 per cent for the year, bread was up 16.5 per cent and fresh milk up 12.6 per cent. Fruit and vegetables rose 17.9 per cent for the year, while meat, poultry and fish were up 8.8 per cent.
- NZPA
