New Zealand consumer prices rose at a slower pace in the September quarter as more expensive vegetables and local body rates offset cheaper vehicle relicensing fees and kept the annual pace of inflation unchanged below the central bank's target.

The consumers price index increased 0.3 percent in the three months ended September 30, meeting the Reserve Bank's forecast last month, and slowing from a pace of 0.4 percent in the June quarter, Statistics New Zealand said. The annual pace of inflation was unchanged at 0.4 percent, slightly ahead of the central bank's forecast and economist expectations.

Annual inflation hasn't been within the central bank's 1 percent-to-3 percent target range since the third quarter of last year, when it scraped in at 1 percent, as a strong kiwi dollar, cheap oil and low interest rates kept a lid on consumer prices.

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Governor Graeme Wheeler this week said more rate cuts were likely, depending on the emerging flow of data, although he's also wary of stoking demand in the housing market by contributing to cheaper borrowing costs.

The New Zealand dollar briefly rose as high as 68.77 US cents from 68.44 cents immediately before the figures were released, and was recently at 68.56 cents.

Vegetable prices rose 14 percent in the quarter due to seasonally more expensive lettuce and tomatoes, and had the biggest influence in lifting inflation, followed by a 5.7 percent increase in local body rates, with bigger-than-average hikes in the major centres.

Prices for newly built housing rose 1.6 percent, driven by a 2 percent increase in Auckland, where a booming property market has attracted tougher lending controls for investors from next month. Rental prices increased 0.6 percent in the quarter.

"The main upward contribution came from housing-related prices," prices senior manager Chris Pike said in a statement. "This was mostly influenced by higher prices for local authority rates new houses excluding land, and housing rentals."

Big fall in ACC keeps lid on consumer prices

A 24 percent drop in the price of vehicle relicensing fees due to ACC changing the way it calculates auto levies kept a lid on inflation in the quarter, while milk, cheese and egg prices fell 2.9 percent.

Petrol prices rose 1.6 percent in the September quarter, with global oil prices recovering from lows earlier this year, and as the kiwi dollar depreciated. On annual basis, petrol prices fell 6.8 percent, the biggest drag on inflation in the year, while international air fares fell 6.5 percent, and milk, cheese and egg prices were down 5.7 percent.

Non-tradables inflation, which covers domestic goods and services, was zero in the quarter, after rising 0.1 percent in June and the lowest level since March 2001. The annual pace of non-tradable inflation slowed to 1.5 percent from 2 percent, its smallest increase since December 2001.


Tradables inflation rose 0.7 percent in the quarter, slowing from a 0.9 percent rate three months earlier. On an annual basis, prices for tradable goods fell 1.2 percent, compared to a 1.8 percent decline in the June year.

On a seasonally adjusted basis, the consumers price index increased 0.1 percent in the September period, slowing from a 0.3 percent rise in June.

See the full Statistics NZ CPI release here: