Butter prices have once again hit a record high in New Zealand, where the cheapest 500g block now costs $5.55 - up 3 per cent in the month and 60 per cent from a year earlier.

The high cost is forcing New Zealand bakers to turn to French butter as an affordable alternative.

According to ASB economist Nathan Penny, demand for butter skyrocketed worldwide after scientists debunked the link between animal fats and heart disease.

Kiwi bakers have had to scramble to find alternatives to the high prices.


"It is a difficult industry to be in anyway because the perception of what we do has been tainted by the $0.89 loaf, so many consumers do not understand the difference between an $0.89 packaged loaf in a supermarket and what a bakery makes," he told Radio New Zealand.

"It is cheaper to get imported French butter, travelling all that distance and up 'til now it has been seen as an extravagance, but it is now cheaper to get that than it is to get stuff across the ditch [for Australian bakers]," he added.

Butter wasn't the only item to get more expensive this month.

The food price index advanced 0.5 per cent on a seasonally adjusted basis in the month, and gained 3 per cent for the year to September, Statistics New Zealand said.

Fruit and vegetables cost 6.5 per cent more than a year earlier, and meat, poultry and fish prices rose 1.4 per cent. Grocery food prices, which includes dairy, increased 3.7 per cent annually.

Consumer price index manager Matthew Haigh said that for every $100 spent on food, Kiwis spent about $10 on dairy products.

Food prices account for about 19 per cent of the consumers price index, which is the Reserve Bank's mandated inflation target when setting interest rates.

A spike in food prices and a recovery in oil prices this year led to a jump in inflation, which has been subdued in recent years. However as those movements flatten out the pace of CPI increase is expected to slow early next year, the Reserve Bank has said.

Vegetable prices increased 6.5 per cent on an annual basis, driven by higher prices for kumara and potatoes, and rose 0.3 per cent in the month on a seasonally adjusted basis. Fruit prices rose 4.4 per cent annually and were up 0.7 per cent in the month.

The price of lamb jumped 15 per cent in the year to September 2017, and the price of chicken rose 4 per cent and pork dropped 4 per cent. Restaurant meals and ready-to-eat food prices rose 2.2 per cent on an annual basis.

- With BusinessDesk