Economists said the small rise in the CPI was unlikely to trouble the Reserve Bank and inflation was expected to remain subdued through 2025.
The rise was “in line with our forecasts and a bit above the market and RBNZ picks – but not enough to cause any worry," said ASB economist Wesley Tanuvasa.
Since that February, there had been large increases in the prices of volatile items like food and overseas holiday costs, which are not the key focus for monetary policy, said Westpac senior economist Satish Ranchhod.
“In addition, today’s result was boosted by a change in how tertiary education costs are measured,” he said.
“More generally, the underlying trend in inflation is looking well contained, with measures of core inflation trending back to levels consistent with the RBNZ’s target band.”
The largest contributor to the annual inflation rate was rent, up 3.7%. Rent prices contributed 14% of the 2.5% annual increase.
“This is the first time annual rent has increased by less than 4% since 2021,” Growden said.
“Rent is one of the largest weighted items in the CPI [Consumers Price Index] basket, so the increase still had a large impact on the overall movement.”
Local authority rates and payments were another big driver, increasing 12.2% in the 12 months to the March 2025 quarter (a 14% contribution to the 2.5% increase).
Rates are captured once a year in the September quarter, as this is when ratepayers see price changes set by councils.
Construction prices also increased, up 1.9% in the 12 months to the March 2025 quarter (7% contribution to the 2.5% increase).
Lower petrol prices slightly offset the annual CPI increase, with prices down 2.8% in the 12 months to the March 2025 quarter.
This decrease followed a 9.2% decrease in petrol prices in the 12 months to the December 2024 quarter.
For the quarter, food prices pushed up inflation.
Tradeable versus non-tradeable inflation
Tradeable inflation was up the 0.3% in the 12 months to the March 2025 quarter.
Tradeable inflation measures final goods and services that are influenced by foreign markets.
Higher prices were recorded for milk, cheese and eggs, up 8.7%.
Meat and poultry were up 6.9%.
These were partly offset by lower prices for petrol, down 2.8% and vegetables, down 8.6%.
Non-tradeable inflation measures final goods and services that do not face foreign competition and is an indicator of domestic demand and supply conditions. However, the inputs of these goods and services can be influenced by foreign competition.
There was a 4% increase in non-tradeable inflation in the 12 months to the March 2025 quarter.
Higher prices were recorded for rents, up 3.7% and rates up 12.2%.
These were partly offset by lower prices for early childhood education, down 22.8%, and domestic accommodation, down 13.8%.
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.
