Oil prices drive rebound in New Zealand Q1 inflation

20 April, 2017, 11:13 | Author: Leticia Walters
  • Petrol prices have climbed sharply since the start of the year pushing inflation to the highest level since 2011

"Nonetheless, we expect annual inflation to hover around 1.5 and 2 percent over the next few years", said ASB chief economist Nick Tuffley. The result was above the market median for a 0.8 percent rise.

The Pound to New Zealand Dollar exchange rate fell down to 1.1890 following the release having been as high as 1.8349 earlier in the week.

It was the highest increase since the September 2011 quarter, which was affected by the rise in GST from 12.5 to 15 per cent.

"The National Party frequently offers low interest rates as evidence for their claim that housing is still affordable in New Zealand, but today's inflation figures show that the mirage is disappearing".

The lift in inflation was largely due to temporary gains from higher oil and food prices and a tax hike on alcohol and tobacco, along with ongoing rising costs from a boom in housing construction.

The Recreation and Culture Index (0.11 percentage points), the Communication Index (0.11 percentage points) and the Clothing and Footwear Index (0.07 percentage points) registered the largest downward impacts on annual inflation, mainly reflecting lower prices for package holidays, mobile phones and garments respectively.

The quarterly rise in inflation was also boosted by higher food prices, which rose 2.2 percent on the quarter on the back of a 16 percent jump in the price of fruit. They were up 3.9 percent on the year.

The price of a food basket, broken down into nine food categories, rose as a whole.

Before the figures were announced, most economists predicted the Reserve Bank would not begin to raise interest rates until at least 2018. 6 percent on the quarter and 3.3 percent on the year.

Tradeables inflation, which includes goods and services that compete with global rivals, rose 0.8 percent in the quarter and 1.6 percent on the year.

For the major part of previous year inflation remained outside the bank's target band of 3 percent and 6 percent. Non-tradeables inflation, which focuses on domestic inflation, rose 1 percent on the quarter and was up 2.5 percent on the year.

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