Cost of living crisis: Inflation reaches 7.3% – the highest in 32 years – due to rising rents and construction costs
Monday’s rise in inflation was largely due to rising rents and construction costs. Video / NZ Herald
The cost of living crisis worsens as inflation hits 7.3%.
The new figure was revealed when Stats NZ released its quarterly consumer price index for the three months ending June this morning.
The 7.3% increase is the highest since 1990.
Today’s increase is largely due to higher rents and construction costs. Prices for new home construction rose 18% in the June quarter of 2022, compared to the same period last year.
“The 18% annual increase in the June quarter follows an 18% increase in March and a 16% increase in December 2021,” said Stats NZ chief executive Jason Attewell.
The second largest contributor to annual inflation came from the transportation group, due to rising gasoline and diesel prices.
Gasoline prices rose 32% in the year to the June quarter of 2022, the largest annual increase since the June quarter of 1985. Diesel prices rose 74% in the same period.
The tradable inflation rate, which measures goods and services influenced by foreign markets, was 8.7% in the year to the June quarter of 2022 – the biggest annual move, up or down. down, since the start of the series in June 2000.
Domestic, or non-tradable, inflation was 6.3% in the year to the June 2022 quarter, the highest since the series began in June 2000.
The 7.3% figure is higher than most economists had picked – expectations were for 7.1%.
It follows a 6.9% annual increase in the March 2022 quarter, the previous largest annual move since a 7.6% increase in the June 1990 quarter that occurred shortly after the introduction of the Reserve Bank of New Zealand Act 1989.
The Reserve Bank forecasts for the year to June that it will reach 7% while economists are between 7.1% and 7.3%.
The New Zealand Dollar barely changed, rising a few pips to US61.61c. Yields on two-year government bonds jumped seven basis points to 3.6%.
Earlier: Experts predicted a rise of just over 7%
In rare good news for consumers, petrol prices plummeted overnight in Auckland.
The price of 91 has dropped below $3 per liter on several sites, with the Gaspy app showing a lowest price of $2.81 in Manukau.
The price of 95 octane fuel also fell below $3 at some gas stations.
In May, unleaded 91 hit $3.15 a liter in central Auckland.
An ANZ briefing note, citing the 7.1% fuel price spike – largely due to uncertainty and sanctions stemming from Russia’s invasion of Ukraine – as the main driver inflation over the past three months. ANZ forecasters said fuel prices rose 3.1% in the quarter.
“Uncertainty remains elevated, with global commodity prices rocked by geopolitical developments and inflation in trading partners continuing to rise. Domestic inflation risks are firmly on the upside, given inflation expectations still high and an extremely tight labor market,” ANZ said.
Infometrics chief forecaster Gareth Kiernan, whose team picks 7.3%, hopes that will represent the peak of inflation, but conditions are likely to be choppy for years to come.
“We think this will be the high point, but it looks very soggy over the next 18 months.”
He said high levels of borrowing in the economy – by governments, businesses and households – was limiting potential growth, and without the expected recovery in the tourism sector this summer, the economy would likely head towards the bottom. recession.
Outside of this sector, according to Infometrics, “most of the economy will feel like it’s contracting anyway.”
Kiwibank chief economist Jarrod Kerr also expects inflation to peak this quarter, but said that while it eased slightly towards the end of the year, the pain would linger.
“Transportation costs are a big factor, and everyone feels the effects: an increase in oil prices is like a tax on consumers. We looked at our credit card spending on gasoline, and the amount purchased is remained the same – this suggests that everyone is spending a little less elsewhere.
“We don’t expect a recession at this point, but it will be close.”
Yesterday the government announced it would extend cuts in fuel taxes, road charges and half-price public transport fares until the end of January next year.
The reductions, in place since March, reduce the cost of petrol by 25 cents per liter as well as an equivalent reduction in road user charges (RUC). The government estimates the reduction will result in a reduction of $11 off the price of filling a 40-litre tank, or $17 off a 60-litre tank and will save public transport commuters $25 a week . Fuel costs well over $3 a liter in most parts of the country.
Finance Minister Grant Robertson said the extension would give households “some certainty over the coming months in the face of volatile pump prices”.
He said “cost of living pressures are making it difficult for New Zealand at the moment.”