Annual inflation increases to 3.3 percent

Annual inflation as measured by the consumers price index (CPI) increased to 3.3 percent in June 2021, Stats NZ said today.

This was the biggest increase in nearly 10 years and was driven by higher prices for new housing and petrol.

Previously, annual inflation had peaked at 5.3 percent in June 2011, impacted by a GST increase of 2.5 percentage points that came into effect in October 2010. Before this, annual inflation reached 5.1 percent in the September 2008 quarter, during the time of the global financial crisis.

Price increases were widespread, with 10 of the 11 main groups in the CPI basket having higher prices on average than a year ago.

Part of the annual increase was attributable to the fact it is measured against the June 2020 quarter, a period impacted by the COVID-19 lockdown where some prices fell.

"A year ago, in the June 2020 quarter, we saw lower petrol prices, as well as measures put in place during the COVID-19 lockdown such as cheaper public transport, which resulted in lower consumer prices that quarter," prices senior manager Aaron Beck said.

"This magnified the overall increase somewhat."

Quarterly inflation was 1.3 percent, also the highest in over a decade.

Construction costs increase

The cost of building a new house was the biggest contributor to both annual and quarterly inflation this quarter, up 7.4 percent for the year, and 4.6 percent for the quarter.

"Higher prices for building houses reflect both supply-chain problems and high demand," Mr Beck said.

"Several construction firms have told us that it is hard to get many of the materials they need to build a house, and that there are higher labour and administration costs. In addition, in the year to May 2021, $18.3 billion of residential building work was consented, up 18 percent on a year earlier."

Building consents issued: May 2021 has more information about building consents.

Rent and transport also key contributors to price increases

Rent prices increased 2.9 percent for the year, and 0.9 percent for the quarter. In the June 2021 quarter, rent prices went up 0.5 percent in Auckland, 1.3 percent in Wellington, and 0.6 percent in Canterbury.

Petrol prices increased 16 percent between the June 2020 quarter and June 2021 quarter. The weighted average price of a litre of 91 octane was $2.13 in the June 2021 quarter, up from $2.00 in the March 2021 quarter. By the end of the quarter, prices were about 2.6 percent higher than the average over the quarter.

"Global crude prices fell sharply over the first four months of 2020, due to COVID-19 uncertainty, which drove down prices at the petrol pump in early 2020," Mr Beck said.

"Prices have recovered to about what they were at the start of the pandemic."

Overall, annual transport prices increased 9.4 percent, due to higher prices for used cars and international airfares, as well as petrol.

Quarterly prices for international airfares fell 7.6 percent. This quarter, all remaining Australian routes and the Rarotonga route were reintroduced into the CPI figures. Flight prices are still higher than pre-COVID levels. However, prices under the two-way bubble are lower than they were with just a one-way bubble. Due to COVID-19 travel restrictions Stats NZ reduced the weight of international airfares during the 2020 CPI reweight.

"We committed to reweighting these annually and will update these weights in the September 2021 quarter," Mr Beck said.

Vegetable prices increased 6.2 percent for the year, and 17 percent for the quarter. Prices for tomatoes, cucumbers, capsicums, and lettuces in June 2021 were higher than May 2021.

Food price index: June 2021 has more information.