Annual inflation reaches 30-year high of 6.9 percent

The consumers price index increased 6.9 percent in the March 2022 quarter compared with the March 2021 quarter, the largest movement since a 7.6 percent annual increase in the year to the June 1990 quarter, Stats NZ said today.

The 6.9 percent increase follows an annual increase of 5.9 percent in the December 2021 quarter, the previous largest annual movement since the 7.6 percent increase in the June 1990 quarter, which occurred shortly after the Reserve Bank of New Zealand Act 1989. The Act came into effect in February 1990 to target the high inflation from the previous decade and maintain stability in the general level of prices over the medium term.

The main driver for the 6.9 percent annual inflation to the March 2022 quarter was the housing and household utilities group, influenced by rising prices for construction and rentals for housing.

Prices for the construction of new dwellings increased 18 percent in the March 2022 quarter compared with the March 2021 quarter, the largest increase recorded since the series began in 1985.

"Construction firms have been experiencing many supply-chain issues, higher labour costs, and also higher demand, which have pushed up the cost of building a new house," senior prices manager Aaron Beck said.

The next largest contribution to the annual inflation was from the transport group, influenced by higher prices for petrol and second-hand cars.

Petrol prices increased 32 percent in the year to the March 2022 quarter, the largest annual increase since the June 1985 quarter.

Higher petrol prices drove quarterly inflation in March

The consumers price index rose 1.8 percent in the March 2022 quarter compared with the December 2021 quarter, mainly driven by higher petrol prices.

The price of a litre of petrol increased steadily over January and February. In the second week of March the average price of 91 petrol at the pump was $3.05. Prices then dropped following a decrease of 25 cents per litre in fuel excise duty. This is expected to remain in place for three months.

"Prices for fuel are volatile," Mr Beck said.

"To capture this change and accurately measure the average fuel price over the whole quarter, we sample petrol prices weekly from key sites in New Zealand. But, like any sample this may not include the highest or lowest prices paid in any period."

The average price of 1 litre of 91 octane, including discounts, increased 8.7 percent to $2.67 in March 2022, compared with $2.45 in December 2021.

Petrol prices increased 8.3 percent for Auckland, 8.5 percent for Wellington, and 8.6 percent for Canterbury in the March 2022 quarter.

Construction of new dwellings, rentals for housing and cigarettes were the next largest contributors to the overall quarterly rise.

The price of cigarettes rose 4.5 percent in the March 2022 quarter following an increase in excise tax on 1 January 2022.

"This is the second year in a row with smaller price rises for cigarettes due to excise tax increases being reduced," Mr Beck said.

Tradable and non-tradable inflation record highs

Tradeable inflation was 8.5 percent in the year to the March 2022 quarter, the biggest annual movement since the series began in June 2000.

Tradeable inflation measures goods and services that are influenced by foreign markets, such as petrol, vegetables, and second-hand cars, which were the biggest contributors to the movement.

Domestic, or non-tradable inflation, was 6.0 percent in the year to the March 2022 quarter, the highest since the series began in June 2000.

Higher prices for construction, rentals for housing, and local authority rates were partly offset by domestic air transport.

Non-tradable inflation measures goods and services that do not face foreign competition. It shows how domestic demand and supply conditions are affecting consumer prices.

Increasing cost of imports helps push up food prices explores the impact of prices for imported commodities on domestic supply chains and food production.

Inflation rates around the world are currently higher than in recent years, with the OECD total at 7.7 percent for the year ended February 2022, United States were at 8.5 percent, and United Kingdom were at 7.0 percent to the year ended March 2022.