Peak might have been reached, says one economist
New Zealand’s inflation figures remained steady at 7.2% in the 12 months to December 2022, as Kiwis continue to struggle with the rising cost-of-living.
Wednesday’s 7.2% increase follows another 7.2% annual increase in the September 2022 quarter and 7.3% increase in the June 2022 quarter, Stats NZ reported.
The largest contributors remain housing and household utilities for the December quarter, due to rising prices for both construction and rental housing. The price of building a new home increased 14% in the 12 months to December 2022, following a 17% increase in the previous quarter.
“Respondents reported more expensive materials and higher labour costs are driving the increase of building a new home,” said Stats NZ consumer prices senior manager Nicola Growden (pictured above left).
Stats NZ’s CPI December 2022 figures also highlight the fact that rental prices for housing increased 4.4% in the 12 months to December 2022, compared to an annual increase of 4.6% in the September 2022 quarter.
Following housing and household utilities, Stats NZ said the next largest contributor to the annual CPI increase was food as higher prices for ready-to-eat food, vegetables, meat and poultry drove the overall lift in price. Transport was the third largest contributor due to rising prices for both international and domestic air fares.
Non-tradeable inflation (which measures goods and services which do not face foreign competition and are considered an indicator of domestic demand and supply conditions), was 6.6% in the 12 months to December 2022, driven by higher prices for the construction of a new house. Tradeable inflation was 8.2%, mainly impacted by higher prices for international airfares.
Economists react to inflation figure
Westpac NZ senior economist Satish Ranchhod (pictured above centre) said Wednesday’s CPI figures were a surprise compared to Westpac’s own forecast, with the main shock being the extent of the rise in airfares.
“A sizeable chunk of the strength in inflation has been due to supply disruptions in recent years, however, the more significant driver of price increase has been the strength of demand,” Ranchhod said.
“High levels of economic activity over the past year has meant that capacity in the economy has become increasingly stretched. Those conditions have also meant that many businesses have been grappling with difficulties finding staff, along with large increases in wage costs.”
Kiwibank chief economist Jarrod Kerr (pictured above right) said New Zealand’s peak in inflation is happening now.
“The outlook for inflation, both offshore and onshore, is improving as the world war on inflation is being won,” Kerr said.
“We now expect the RBNZ to deliver a 50bp hike in February, a step back from the outsized (catch-up style) 75bp signalled. We have seen more than enough to justify a reduction in the pace and extent of future rate rises. Enough is enough and we expect a move to 5%.”
Australian inflation hits new heights
CPI inflation tipped 7.8% on Wednesday in Australia, its highest level since 1990. This was the fourth consecutive quarter to show a rise greater than any seen since the introduction of the GST in 2000.
“The increase for the quarter was slightly higher than the quarterly movements for the September and June quarters last year (both 1.8%),” said Australian Bureau of Statistics head of price statistics Michelle Marquardt.
The most significant contributors to Australia’s CPI Index for December 2022 quarter were domestic holiday travel and accommodation (+13.3%), electricity (+8.6%) and international holiday travel and accommodation (+7.6%).
“Labour and material costs are driving price growth in this area, with signs of material cost pressures easing," she said. "Slowing demand for new dwelling construction was reflected in a lower quarterly rate of inflation for new dwellings this quarter compared with the past five quarters.”
