Inflation lower than expected but Cyclone Gabrielle keeps prices elevated
Inflation has come in lower than all market expectations but the Government is still focussed on bringing it down further and helping kiwis with the cost of living.
Stats NZ reported the Consumer Price Index was lower than expected at 1.2 percent in the March quarter, leaving the annual inflation rate at 6.7 percent despite recent extreme weather events.
This is lowest quarterly increase since March 2021. The annual rate is below Australia, the United Kingdom and the OECD average of 8.8 percent. The Reserve Bank had forecast 7.3 percent and only one of the major banks predicted inflation would be below 7 percent.
“The Government is committed to bringing down the cost of living and supporting New Zealanders through these difficult times,” Grant Robertson said.
“While lower than expected, today’s result is still elevated by the impact of flooding and cyclone events on food prices, with prices increasing 8.6 percent for vegetables. The prices of second hand cars and insurance were also elevated. The effects of the cyclone will flow through into the June quarter results as well.
“Treasury forecast inflation will be 0.4 percentage points higher in the first half of the year because of the extreme weather. We don’t have control over what the weather does, but we know it puts a strain on household’s budgets.
“We’re taking a range of actions to ease the pressure on families. We’ve lifted the incomes of over 1.4 million New Zealanders, including seniors, families, workers and students, In order to help budgets stretch further, we’ve extended the fuel tax cuts and half price public transport and made childcare more affordable to more families. The Winter Energy Payment will provide cost of living relief for electricity bills from the start of May.
“The cost of living is the main challenge right now in the economy and will be a major focus in May’s budget. Our policy repriorisation review has netted $1 billion in savings so we can do more to support New Zealanders at this challenging time,” Grant Robertson said.
“The Government is also playing its part to bring down inflation by reducing spending to more normal levels and reduce overall demand in the economy. The latest figures show central government consumption fell 2.8 percent in the December quarter and 1 percent in the previous quarter.
“Our economic plan and responsible financial management means we are in a strong position to respond to these challenges and to support families. People are in work in record numbers and incomes are rising, our public debt levels are among the lowest in the world, exports are rising and tourists are returning.
“We understand that Kiwis are doing it tough. We will continue to work hard to ease the pressure families are under while making sure we invest in the recovery and rebuild from the cyclone as well as deliver the strong public services that New Zealanders can rely on and build a stronger and more resilient economy,” Grant Robertson said.