Living costs have surged for Kiwi households with the biggest annual jump in the Consumer Price Index in over a decade.
Released by Statistics New Zealand on Monday, the Consumer Price Index (CPI) uses a set sample of goods and services (e.g. food, housing, health and transport), to measure price changes on a quarterly and annual basis. As a measure of inflation, latest CPI figures show high price rises are hitting the back pockets of Kiwi consumers.
Annual price inflation (the difference between the September 2020 quarter and the September 2021 quarter), was 4.9 percent.
It marks the biggest annual jump since June 2011, when annual inflation reached 5.3 percent, Statistics New Zealand confirms.
The quarterly change in prices (June 2021 quarter compared to the September 2021 quarter), was 2.2 percent. It is the highest quarterly increase since June 1987, when the CPI rose 3.3 percent (excludes quarters affected by the rise in GST from 12.5 percent to 15 percent in October 2010).
Housing-related costs, mainly construction and local authority rates, were the biggest drivers of the quarterly increase, Statistics New Zealand said.
Construction prices were up 4.5 percent over the September 2021 quarter (12 percent over the year), a key contributor to the 2.6 percent rise in housing and household utilities.
“Both supply-chain challenges and high demand are pushing up the cost of building houses,” Statistics New Zealand consumer prices manager Aaron Beck said.
Construction companies reported difficulty sourcing many materials - and of higher labour and administration costs. Due to high demand, wages in the construction industry rose 3.1 percent in the year to June 2021.
Local authority rates and payments rose 7.1 percent over the quarter. Statistics New Zealand acknowledged councils faced increasing revenue and cost pressures following COVID-19.
"Many councils set smaller than usual rate increases in 2020 to alleviate cost pressures on rate payers due to COVID-19,” Beck added.
Food prices rose 2.7 percent over the quarter, fruit and vegetables rising 11 percent. Transport costs were up 4.2 percent.
Petrol prices rose 6.5 percent over the quarter (22 percent for the year). The average price of one litre of 91 octane petrol was $2.27 - up from $2.13 in the June quarter.
Rent prices rose 0.3 percent in Auckland, 1 percent in Wellington and 0.7 percent in Canterbury.
Following Monday's announcement, ASB chief economist Nick Tuffley said the increase was stronger than expected.
The bank had forecast an annual CPI rise of 4.4 percent (1.7 percent over the September quarter).
"The clear message is there's a lot of inflation coming through and it's from a broad range of sources," Tuffley said.
Supply chain disruptions were driving up prices of imported goods. Hiring challenges and labour shortages put pressure on local businesses. A tight labour market is putting pressure on wages as employers have to pay more to attract and retain workers.
Ongoing material and labour shortages affected the construction sector - and council rates also went up.
Consumers would see those everyday price increases coming through in higher petrol and food prices - and higher prices for offshore goods.
"What we're seeing is a broad-based increase in the cost of living for many people," Tuffley said.
ASB expects inflation to peak just over 5 percent before the end of the year.
In its October Monetary Policy Statement, the Reserve Bank forecast inflation to rise above 4 percent in the near term, hiking the Official Cash Rate by 25 basis points for the first time in seven years.
As ongoing restrictions following the COVID-19 Delta outbreak are weighed up, the extent of inflation rises in 2022 is something the Reserve Bank will be keeping an eye on.
"The key message for the Reserve Bank is over time, interest rates still need to go up," Tuffley added.
