The economist experts had all expected Aotearoa's annual inflation to have dropped below 7% in the September quarter - but they were wrong.
Instead, inflation dipped only slightly to an annual 7.2% from the previous quarter where it was 7.3%. These are the highest inflation figures seen since June 1990.
And that’s going to keep hurting the people already having trouble buying food and paying rent.
The Reserve Bank had expected a much larger drop in annual inflation to 6.4%, and bank economists had not been expecting it to rise above 7% this time.
But Stats NZ today said the 7.2% came from a combination of sharp rises In rentals, housing construction, local body rates, fuel and vegetables.
Cost of living continues to rise.
Because the Reserve Bank got it wrong and its job is to tame inflation, it may have to consider lifting interest rates even higher via the official cash rate in November, which will hurt people paying mortgages as their fixed rate period ends and banks lift rates.
Moody's Analytics says the high September-quarter CPI data supports the case for higher interest rates. "Even with rate hikes, inflation is unlikely to return to the central bank’s target range until 2024," it said today. It predicted the rate hike could be larger than the expected 50 basis points.
Food prices soar
The central bank has been lifting the OCR for some months to reduce inflation.
Annual food prices were up by 8.0%, driven by an 8.0% lift in grocery food and a 13.8% rise in fruit and vegetables.
In the September 2022 quarter, compared with the June 2022 quarter, vegetable prices rose 24%.
“This is the largest quarterly rise in vegetable prices since the series began in September 1999,” Stats NZ prices senior manager Nicola Growden said.
“Tomatoes, lettuce, and broccoli drove this rise in vegetable prices.”
Rental prices for housing had an annual increase of 4.6% in the September 2022 quarter. This follows an annual increase of 4.3% in the June 2022 quarter.
Housing costs
Prices for the building of a new house increased 17% in the September 2022 quarter compared with the September 2021 quarter.
“The cost to construct a new house has continued to rise with supply-chain issues, labour costs, and higher demand, all of which combine to push up prices,” Growden said.
Local body rates had an annual increase of 7.3% in the September 2022 quarter. This compares with a 7.1% annual increase in the September 2021 quarter.
Petrol prices increased 19% in the year to the September 2022 quarter. Diesel prices increased 72% over the same period.
New Zealand is not an inflation outlier though, with the OECD average at 10.3% for the 12 months to August 31. The UK was at 9.9% in the year to August while the US was at 8.2% in the 12 months to September.
Australia, however, was at 6.1% for the year ended June 2022.