New Zealand has given Australia a foretaste of what to expect from the June quarter consumer price index release a week tomorrow with a bigger rise than expected in Monday’s data release.
Statistics NZ reported annual inflation jumped to a higher-than-expected 7.3% during the three months to the end of June from the 6.9% reading in the three months to March.
That means NZ inflation is now at its highest level for 32 years.
That is still well under the 9.1% reported in the US last week for June and the 9.1% rate in the UK in May.
Quarter on quarter the NZ CPI was up 1.7%, slightly slower than the 1.8% in the March quarter and in the initial response to Russia’s invasion of Ukraine.
Forecasts for the June year NZ CPI were around 7% or 7.1%.
Core consumer price inflation excluding food group, household energy subgroup, and vehicle fuels increased 6.1% in the quarter.
Australia’s Consumer Price Index is widely forecast to also top the 6% when released next week after the 5.1% reading in the March quarter and head towards 7% in the current September quarter when higher electricity and gas prices kick in. Australia’s core inflation was 3.7%.
As a result of the higher-than-expected rise in the NZ CPI, economists there are looking for more big interest rate hikes from the Reserve Bank of NZ after rises of 0.5% from the last three monetary policy meetings.
That left the country’s official cash rate at 2.5% – and economists at the ANZ in New Zealand see that hitting 4% by November with more half per cent rises from the RBNZ.
The Commonwealth Bank’s ASB subsidiary is forecasting annual NZ inflation will remain “well above 6% over the remainder of the year”, and that it is “highly unlikely that elevated annual inflation will quickly drop”.
Westpac forecast the RBNZ Reserve will reveal “a fourth 50 basis point hike at the time of the August policy review,” and then ease to successive 0.25% rises to leave the cash rate at 3.5% by the end of 2022.
Petrol prices leapt 32% over the year while diesel prices were up an eye-watering 74%, Stats NZ reported.
Globally, demand for diesel was exceeding supply, it said.
The cost of building new houses surged 18% over the year and was also a major contributor to the higher inflation rate.
“Supply-chain issues, labour costs and higher demand have continued to push up the cost of building a new house,” Statistics NZ general manager Jason Attewell said.
Grocery food prices were up by marginally less than the overall inflation rate, rising 7.1%, while rents were up 4.3%.
The prices of so-called “tradeable” goods and services, whose prices are largely set overseas, rose 8.7% during the quarter.
But the prices of locally-produced non-tradeable goods and services rose by 6.3%, which was ahead of most economists’ expectations.
Kiwi economists say the data revealed that inflation was now more broad-based, a situation the RBA thinks is being repeated in Australia.
The New Zealand government on Sunday moved to ease some of the inflationary pressures by extending the duration of cuts to the fuel excise tax, road user charges and public transport fares.
The Government will extend cuts to fuel taxes, road user charges, and half-price public transport fares until the end of January next year, as new inflation figures out tomorrow are expected to show another three months of pain for households.
The cuts, in place since March, take 25 cents a litre off the cost of petrol along with an equivalent reduction to road user charges (RUCs).
Minister of Finance Grant Robertson said the extension would give households “some certainty over the coming months in the face of volatile prices at the pump”.
Australia’s fuel excise cut of 22 cents a litre is due to end in September.