Today's Consumer Price Index (CPI) figures are already too high even before the GST rise flows into prices.The CPI for the September quarter, released this morning by Statistics New Zealand, showed a quarterly increase of 1.1% and an annualised increase o
Today’s Consumer Price Index (CPI) figures are already too high even before the GST rise flows into prices.
The CPI for the September quarter, released this morning by Statistics New Zealand, showed a quarterly increase of 1.1% and an annualised increase of 1.5%.
That is – as Finance Minister Bill English was quick to trumpet – the lowest annual rate since March 2004.
All good?
Well, no. There’s a few worrying trends in today’s data.
It is not just that the next quarter’s CPI figures – due out on 20 January – will include the rise in GST from 12.5% to 15%.
Today’s figure is higher than the Reserve Bank was expecting - the RBNZ had 0.9% for the quarter.
We have to discount a few government- imposed one-offs: excise tax increases on tobacco and alcohol flowed through into today’s figures, and there was also some backwards leakage from the GST increase because electricity companies, and, to a less extent, telecommunications companies, included the GST rise on invoices which partially covered the September quarter.
Even beyond that, inflation in the “non-tradeable” sector – that is, the parts not subject to international competition – is stubbornly high, at 1.2% for the quarter and 2.5% for the year.
ASB Bank chief economist Nick Tuffley estimates that if the various government impost changes are left off, non-tradeable inflation would still have been up by around 0.9%.
“Inflation pressures are picking up,” he said. “We expect underlying inflation will continue to lift as the recovery in economic activity in New Zealand gathers momentum.”
Bank of New Zealand economist Craig Ebert is another who warns that although the rate is low on an annualised basis, it should be lower.
The high New Zealand exchange rate against the US currency should have helped push inflation down further, and is “another sign that underlying inflation is sticky, and hardly slack.”
