Official figures out today show inflation has stayed at 2.2%, latest figures from Stats NZ show.
The previous figures in October also had inflation at 2.2%, bringing it into the Reserve Bank’s target range for the first time in more than three years.
“This is the second consecutive quarter that the annual inflation rate has been within the Reserve Bank of New Zealand’s target band of 1 to 3%,” prices and deflators spokesperson Nicola Growden said.
“Prices are still rising, but not as much as previously recorded. The most recent peak was in the June 2022 quarter when the annual inflation rate reached 7.3%.”
According to StatsNZ, the largest contributor to annual inflation was rent, which was up 4.2%. Almost one-fifth of the 2.2% increase was caused by rising rent prices.
“Annual rent inflation continues to grow at a consistent rate. Between the December 2023 and 2024 quarters, annual rent inflation ranged between 4.2% and 4.8%,” Growden said.
Petrol prices — which fell 9.2% and included the removal of the Auckland regional fuel tax in June last year — helped offset the rising prices.
Growden said that if petrol were excluded, inflation would have increased 2.7%.
“Petrol makes up about 4% of the CPI basket. Its price fall made a significant contribution to the slower increase in the annual inflation rate in December 2024,” she said.
Between December 2023 and December 2024, the weighted average price for one litre of 91 octane petrol fell 26 cents, from $2.81 to $2.55.
Local authority rates and payments (up 12.2%) and cigarette and tobacco prices (up 7.6%) were also factors in the inflation stall.
‘Scope for further rate reductions’ — Finance Minister
Finance Minister Nicola Willis said inflation staying within target range was “good news for people with mortgages”.
She said the CPI, alongside other economic data, showed there was “spare capacity” in the economy and suggested there was “scope for further rate reductions in the coming months”.
Willis said today’s data showed the Government had taken the right steps to reduce inflationary pressures by “restoring discipline to public expenditure”.
“Lower inflation and interest rates set the foundations for economic growth, and the investment, jobs and incomes it creates,” she said.
“The benefits of restoring discipline to public spending are starting to flow through to people’s bank accounts. Recent data published by the Reserve Bank shows the average interest rate paid on residential mortgages fell in November for the first time since September 2021.
“Further drops in coming months will reduce cost of living pressures on households, free up cash to be spent in local businesses and encourage investment and growth.”
Meanwhile, ACT leader David Seymour said there was still work to do and urged “continued discipline” from the Government to defeat the “inflation monster”.
“We cannot rely on low oil prices to control inflation in our troubled world,” he said.
“The Government needs to forge ahead in its work to cancel spending programmes that are not making New Zealand richer.”
Opposition reacts
The largest contributor was rent, according to the latest Stats NZ figures. (Source: 1News)
Labour’s finance spokesperson Barbara Edmonds said the Government had “failed to steer our economy out of trouble, leaving families worse off”.
“New Zealand is now in the deepest recession in 30 years, with unemployment rising, and thousands of Kiwis leaving the country every month,” she said
“Nicola Willis is taking credit for global inflation trends, but domestically high rent, which has increased by 4.2%, and local authority rates, up 12.2% continue to bite. Rents have increased despite the Prime Minister’s continued promises to Kiwis they wouldn’t.
“National has had over a year to deliver results, and instead, they’ve deepened the recession and let opportunities slip away.”
Green Party Co-leader Chlöe Swarbrick blasted the Government, saying its decisions had created rent inflation and “driven more people into poverty”.
“The Government is either deeply economically illiterate, taking New Zealanders for chumps, or both,” she said.
“Cutting taxes for landlords, paid for by chopping public spending on essential services right through the bone, is not only deeply unfair, but deeply unproductive. It hurts the poorest most, and all of us in the long run.
“The only thing that’s trickling down is more cost for regular people, while Government decisions secure profits for the wealthiest.”
Economy still struggling
The economy has continued to struggle — New Zealand’s gross domestic product (GDP) fell 1% in the September quarter and the number for the June quarter was also revised downwards to a decrease of 1.1%.
That meant New Zealand’s economy was officially in recession, with two successive quarters of contraction.
When the Reserve Bank cut the Official Cash Rate to 4.75% in October it said inflation was now within the 1-3% target range and heading towards the 2% midpoint. It then cut the rate by a further 0.5% to 4.25% in November.
The next Cash Rate review is due on February 19 but banks have continued to trim their rates in the meantime, with ANZ today announcing cuts to both its home loan costs and saving returns.
Kiwibank said in its assessment of the economy this week: “We’re going into 2025 feeling optimistic for the Kiwi economy with rates continuing to fall and inflation stabilising at 2%.”
However, it said there were “a couple of hurdles to get through”. It predicted another 0.5% cut in the Official Cash Rate by the Reserve Bank in February.
Inflation peaked during and after the pandemic, hitting 7.3% in the June 2022 quarter. With house prices also shooting up, the official interest rate was lifted to dampen demand, to a high of 5.5% in May 2023, which then lasted for more than a year.