Inflation bumped up to 2.5% according to official figures from Stats NZ out today but still remained within the Reserve Bank’s target range.
The slight increase in the 12 months to the March quarter followed two consecutive inflation figures of 2.2% in October 2024 and January 2025.
“The annual inflation rate is within the Reserve Bank of New Zealand’s target band of 1% to 3% for the third consecutive quarter,” Stats NZ prices and deflators spokesperson Nicola Growden said.
The largest contributor to annual inflation was rent, which was up 3.7%. According to Stats NZ, rent prices contributed to 14% of the 2.5% annual increase.
“This is the first time annual rent has increased by less than 4% since 2021,” Growden said.
“Rent is one of the largest weighted items in the CPI basket, so the increase still had a large impact on the overall movement.”
Local authority rates and payments increased 12.2%, contributing 14% to the 2.5% increase.
Rates are captured once a year in the September quarter, as this is when ratepayers see price changes set by councils.
A 1.9% increase in construction prices contributed 7% to the overall figure.
While inflation was up, the figure was still within the Reserve Bank’s target range. (Source: 1News)
Lower petrol prices “slightly offset” the increase. Prices were down 2.8% over the 12 months. The decrease came after a 9.2% decrease in petrol prices in the 12 months to the December 2024 quarter.
The average price for one litre of 91 octane fuel was $2.67 during the March 2025 quarter, down from an average price of $2.74 in the March 2024 quarter.
Coinciding with removing the Auckland regional fuel tax last year, petrol prices in the city dropped 5.8%. The rest of the country saw a 1.3% decrease.
Less than a quarter of the CPI basket increased in price by 5% or more in the 12 months to the March 2025 quarter, Growden said.
“We are seeing the lowest proportion of the CPI basket increase in price by more than 5 percent over the last four years.
“However, it is still above the pre-Covid levels seen prior to 2021.”
Quarterly inflation up 0.9%
Inflation rose 0.9% in the March quarter when compared to the December 2024 quarter.
Petrol prices accounted for 17% of the increase, while tertiary and other post-school education costs (up 22.6%) contributed 11% to the rise.
It came as fees free for the first year of study ended, being replaced by final year fees free.
“Students who have already claimed first-year Fees Free are ineligible to claim final-year Fees Free, meaning more students are paying the full study cost in 2025,” Growden said.
These prices dropped by 16% in the March 2018 quarter when first-year fees were introduced.
Cigarette and tobacco prices increase 3.9%
New excise duty rates were introduced for tobacco products from January 1 of this year.
This prompted a 3.9% increase in the March 2025 quarter compared to the 2024 quarter.
“The increase in the price for cigarettes and tobacco is lower than we have typically seen in a March quarter,” Growden said.
Wilis: ‘The era of high inflation is over’
Finance Minister Nicola Willis said today’s result confirmed “the era of high inflation is over”.
She said the Government’s moves to cut back public spending took the heat out of inflation and allowed the Reserve Bank to reduce interest rates.
“Decisions about the Official Cash Rate are a matter for the Reserve Bank which is operationally independent, but the stabilisation of inflation is good news for people with mortgages.
“It means people should be able to look forward to more rate reductions in the coming months.”
Last week, the Reserve Bank reduced the official cash rate by 25 basis points to 3.5%. Following this, most major banks announced several mortgage rate cuts, some below 5%. Willis called this encouraging.
Willis said it was also encouraging that non-tradeable inflation decreased from 4.5% in the year to December and 4% in the year to March.
“The impact of lower rates on individual households depends on the terms of people’s mortgages but the Official Cash Rate has already fallen two percentage points since August,” Willis said.
“For someone with a $500,000 mortgage over 25 years, a two percentage point drop in their interest rate reduces their repayments by about $300 a fortnight.
“Further falls will mean more money in people’s pockets and more money flowing through business tills.”
The New Zealand Council of Trade Unions said it was concerned for low-income workers because “the prices of things that people can’t avoid are rising”.
“This data is another piece of evidence about who is winning and losing in the economy. The poorest working people are facing higher costs they can’t avoid – but with less money to pay,”
