New Zealand’s Inflation Rate Falls Below Australia, US, and OECD
New Zealand’s Finance Minister acknowledges that the country has reached a turning point in interest rates as inflation hits 2.2 percent, although economic challenges still persist.
According to recent data, inflation in New Zealand has fallen to its lowest level in over three years, now standing at 2.2 percent annually.
The government has expressed satisfaction with this development, with ACT Party Leader David Seymour stating, “We’ve turned the corner on interest rates, and now we’re returning to normalcy on inflation.”
The Reserve Bank of New Zealand (RBNZ) recently reduced the Official Cash Rate (OCR) by 50 basis points on Oct. 9, bringing it down to 4.75 percent.
Finance Minister Nicola Willis declared, “The era of crushing price rises is now over.” She attributed the improvement in inflation to government measures aimed at reducing inflationary pressures, restoring fiscal discipline, cutting red tape to promote innovation and development, and rebuilding business confidence.
While acknowledging that annual inflation is now within the Reserve Bank’s target band of one to three percent, Statistics NZ consumer prices manager Nicola Growden emphasized that prices are still rising, albeit at a slower rate than before.
Despite the positive headline figure, the data highlights ongoing economic challenges. Domestic (non-tradeable) inflation remains high at 4.9 percent, indicating significant price growth in goods and services produced within New Zealand.
Rents and Rates Still on the Rise
Rents, which contributed significantly to the inflation rate, increased by 4.5 percent, making up almost a fifth of the overall 2.2 percent rise.
Council rate hikes also played a role in driving up inflation, with an average increase of 12.2 percent across the country in the year leading up to Sept. 30.
On a positive note, lower petrol prices (down eight percent) and a significant drop in vegetable prices (17.9 percent) helped offset other price increases. Core inflation, excluding volatile sectors like energy and seasonal food, stood at 3.1 percent.
Labour Finance spokesperson Barbara Edmonds expressed concerns about the broader economic outlook, noting sluggish growth and skilled workers leaving the country or facing shortages due to cuts in apprenticeship programs.
The Green Party criticized the government’s handling of housing issues, particularly the sharp rise in rents and treatment of tenants.
Unemployment Remains a Challenge
The Council of Trade Unions highlighted rising unemployment as a crucial issue, warning that lower inflation should not come at the cost of increased joblessness.
Eyes are now on the Reserve Bank, set to make an announcement on Nov. 27, with many economists predicting an additional five basis point cut.
By comparison, while New Zealand’s inflation rate stands at 2.2 percent, the United States sees 2.4 percent inflation, Australia sits at 3.8 percent, and the OECD average is 5.4 percent.
