Has inflation peaked? The latest data from Stats NZ seems to confirm that, revealing a slower than expected inflation rate. And this could be good news for mortgage holders, as further aggressive interest rate hikes may no longer be needed. So, here’s a summary of the key things to know.
A welcome slowdown
According to Stats NZ, the annual inflation rate fell to 6.7% in March, still more than double the RBNZ’s target of 2-3%, but lower than the expected 7% and the previous quarter’s 7.2%. It’s a promising sign as a more manageable rate allows for greater flexibility in monetary policy decisions.
In the March 2023 quarter, the CPI rose 1.2% (also slower than expected), influenced by rising prices in food, alcoholic beverages, tobacco, and housing and household utilities. Food prices gained 11.3% annually, driven by a 22% increase in vegetable prices, a 9.7% increase in ready-to-eat food, and a 15% increase in milk, cheese, and eggs. Construction costs also increased by 11% in the year to March, reflecting the ongoing impact of supply chain disruptions and labour shortages in the construction industry.
The path ahead
“Inflation is still at levels not seen since the 1990s,” said Nicola Growden, Statistics NZ’s consumer prices senior manager. However, Infometrics Chief Executive Brad Olsen noted that the figures were better than expected, also thanks to falling fuel prices.
“Fuel prices falling have contributed to this moderation, with petrol prices down 8.3 percent from a year ago,” he said. “That’s encouraging news and shows that the intense inflationary pressures we’ve been seeing are starting to be dampened just a bit.”
Despite the high inflation rate, New Zealand is “on the right path,” according to Olsen. The declining annual figure indicates that the economy is moving in a positive direction, and that the various pressures causing the inflation surge are beginning to ease.
Meanwhile, Finance Minister Grant Robertson emphasised the Government’s commitment to supporting New Zealanders through these challenging times and addressing the cost of living in the upcoming budget – including benefit increases, minimum wage hikes, and fuel tax cuts.
The latest CPI data could also be good news for mortgage holders. As inflation slows down, the RBNZ may not need to be as aggressive with interest rate hikes, providing some relief to homeowners and borrowers. However, vigilance and careful management will be crucial to maintaining a healthy economic outlook. Policymakers and economic experts will continue to monitor inflation trends and adapt their strategies accordingly to ensure that the economy remains on a sustainable path to recovery and growth.
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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.