The economy is cooling – new annual inflation figures show a third consecutive fall from its record peak last year.
Statistics NZ has released its latest inflation figures – a 6.0% annual change in the Consumer Price Index (CPI) for the June 2023 quarter.
Quarter-on-quarter inflation was 1.1%.
Today’s figures confirm that inflation has finally peaked after hitting a 32-year high in the June 2022 quarter.
Statistics NZ consumer prices senior manager Nicola Growden said: „Prices are still rising at a rate not seen since the 1990s, but at a slower rate than in the last few quarters.”
Today’s figures show food is the biggest driver of annual inflation, he said. This is due to increase in prices of vegetables, ready meals, milk, cheese and eggs.
Food prices are rising at 12.3% per annum [in the June 2023 quarter]”Consumers can buy cheaper alternatives to keep their food bills down,” Groden said.
Economists had largely predicted today’s downturn – citing low gasoline prices as a key reason for the drop, and households’ growing reluctance to spend.
„Vegetable prices increased by 23.3% in the 12 months to June 2023, while ready-to-eat food and milk, cheese and eggs increased by 9.8% and 13.8% respectively,” Statistics NZ said.
„The next largest contributor to the annual increase was housing and home appliances, with the increase driven by higher prices for both construction and rentals.”
Groton said: „The cost of building a new home has increased by more than a third in the three years to the June 2020 quarter.”
The rising cost of living is making it difficult for the average New Zealander.
Napier resident Shalia Lawrence’s rent has risen from $340 to $390 a week. He told 1News that finding an extra $50 a week is not easy.
„I’ve been blessed with good landlords, but it has to be spent, and it’s a roll-on effect.”
The 23-year-old has had to work extra hours to find the extra cash and has cut back on spending as much as she can.
„The heat pump doesn’t turn on when it usually does. I don’t go on road trips. There are some things I don’t do anymore.”
But carrying is still a big financial and emotional burden, she said — especially when she has two younger sisters.
„I’ll go without, so they can.”
But the combined impact of high living costs and devastating weather damage has put his business – and main source of income – at risk.
„It was easy to see the light, but it’s fading,” Lawrence told 1 News.
„It’s a really tough thing. Like every quarter, I’m hoping it’s going to be a good fall year, but we’re at risk, and that’s what’s scary.”
Retail NZ’s Aimee Hynes says businesses across the country are feeling the pressure, with higher wages and inventory costs being one of the biggest areas affecting them financially.
„We have some businesses going through the process of closing down, which is really unfortunate,” he said. „We want to see a vibrant New Zealand, but in this environment, some are choosing to shut it down because it’s a step too difficult.”
Political Reaction: 'Incentive’ or 'No Control’?
Eighty-seven days after the election, Finance Minister Grant Robertson insisted that annual inflation was now at its lowest level since late 2021.
„It’s encouraging news that inflation continues to move in the right direction while Kiwis are working in record numbers,” he said.
„Quarterly inflation is now at its lowest level in two years, while New Zealand’s annual rate of 6% is below the OECD average of 6.5%.”
„With real consumption forecast to fall by 5% in early 2025, the government is doing its part to reduce inflationary pressures by reducing spending to more modest levels and reducing overall demand in the economy.”
He pointed to the government’s Budget 2023 initiatives to address Quis’ daily cost of living challenges and said there were other „positive signs” for the economy.
„The economy is adding jobs, business confidence is starting to improve, tourists and international students are returning, foreign workers are filling vacancies, and our public debt levels are among the lowest in the world, helping us to meet the challenges ahead.”
Meanwhile, National Finance spokeswoman Nicola Willis was keen to point out other countries – such as Canada and the US – are seeing inflation cool.
Willis said Aotearoa was uniquely „held hostage by an ongoing cost-of-living crisis”.
„Over the past week, Canada’s inflation rate has dropped to 2.8% and the US’s inflation rate has dropped to 3%. Australia’s inflation rate is 5.6% lower than ours,” he said.
„New Zealanders are constantly scandalized with high prices everywhere they look and the government is doing nothing to end it.
„Global Inflation Is Boiling, Yet New Zealand’s Inflation Is Still Hot.”
He attacked the government for refusing to „rein in spending, cut costs or fix labor shortages” and therefore „fueled our home-grown inflation”.
„New Zealand is now entering its third year of out-of-control inflation – the longest period of high inflation since the early 1990s,” he said.
“As the government refused to do its own thing to tackle inflation, the RBI was left alone and they had no choice. [but] to lower interest rates ever higher.”