Annual inflation, as measured by the consumers price index (CPI), rose to 3.0% in the September quarter reaching the top of the Reserve Bank’s 1% to 3% inflation target range.
The RBNZ had expected inflation to reach 3.0%, but does expect it to decline again from here.
The increase in the latest annual inflation figure rate was driven by electricity, rent, local authority rates and payments. This latest annual inflation figure is a jump from the June quarter, when annual inflation was 2.7%.
This 3% annual inflation rate is the highest since the June 2024 quarter, which saw annual inflation reach 3.3%, Statistics New Zealand’s prices and deflators spokesperson Nicola Growden says.
The latest inflation figure, released on Monday, is unlikely to deter the Reserve Bank (RBNZ) as its Monetary Policy Committee previously noted inflation was projected to reach 3% in the September quarter.
The RBNZ is tasked with maintaining inflation between 1% and 3% and it specifically targets 2%. Its next Official Cash Rate decision will be in November. Earlier this month the RBNZ cut the OCR to 2.5% from 3.0% and, notwithstanding the inflation figure, there's universal expectation that the OCR will be cut to 2.25% in the review on November 26.
In notes written before Statistics New Zealand’s CPI release, economists also suggested the CPI inflation for the September quarter would reach 3% to 3.1% with ANZ economists saying the Monetary Policy Committee are unlikely to get too spooked by inflation breaching the target band “provided the core measures remain contained and non-tradeable inflation continues to slow”.
The latest CPI figures show annual tradeable (imported) inflation went up 2.2%. Higher prices were recorded for overseas accommodation prepaid in New Zealand which went up 9.6%, and meat and poultry which jumped 12.2%.
These were partly offset by telecommunication equipment which decreased 15.2% and petrol which was down 1.6%.
Non-tradeable annual inflation (goods and services that don’t face overseas competition but can be influenced by foreign competition) was at 3.5% (down from 3.7% in the June quarter) with higher prices recorded for electricity which was up 11.3% and local authority rates and payments – jumping 8.8%.
These were partly offset by pharmaceutical products, down 80.9% and real estate services which decreased by 2.4%.
Top three contributors to annual inflation
With electricity up 11.3% - it contributed 10.1% to the 3% annual CPI increase, while rent was up 2.6% (contributing 9.2%) and local authority rates and payments were up by 8.8% (contributing 9.2%).
The top three contributors make up 17% of the weight of the CPI basket.
“Annual electricity increases are at their highest since the late 1980s, when there were several major reforms in the electricity market,” Growden says.
“The 11.3% annual increase in electricity prices is the largest since the March 1989 quarter when they rose 12.8%.”
While rent was also a top three contributor – it went up by 2.6%. This is the smallest annual increase in over four years. The last time it was this low was in the June 2019 quarter when it was 2.5%.
Rent prices in Canterbury and the rest of the South Island had the largest annual increases – both jumping by 4.3% while Wellington had the smallest annual increase at 0.1%.
Local authority rates and payments are measured once a year in the September quarter.
Growden says the annual increase in rates in this quarter was lower than the 12.2% increase in the September 2024 quarter – but higher than the average increase of around 7.3% between 2018 and 2025.
Larger increases were reported in Napier, Hastings and New Plymouth and lower increases for Whanganui and Timaru.
Downward contributors to the CPI were pharmaceutical products which had decreased 10.6%, telecommunication equipment was down 15.2% and petrol was down 1.6%.
Growden says Statistics New Zealand measures the change of prescription charges in over year and this does start to decline over time.
Other areas
Insurance saw an overall annual increase of 4.1% with health insurance jumping 19.2%.
Dwelling insurance saw a jump of 5.6% while contents insurance jumped 9.3% and vehicle insurance saw a 0.8% decrease.
Milk, cheese and eggs saw a 10.9% annual increase.
The purchase of new housing saw a 0.8% annual change.
Quarterly rise
The CPI increased 1% in the September quarter, compared with the June 2025 quarter.
Local authority rates and payments was the largest contributor – making up 28% of the 1% quarterly rise.
Vegetables made up 15% of the quarterly 1% rise with Growden saying seasonal rises for tomatoes, cabbage, capsicums, lettuce and broccoli all contributed to the rise in vegetable prices.
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