Annual inflation, as measured by Statistics New Zealand’s Consumers Price Index (CPI), increased 3.7% in the September quarter driven by petrol.
Statistics NZ says petrol was the largest contributor to the annual inflation rate, up 19.1%. Petrol had a 17.5% contribution to the 3.7% inflation rate for the September quarter.
The cost of constructing new housing was up 3.2% and also contributed to the annual CPI rise with a 7.9% contribution to the annual inflation rate.
Stats NZ prices and deflators spokesperson Nicola Growden said respondents reported that higher costs for materials, subcontractors, labour and fuel contributed to rising prices for new housing.
Electricity, international airfares, and local authority rates and payments also contributed to the annual CPI increase.
Electricity was up 9.3%, international airfares was up 12.5%, and local authority rates and payments were up 6.2%.
In terms of their contribution to the annual inflation rate, electricity has a 7.2% contribution, international airfares was 6.0%, and local authority rates and payments contributed 5.5%.
CPI would have risen to 3.2% if petrol prices had not changed
The latest inflation figure comes after annual June quarter CPI hit 4.1% - the highest annual inflation rate NZ has seen since 4.7% in December 2023.
Statistics NZ said if petrol prices had not changed, the CPI would have risen 3.2% in the September quarter – continuing to breach the Reserve Bank’s (RBNZ) target range of 1% to 3%.
CPI excluding food group, household energy subgroup and vehicle fuels, was 2.9%.
The latest annual CPI inflation figure was below the RBNZ’s projection of 3.9% for the September quarter and slightly lower than forecasts from bank economists, except for Westpac NZ who projected 3.7%.
The RBNZ had updated its inflation forecast at its September Monetary Policy Statement (MPS) for both the September and December quarters to 3.9%, down from earlier projections of 4.3% and 4.1% in its May MPS.
In the lead up to the CPI release, BNZ was projecting 3.9% CPI for the September quarter, while ANZ had gone for 3.8%. Kiwibank picked 4.0% and ASB was projecting 3.9%.
More than 85% of CPI basket saw an annual increase in price
Although petrol was the largest contributor to the annual CPI increase, Growden said petrol prices fell in the September quarter compared with the June quarter.
“However, petrol prices remained higher than in the September 2025 quarter.”
As for local authority rates and payments, these are measured once a year in the September quarter and have been one of the main drivers of annual inflation in recent years.
“The 6.2% annual increase in rates in the September 2026 quarter follows an 8.8% annual increase in the September 2025 quarter,” Growden said.
Health insurance saw a 17.5% annual jump. Meanwhile olive oil, butter, vegetables and audio-visual equipment fell in price over the year.
Stats NZ said in the 12 months to the September quarter, 85.5% of the CPI basket increased in price.
Over the same period, 54.9% of the CPI basket increased by more than 3%, up from 38.5% in the June quarter.
“In contrast, about 13% of the basket fell in price – the lowest proportion since the December 2023 quarter,” Stats NZ said.
International airfares the largest contributor to quarterly increase
The CPI increased 0.7% in the September quarter, compared to a 1.5% rise in the June quarter.
International airfares were the largest contributor to the quarterly inflation rate, up 14.3%.
“This was the largest quarterly increase in international airfares since the December 2022 quarter. The increase was mainly driven by higher fares to Europe and Asia," Growden said.
Higher prices for local authority rates and payments (up 6.2%), vegetables (up 10.5%) and construction also contributed to the quarterly increase in CPI.
Lower petrol prices were the largest downward contributor to the quarterly inflation rate, dropping 6.5%. Other vehicle fuels and lubricants were down 15.5%.
Petrol prices fell 6.5% in the September quarter after rising 20.1% in the June quarter, Growden said.
Non-tradeable inflation up 3.3%
The latest CPI figures show annual tradeable (imported inflation) rose 4.3%. Higher prices were recorded for petrol, which jumped 19.1% and international air transport, up 12.5%.
These were partly offset by oils and fats which fell 8.3% and vegetables which was down 2.2%.
Non-tradeable annual inflation (goods and services that don’t face overseas competition but can be influenced by foreign competition) increased 3.3% with higher prices recorded for electricity, which was up 9.3%, and purchase of housing jumping 3.2%.
Lower prices were recorded for other miscellaneous services (driven by auction services), which dropped 5.9%, and milk, cheese and eggs decreased 14.7%.
Stats NZ said eggs were the only non-tradeable item in the milk, cheese and eggs group.
Official Cash Rate
The RBNZ’s target band for inflation is 1% to 3% and it aims for 2%. The Official Cash Rate (OCR) is the central bank’s main tool for targeting inflation.
The RBNZ has previously hinted strongly at a possible pause at the next OCR review following a hike in September to 2.75% from 2.50%.
But following the latest gross domestic product (GDP) figures in September and Stats NZ’s latest Selected Price Indexes (SPI) figures, some economists have suggested the central bank could potentially increase the OCR in October.
The RBNZ’s next OCR review is on October 28.
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