Reserve Bank keen for fully fledged monthly CPI inflation data from Statistics NZ with regular reweightings

The Reserve Bank's making it clear it wants more and faster inflation data from Statistics New Zealand.

In Wednesday's Monetary Policy Statement (MPS) the Reserve Bank said Statistics NZ's recent move to start reporting Selected Price Indexes (SPI), representing about 45% of the total Consumers Price Index (CPI) basket monthly, was welcome. This is in the context of NZ being one of only a few developed countries that doesn't produce a monthly CPI, and nor do we review CPI weights as often as most developed countries.

"While the SPI is not intended to be a perfect measure of the CPI, it is a step in the right direction and gets New Zealand closer to the global standard. Overall, the SPI has increased the frequency of available information on consumer prices and gives forecasters an additional set of data to indicate the size and direction of changes in inflation components in a timelier manner. The Reserve Bank encourages Stats NZ to continue improving the frequency at which prices are reported in the New Zealand economy," the RBNZ says.

"Timely reweighting is important because consumers substitute various goods and services when relative prices, preferences or availability changes. It is likely that many such substitutions have occurred since the most recent reweight in 2020 based on the Household Economic Survey 2018-19. More frequent publication and reweighting of the CPI would support the [Reserve Bank's] Monetary Policy Committee in assessing the current state of the economy and reduce the risk of policy errors from slow data releases, particularly in periods of heightened uncertainty."

Speaking in a press conference after the MPS was issued, Reserve Bank Governor described NZ's inflation data as "very lagged and quarterly," when beginning an answer to a question about NZ's stubbornly high inflation compared to the now lower inflation in some overseas countries.

"The more they [Statistics NZ] can get to monthly whole consumer price indices, the more regularly they can be reweighted, rebased, then at least we know we've got apples with apples [comparisons] across countries. So that is an important caveat," Orr said.

The Reserve Bank's and Orr's comments come after interest.co.nz reported earlier in February Statistics NZ is overdue on updating the goods and services included in its CPI.

"We currently do not have the funding available to update the CPI basket to ensure it is fully representative of the goods and services that New Zealand households are purchasing," Statistics NZ said.

"The CPI is typically reweighted every three years, using the [Statistics NZ] Household Economic Survey (HES). The HES was suspended in 2021/22 as a result of COVID-19 restrictions on household interviewing. The data has now been collected for 2022/23, but the development work to update the CPI weights is currently unfunded."

Statistics Minister Andrew Bayly said reweighting the CPI basket is a priority for him.

"Currently the development work to update the CPI weights remains unfunded. The CPI basket reweight is a priority for me, and I am engaging with officials on this work," Bayly told interest.co.nz.

The Reserve Bank's monetary policy remit tasks it with achieving and maintaining annual inflation between 1% and 3% over the medium term, with a focus on keeping future inflation near the 2% mid-point. It uses Statistics NZ's CPI to measure inflation. The CPI measures the changes in prices households pay for goods and services. Price change is measured by tracking the prices of individual items that make up a representative basket of goods and services. 

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