{"id":226402,"date":"2025-10-20T01:56:10","date_gmt":"2025-10-20T01:56:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/226402\/"},"modified":"2025-10-20T01:56:10","modified_gmt":"2025-10-20T01:56:10","slug":"inflation-hits-3-as-consumers-suffer-largest-power-price-spike-since-1989","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/226402\/","title":{"rendered":"Inflation hits 3% as consumers suffer largest power price spike since 1989"},"content":{"rendered":"
The largest contributors to the annual inflation rate were all in the housing and household utilities group. The main contributors were:<\/p>\n
Electricity \u2013 up 11.3% (10.1% contribution to the 3% annual CPI increase).Rent \u2013 up 2.6% (9.2% contribution).Local authority rates and payments \u2013 up 8.8% (9.2%).<\/p>\n
The top three contributors make up around 17% of the weight in the CPI basket.<\/p>\n
\u201cAnnual electricity increases are at their highest since the late 1980s, when there were several major reforms in the electricity market,\u201d Growden said.<\/p>\n
\u201cThe 11.3% annual increase in electricity prices is the largest since the March 1989 quarter when they rose 12.8%.\u201d<\/p>\n
Economists had widely expected the annual rate to land at about 3%.<\/p>\n
But there was widespread agreement that this would represent a peak in this latest cycle of inflation, allowing the Reserve Bank to look through the breach and cut the Official Cash Rate again in November.<\/p>\n
Today\u2019s number confirmed that domestically-generated inflation was easing, said ASB senior economist Mark Smith. <\/p>\n
\u201cThis should cool overall inflation over 2026,\u201d he said. \u201cWith few economic tailwinds on the horizon, more policy support is needed to get the economy moving to prevent medium-term inflation undershooting the 1-3% inflation target midpoint.\u201d<\/p>\n
ASB expects a 25bp OCR cut in November, with a risk that a further cut was needed.<\/p>\n
On the plus side a 2.6% increase in rents was the smallest annual increase in over four years. Rents increased 2.9% in the 12 months to June 2021.<\/p>\n
Of the five broad regions measured by Stats NZ, rent prices in Canterbury and Rest of South Island had the largest annual increases, both up 4.3%. Wellington had the smallest annual increase, up 0.1%.<\/p>\n
Local authority rates and payments are measured once a year in the September quarter and have been one of the main drivers of annual inflation in recent years.<\/p>\n
\u201cThe annual increase in rates in the September 2025 quarter was lower than the 12.2% increase in the September 2024 quarter, but higher than the average increase of around 7.3% observed between 2018 and 2025,\u201d Growden said.<\/p>\n
But despite being down from its post-Covid peak, the cost of living remained problematic for the economic recovery, Smith said.<\/p>\n
\u201cIn our view, this is the largest single headwind facing the household sector,\u201d Smith said.<\/p>\n
\u201cWe have seen a cumulative increase in household costs of around 25% since the end of 2019. Increases are somewhat larger for key necessities like food and housing. Little wonder households feel under the pump.\u201d<\/p>\n
There were promising signs that food price inflation, which has been elevated in the past year, has now peaked.<\/p>\n
The monthly Stats NZ Selected Price Index \u2013 which covers food, travel and accommodation costs (about 46% of the total CPI) was released last Thursday.<\/p>\n
It showed food prices were down 0.4% for the month of September, taking the annual rate of food price rises to 4.1% \u2013 from 5% in the year to June.<\/p>\n
\u201cSeasonal rises for tomatoes, cabbage, capsicums, lettuce, and broccoli all contributed to the rise in vegetable prices,\u201d Growden said.<\/p>\n
Vegetables, up 12.2%, for the quarter (15% of the 1% quarterly rise).<\/p>\n
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n