Annual contributors
Petrol was the largest upward contributor to the September annual inflation rate, up 19.1%.
“Petrol prices fell in the September 2026 quarter, compared with the June 2026 quarter,” prices and deflators spokeswoman Nicola Growden said.
“However, petrol prices remained higher than in the September 2025 quarter.”
If petrol prices had not changed, the CPI would have risen 3.2% in the 12 months to the September 2026 quarter.
Non-tradeable inflation was weaker than expected, which looked to be on account of lower than expected rises in construction costs and local authority rates, ASB senior economist Mark Smith said.
“That said, core inflation measures have firmed and are now generally above 3% annually, which is of concern.”
Other contributors to the annual CPI increase were:
electricity – up 9.3%international airfares – up 12.5%local authority rates and payments – up 6.2%
Quarterly inflation
The CPI rose 0.7% in the September 2026 quarter, compared with the June 2026 quarter.
Lower petrol prices were the largest downward contributor to the quarterly inflation rate, down 6.5%.
“Petrol prices fell 6.5% in the September 2026 quarter after rising 20.1% in the June 2026 quarter,” Growden said.
In the minutes following the release, the New Zealand dollar dropped by about 10 basis points to around US56.95c based on a better-than-expected outcome for non-tradeables inflation.
“It reflects the downside surprise to the non-tradeables component, which came in a little bit lower than what people were expecting and even lower than the Reserve Bank was expecting,” ANZ strategist David Croy said.
The Reserve Bank had forecast non-tradeables to show a 1.3% rise for the quarter. ANZ economists predicted a 1.2% gain, while the actual Stats NZ number showed a 1.0% quarterly increase.
Capital Economics said the pullback in headline inflation in the quarter would not provide much comfort to the Reserve Bank, given that underlying price pressures continued to build.
“We suspect the Reserve Bank will be more concerned about the fact that all three measures of core inflation gathered momentum last quarter,” Capital Economics said.
“Indeed, inflation excluding food and energy rose from 2.5% to 2.9% in the third quarter.
“Our base case has been that the Reserve Bank would hike rates by 25 basis points at its meeting ending on October 28, with a final follow-up hike likely in [the first quarter] 2027. That would take the Official Cash Rate to a peak of 3.25%.
“However, with underlying price pressures strengthening, we believe the risks are tilted towards the bank hiking more aggressively than we currently anticipate.”
Westpac senior economist Satish Ranchhod shared those concerns.
“With big swings in fuel costs, and concern that this is spilling over into operating costs more generally, a key focus for the RBNZ is what’s been happening to measures of core inflation,” he said.
Core inflation smooths through quarter-to-quarter swings in individual prices by excluding volatile items like fuel, food and electricity.
“On this front we did see some worrying signs. Several closely watched measures of core inflation have picked up, and now sit at the top of, or slightly above, the RBNZ target band.”
December quarter
Despite some heartening topline numbers in this release, the (current) December quarter was “shaping up to be bad”, said KiwiBank economist Alexandra Turcu.
“With record high shipping costs for oil into Asia, we will continue to feel the pinch at the pump here in Aotearoa,” she said.
“The question remains of whether domestic businesses will raise prices as a result. If the last two quarters tell us anything about that, it’s that they can’t even if they want to.
“Consumers are spending more on petrol, rates and electricity [among other necessities] and have less to spend on everything else.”
ASB economists have been forecasting a 4.5% annual inflation rate for the year-end, but say today’s data suggest it could be worse.
“We see modest upside risk to our 4.5% end-of-year CPI pick,” ASB’s Smith said.
“The 2027 inflation profile also looks to be considerably firmer than September MPS expectations.”
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.
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