Westpac New Zealand economists have revised their inflation forecasts and now expect annual inflation to hit a three-year high in the December 2026 quarter, driven by \u201csharply higher\u201d global fuel prices and a tumble in the NZ dollar.<\/p>\n
Annual inflation, as measured by Statistics NZ\u2019s Consumers Price Index (CPI), increased to 4.1%<\/a> in the June quarter. It’s the highest annual inflation rate NZ has seen since hitting 4.7% in December 2023.<\/p>\n Westpac NZ still estimates consumer prices rose 0.7% in the September quarter, with September quarter CPI due to be released on October 22. This would bring annual inflation to 3.7% in the year to September, down from 4.1% in the year to June.<\/p>\n \u201cHowever, that easing in inflation appears set to be only a temporary reprieve. We now expect consumer prices to rise 1.1% in the December quarter,\u201d Westpac NZ chief economist Kelly Eckhold said.<\/p>\n That would see annual inflation rising to a three-year high of 4.2% by the end of this year.<\/p>\n \u201cThe main driver of this revision are sharply higher global fuel prices, compounded by a more than 4% fall in the New Zealand dollar since the start of September. Together, those developments have already pushed local petrol prices up around 50 cents\/litre over the past month, with the nationwide average price of 91 unleaded reaching a record $3.53\/litre earlier this week,\u201d Eckhold said.<\/p>\n He went on to describe NZ\u2019s inflationary environment as \u201call gas, no brakes.\u201d<\/p>\n The Reserve Bank\u2019s (RBNZ) most recent projections for December quarter inflation are higher than Westpac NZ\u2019s updated forecast. The RBNZ lowered its annual CPI expectations for both the September and December quarters to 3.9% in its September Monetary Policy Statement (MPS)<\/a>, down from earlier projections of 4.3% and 4.1% in its May MPS<\/a>.<\/p>\n