New Zealand inflation eases to 3.7% but remains above target
Annual consumer price inflation in New Zealand eased to 3.7 per cent in the year to September, down from 4.1 per cent in the year to June, while remaining above the Reserve Bank’s 1 to 3 per cent target band. The latest official figures show prices rose 0.7 per cent in the September quarter.
The quarterly slowdown in petrol prices provided the largest downward contribution to the latest change. Petrol fell 6.5 per cent between the June and September quarters, after rising sharply in the previous quarter. That fall moderated the overall increase, but did not reverse the year-on-year rise: petrol was still 19.1 per cent more expensive than a year earlier and was the largest upward contributor to annual inflation.
Airfares and rates added to quarterly prices
International air transport recorded the largest upward contribution to the quarterly CPI movement. Fares rose 14.3 per cent in the three months to September, the largest quarterly increase since December 2022. The increase was mainly driven by higher fares to Europe and Asia.
Local authority rates and payments also rose, increasing 6.2 per cent over the quarter. Rates are measured once a year in the September quarter, so their movement is concentrated in that release rather than spread evenly across the year. Vegetables rose 10.5 per cent and also contributed to the quarterly increase.
These increases were partly offset by lower fuel costs. Alongside petrol, other vehicle fuels and lubricants fell 15.5 per cent during the quarter. The mix of changes meant the headline index still increased, even as one of the most visible household costs moved down from its June-quarter level.
Annual increases remain broad
Looking across the year, petrol, housing and electricity were among the important sources of upward pressure. The cost of purchasing a home rose 3.2 per cent, while electricity prices increased 9.3 per cent. Local authority rates and payments were 6.2 per cent higher than a year earlier. The annual rise in petrol prices remained prominent despite the quarterly fall.
The breadth of price changes also matters alongside the headline rate. More than 85 per cent of the consumer price basket was higher in price than a year earlier. The official breakdown shows that price changes were not confined to fuel or a single category, although the size and timing of increases varied considerably between items.
The CPI measures changes in the prices of a broad basket of goods and services purchased by households. A quarterly movement compares prices with the previous quarter; the annual rate compares them with the same quarter a year before. Those comparisons can tell different stories when prices move sharply within the year, as the recent petrol figures illustrate.
What the figures say about the target
At 3.7 per cent, annual inflation is above the Reserve Bank’s target range of 1 to 3 per cent over the medium term. The latest quarter’s softer petrol prices helped bring the annual rate down from June, but the headline figure alone does not show that household prices have returned to the target band. Nor does it mean that every household faces the same price changes: spending patterns differ, and individual bills can rise or fall by more than the overall index.
The data describe price changes that have already occurred. They do not amount to a decision on interest rates. Any future movement in borrowing costs would depend on the Reserve Bank’s assessment and its policy decisions, rather than being determined automatically by this CPI release.
For households, the figures therefore present a mixed picture: annual inflation has eased, but remains above target; petrol fell in the quarter, but is much more expensive than a year ago; and airfare, rates, electricity and housing costs contributed to increases. The next quarterly CPI release, covering December 2026, is due on 27 January 2027.
