NZ consumer prices rise 0.3% in first quarter on tobacco tax hike, more expensive housing
By Paul McBeth
April 16 (BusinessDesk) - New Zealand consumer prices rose less than expected in the first quarter as a hike in tobacco
taxes and more expensive housing were offset by cheaper international holidays and in-season vegetables. The kiwi dollar
dropped on the data.
The consumers price index rose 0.3 percent in the three months ended March 31, accelerating from a quarterly rate of 0.1
percent in the fourth quarter of 2013, according to Statistics New Zealand. That was slower than the 0.5 percent pace
predicted by the Reserve Bank and economists. The annual pace of inflation slowed to 1.5 percent from 1.6 percent in
calendar 2013, also below expectations.
The New Zealand dollar fell to 86.07 US cents from 86.36 cents immediately before the figures were released and the
trade-weighted index fell to 79.93 from 80.18 as traders pondered whether a milder track of inflation would temper the
central bank’s interest rate tightening cycle.
The increase in first-quarter inflation was driven by a 10 percent lift in the price of cigarettes and tobacco, stemming
from the government’s annual hike in the excise tax. Stripping out tobacco, CPI was flat in the quarter.
International air travel prices fell 10 percent in the quarter, as a stronger New Zealand dollar made overseas holidays
more attractive amid seasonally lower airfares, and the price of vegetables declined 5.8 percent.
A 0.7 percent increase in prices for housing and household utilities contributed to the quarterly increase, with new
housing prices up 1.2 percent, rentals increasing 0.6 percent, and a 1.5 percent rise in property maintenance services.
Gas prices rose 3.3 percent in the quarter, and dwelling insurance climbed 6 percent.
The Reserve Bank is closely watching the pace of inflation, having flagged increased price pressures as a reason behind
its shift to tighter monetary policy this year. Governor Graeme Wheeler hiked the benchmark rate 25 basis points to 2.75
percent last month and is expected to lift the official cash rate another quarter-point next week.
Housing is a key concern for the central bank with increased building activity to lift supply in Auckland and the
rebuild of Christchurch.
Housing and household utilities underpinned the annual lift in the inflation rate, with new housing prices up 5.1
percent, rentals up 2 percent, and property maintenance services increasing 5.1 percent. Dwelling insurance prices were
up 21 percent in the year.
Energy prices rose 2.7 percent in the year, with a 2.9 percent increase in electricity prices and a 2.1 percent lift in
gas prices.
That helped drive the annual pace of non-tradable inflation to 3 percent, the fastest since September 2011 when the
impact of the government’s hike in goods and services tax was still working through the data. Non-tradable inflation
rose at a quarterly pace of 1.1 percent.
Tradable inflation, which covers goods and services facing international competition, fell 0.7 percent in the quarter
for an annual decline of 0.6 percent. Tradable inflation has been shrinking on an annual basis since June 2012.
Prices for telecommunication equipment continued to fall, down 5.9 percent in the quarter, for an annual drop of 21
percent. That happened even as retailers reduced the amount of discounting to 16 percent of prices below the standard
from 24 percent in the December quarter.
The price of household contents fell 0.8 percent in the quarter, with furniture and furnishings prices down 3.1 percent
and the price of appliances falling 1.6 percent. On an annual basis, household contents and services price fell 0.2
percent, led by a 2.5 percent drop in the price of appliances.
Apparel prices extended their decline, down 0.7 percent in the quarter for an annual drop of 1.2 percent, with
discounting of men’s and women’s clothing up in the March period.
Discounting across all retailers in the quarter was unchanged at 16 percent of below-par prices.
(BusinessDesk)