Rising petrol prices could see annual inflation climb to highest since 2011 next year
Tuesday, 16 October 2018
Record high petrol prices are likely to stoke household inflation, with economists warning annual cost of living increases could be headed above 2 per cent for only the second time since 2011.
On Tuesday Statistics New Zealand revealed a sharp climb in petrol prices pushed inflation to 1.9 per cent in the year to the end of September, a faster increase than economists were expecting.
'Petrol prices increased 19 percent in the September 2018 year,' Statistics New Zealand spokesman Paul Pascoe said. 'This is the highest annual increase since June 2011.'
In the September quarter alone, petrol prices rose 5.5 per cent, with rising product price and the new Auckland regional fuel tax - which came into force at the start of July - contributing.
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Economists were, on average, expecting inflation to rise to 1.7 per cent. The New Zealand dollar jumped on the news, as the odds of an interest rate cut fell, rising around half a cent against the US dollar, buying just under US66c.
The figures released by Statistics New Zealand suggest the impact of stronger prices in inflation is likely to continue into the latest quarter. In the September quarter, average price of 91 octane, after discounts (for the whole of the September quarter), reached $2.18, Statistics New Zealand said, well below the prevailing price being paid now.
While inflation remains below the middle of the 1-3 per cent band the Reserve Bank is meant to target, economists see inflation climbing over 2 per cent in the coming months.
A hike in GST to 15 per cent in 2010 saw inflation climb above 5 per cent in early 2011, however since then it has only been above 2 per cent for a brief period at the start of 2017, when it hit 2.2 per cent.
BNZ said on Monday that it expects inflation could hit 2.5 per cent by the middle of 2019, which was likely to push wage inflation higher. 'This is by way of the indexation that still permeates NZ wage negotiations,' BNZ senior economist Craig Ebert said.
ASB warned however that higher fuel prices were likely to have a cooling impact on the economy overall.
'A key risk now is the impact higher fuel prices could have on demand in other sectors of the economy, given that a higher proportion of consumers' wages each week are now being spent at the pump,' ASB chief economist Nick Tuffley said.