Inflation rises to 2.7%: Higher local council rates 'largest contributor' to uptick

Monday, 21 July 2025

Consumer prices increased by 2.7% in the 12 months to June, and councils made the biggest contribution.

Higher local council rates were the 'largest contributor' to a 2.7% rise in consumer prices in the 12 months to June, according to Statistics New Zealand's latest inflation update.

Rates - quarterly payments made by property owners to councils to pay for services such as rubbish collection, public transport and road maintenance - increased by 12.2% in the year to June.

The 2.7% increase in annual inflation - officially known as the Consumer Price Index (CPI) - followed a 2.5% rise in the 12 months to March, meaning consumer prices have risen.

Compared to the previous March quarter, the CPI rose 0.5%.

However, price inflation was offset by cheaper petrol, down 8% in the 12 months to June. The average price for one litre of 91 octane fuel was $2.54, down from $2.76 at the same time last year.

If petrol was excluded from the CPI, the annual inflation rate would be 3.2%, rather than 2.7%.

'Although the annual inflation rate increased from the March 2025 quarter, it remains within the Reserve Bank of New Zealand's target band of 1 to 3% - the fourth consecutive quarter it has done so,' Stats NZ's Nicola Growden said.

Rental prices increased in the 12 months to June by 3.2%, but that was the smallest annual increase in four years. Wellington had the lowest annual increase, up 1.1%.

Electricity prices also increased by 8.4% in the year to June. Compared to the previous quarter, electricity prices rose by 4.9%, which according to Growden, was 'the largest quarterly increase in over a decade'.

Are global issues to blame for inflation?

There is a difference between foreign-influenced inflation known as 'tradeable', and locally-influenced inflation known as 'non-tradeable. Local council rates is an example of a 'non-tradeable' while petrol is an example of a 'tradeable'.

The data provided by Statistics New Zealand shows that non-tradeable inflation is more prominent. The annual non-tradeable inflation rate was 3.7% compared to 1.2% for tradeable.

The biggest contributors to tradeable inflation were food items - milk, cheese and eggs - up 11.1% in the 12 months to June, and overseas accommodation prepaid in New Zealand, up 9.1%.

The data also captured a rise in the cost of online streaming services, which is a tradeable, and falls under the category of 'cultural services'. Prices were up 9.5% compared to the previous quarter, driven by subscriptions to streaming services.

Local council rates and rent prices were the largest contributors to non-tradeable inflation. Those were partly offset by lower prices for domestic accommodation services, down 6.3%, and cheaper early childhood education, down 22.8%.

The data captured the Government's FamilyBoost scheme, which provides a tax refund on the cost of early childhood education.

How does NZ's inflation rate compare?

New Zealand: 2.7%

Australia: 2.1%

United Kingdom: 3.6%

United States: 2.7%

European Union: 2.2%