Inflation reaches 4.1% as higher fuel prices hit home

Tuesday, 21 July 2026

Annual inflation jumped to 4.1% in the three months to the end of June, to reach its highest level in two and a half years, Stats NZ has reported.

The result, , up a full percentage point on the previous quarter, was in line with forecasts from BNZ and Westpac, but higher than the Reserve Bank’s 3.9% forecast.

The update appears unlikely to do anything to dampen economists’ expectations that another 25-basis-point increase in the Official Cash Rate may be in the pipeline for September.

But ANZ ‒ which had already been forecasting a rate rise in September ‒ said the signals on underlying inflation were mixed and shouldn’t move the dial much for the Reserve Bank.

Read more:

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• OCR decision reached ‘relatively quickly’, Reserve Bank’s Anna Breman says in face of doubters

• Reserve Bank lifts OCR to 2.5%, more rate rises likely but timing ‘highly uncertain’

The silver lining in the latest figures was that the jump in inflation was driven by the increased price of petrol and diesel in the wake of the Middle East conflict.

Inflation would have just crept in within the Reserve Bank’s 1% to 3% target band, at 2.9%, had fuel prices not changed.

So-called non-tradable or “domestic” inflation, reflecting only the changes in prices of goods and services whose prices are largely determined within New Zealand, eased fractionally to 3.4%, down from the annual rate of 3.5% the previous quarter.

Finance Minister Nicola Willis said higher global oil prices drove much of this quarter’s inflation increase, “rather than a broad surge in prices across the whole economy”.

“There are encouraging numbers in this release, with annual food price inflation falling from 4% to 2.8%. Annual rent increases were only 0.5% across the year, the lowest for almost 25 years.

Anticipating the surge in headline inflation, Prime Minister Christopher Luxon said on Monday that the Government had known the Middle East conflict would impact inflation and growth.

But he drew comfort from the fact that most economists expected it to fall back below 3% “in the year ahead”.

“I've said consistently, it's our job to control what we can control, and for us that means keeping government spending down to ease the pressure on inflation and interest rates,” he said.

Labour finance spokesperson Barbara Edmonds said costs were climbing before the Middle East conflict drove fuel prices higher.

“National's decisions have left New Zealand more exposed and more vulnerable than it needed to be,” she said.

“When fuel prices surged during the war in Ukraine, National demanded accountability from Labour. Now they’re in Government, they’re asking New Zealanders to accept exactly the same pressures they once condemned.”

Aside from fuel, other cost increases singled out by Stats NZ included rises in the prices of electricity, rates and new housing.

The price of electricity was up 12% on a year prior, while rates jumped 8.8%.

Electricity prices jumped 4.4% in the June quarter itself and new-home construction costs rose 1.6% in the three-month period.

The latter was the largest quarterly increase since December 2022, Stats NZ price manager Nicola Growden said.

“Respondents reported that higher costs for materials, subcontractors, fuel and labour contributed to rising prices for new housing,” she said.

BNZ research head Stephen Toplis noted ahead of the statistics release that, in addition to the ongoing conflict in the Middle East, there were three other potential supply shocks on the horizon that had the potential to drive up prices for specific goods and services.

They are the forecast strong El Nino, which threatens to drive up global food prices this summer, the risk of bird flu impacting poultry and egg prices and a computer chip shortage which could increase the cost of both computers and cloud services.