KEY POINTS:
Lower prices in some areas of health and education due to new or higher government subsidies helped keep the inflation rate for the September quarter to an unexpectedly low 0.5 per cent.
Figures out today from Statistics New Zealand (SNZ) today show the increase for the year was
also lower than expected at 1.8 per cent.
The median of economists' forecasts in a Reuters poll was for a 0.8 per cent quarterly rise in the consumers price index, with the median forecast for the year at 2.1 per cent.
Today's lower figures may indicate an economy slowing more quickly than widely thought and could also provide some breathing space for the Reserve Bank, which has a target range for inflation of 1 per cent to 3 per cent, at a time of record oil prices.
The central bank lifted interest rates four times this year to 8.25 per cent due to concerns about robust domestic spending, particularly in the housing market. At its most recent review last month the Reserve Bank signalled it did not expect any further rises.
SNZ said the most significant upward contribution in the September quarter came from the housing and household utilities group, up 1.8 per cent, and the food group, up 1.2 per cent.
The most significant downward contributions in the quarter came from a 3.1 per cent fall in the health group and a 5.2 per cent drop in education.
Significant individual contributors to the quarterly rise included a 6 per cent rise in local authority rates and payments, a 2.4 per cent rise in alcoholic beverages, a 1.7 per cent increase in grocery food, a 4.3 per cent rise in fruit and vegetables, petrol up 1.9 per cent, and the purchase of new housing up 1.8 per cent.
Significant individual price reductions included a 16.2 per cent drop in pharmaceutical products, mainly as a result of lower prices for prescription charges, and a 15.4 per cent fall in general practitioner fees.
Those falls followed the final roll-out of increased government subsidies on July 1 for interim-funded primary health organisations for adults aged 25 to 44, SNZ said.
The full effect of reduced prescription charges for people aged six years and over enrolled with interim-funded PHOs was also shown in the September quarter.
The 5.2 per cent fall in the education group for the quarter included a fall of 32.4 per cent in costs of early childhood education, due to the introduction on July 1 of 20 hours free early childhood education for three and four-year-olds at participating services.
Other downward pressure also came from a 2.9 per cent fall in second-hand car prices.
Most significant upward contributions to the 1.8 per cent annual CPI rise were new houses up 5.8 per cent, rents up 3.1 per cent, electricity up 6.2 per cent, local authority rates and payments up 6.6 per cent and poultry up 26.9 per cent.
The price of petrol fell 5.9 per cent during the year, while audio-visual and computing equipment slipped 13.2 per cent.
The New Zealand dollar fell to US77.32c after the data was released from US77.55c at 8am.
Shamubeel Eaqub, economist at Goldman Sachs JBWere, said one-off factors pulled the headline number down and core numbers were still strong, Reuters reported.
"The headline will give the Reserve Bank room to manoeuvre and prevent further rate hikes, but for any rate cut the Reserve Bank will still need to see activity passing through to lower inflation numbers and I don't think that's going to happen until early next year, with rate cuts mid next year."
- NZPA
