A small bit of inflation relief

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

Confirmation from Stats NZ this week that New Zealand’s inflation rate is finally taking a downward turn will come as a mixed blessing, especially for the many who are struggling with the cost-of-living crisis.

The fall has something of a good news-bad news joke ethos to it. Inflation has fallen to its lowest level since late 2021 but prices are still rising, albeit at a lower rate than before, and general forecasts seem to be there will be no lessening until later this year at the earliest.

Stats NZ says consumer prices rose 1.1 percent for the three months ended June, with the annual rate falling from 6.7 percent to 6.0 percent.

This is slightly above analysts’ expectations of 5.9 percent and just below the Reserve Bank’s forecast of 6.1 percent.

But Stats NZ consumer prices senior manager Nicola Growden says prices are still increasing at rates not seen since the 1990s, although they are doing so at a lower rate than in the previous few quarters.

There are no surprises when she says the main drivers are the familiar factors — food prices, building costs, rents, insurance and energy — although these have been partly offset by falls in transport costs and telecommunications.

Of these the biggie is food, with visits to the supermarket seeming to see higher prices almost every time; vegetable prices are up 23.3 percent over the past year, milk, cheese and eggs are up 13.8 percent, and ready-to-eat food is up 9.8 percent.

Last week the Reserve Bank said it did not expect inflation to get back to its target band until late 2024 and the official cash rate would need to stay at 5.5 percent for an extended period; some analysts even point to the possibility of a .25 percent increase for the November review.

All of this is bleak news for any sitting government less than 90 days out from an election.

Finance Minister Grant Robertson said the inflation fall was encouraging but it was still too high and the Government was committed to helping bring down the cost of living, and “supporting those doing it tough”.

It was trying to ease inflation pressures by reducing spending to more normal levels, and reducing overall demands on the economy, with real government consumption forecast to fall by 5 percent by the beginning of 2025.

Robertson also said there were positive signs such as employment growth, improving business confidence, increasing tourism and migration, and low public debt.

But the outlook for struggling Kiwi families is that the cavalry is not coming over the hill soon and they will have to struggle on for some time yet.