The latest figure also included an outsized rise in the cost of overseas accommodation, which goes into the CPI when booked in New Zealand . . . the spike coincided with February’s Taylor Swift mania in Australia.
But looking through those factors, domestic accommodation costs continue to rise above the topline inflation rate. Rising rents are a very real cost-of-living problem for many.
Economists break all these different cost inputs into two broad categories.
In the past few years of high inflation, many Kiwis have also been forced to learn about what economists call tradeable and non-tradeable inflation.
Non-tradeable inflation measures final goods and services that do not face foreign competition; it is an indicator of domestic demand and supply conditions. Tradeable inflation measures final goods and services that are directly influenced by foreign markets — like oil prices, electronics, building products.
It’s the non-tradeable inflation that is worrying; on an annual basis it is still way too high — 5.8 percent.
But we are making some progress.
UBS analysis shows that, after adjusting for seasonal patterns, all measures of quarter-on-quarter inflation eased further in the latest data. This includes non-tradeable CPI, which rose 1.6 percent.
Non-tradeable inflation will fall. As high interest rates continue to bite and the economy stumbles through a year of recession and low growth, supply and demand will work their magic.
Higher unemployment, and less consumer spending and investment, will put a cap on local pricing. But it is a hell of a cure and not something we should prolong, not least because the longer it takes to get non-tradeable inflation under control, the more risk there is of another global supply shock that drives up commodity prices and kick-starts the whole cycle.