Government charges, food prices drive CPI increase

Government charges and food prices drive big CPI increase

A 1.1 percent increase in the Consumer Price Index in the three months to September has been largely driven by additional government charges and increases in food prices.

“This is a steep rise, higher than the Reserve Bank forecast for the quarter,” said Bill Rosenberg, CTU Policy Director and Economist. “While price rises in the year to September have been relatively low – at 1.5 percent, the lowest since the year to March 2004 – this is the calm before the storm.”

“The rise in GST along with other government charges and policy decisions will together mean big increases in prices. The next three annual increases are likely to be over 4 percent with some possibly over 5 percent, probably peaking in June. This is going to be a difficult time for many workers and their families.”

“However the good news is that underlying inflation is probably quite low. Unless retailers take advantage of the GST rise to hike prices, the Reserve Bank can afford to keep interest rates down for some time.”

Housing and household utilities rose 1.4 percent in the quarter because of local authority rates (up 4.4 percent) and electricity (up 2.8 percent with the GST increase already starting to kick in and some effects of emissions trading). Rents have increased 1.7 percent over the year.

Alcoholic beverages and tobacco rose 2.3 percent in the quarter and 6.1 percent for the year partly due to increased excise duties which took effect for tobacco in April, and for alcohol from July.

Private transport costs rose sharply due to increased vehicle relicensing fees, in part as a result of increased ACC levies for car and motorcycle relicensing fees. However petrol prices fell 1.3 percent.

Food prices have risen 2.4 percent for the three months to September after a fall in the June quarter, partly due to bad weather affecting fruit and vegetable prices, and partly a result of higher international prices for dairy products.

ENDS

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