16 July 2015

Housing costs driving inflation

“The annual increase in the consumer price index (CPI) would have been negative 0.4 percent instead of going up 0.3 percent if it hadn’t been for the 2.5 percent increase in housing, energy and property costs,” says CTU Economist Bill Rosenberg. “While petrol prices are on the rise again and drove the 0.4 percent increase in CPI inflation for the last three months, over the year it has been housing that has driven the CPI.”

Housing costs went up 3.4 percent in Auckland and 3.0 percent in Canterbury during the year. Nationally, rents went up 2.3 percent and home ownership (newly built homes excluding land) 5.3 percent.

“This reinforces the need for action on housing in Auckland. However general price inflation remains low, and along with falling dairy prices and flattening rebuild activity in Canterbury means the Reserve Bank should continue to lower interest rates alongside specific policies to address house price inflation and speculation. But they cannot fix the housing problem: that requires more effective Government action to curb speculation, control demand from high immigration, and build more houses,” Rosenberg says.

ENDS

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