Inflation data released today by Statistics NZ showed that the cost of living rose by 5.6% in September 2023, down from 6% in the June Quarter. CTU Economist Craig Renney said “This data confirms the downward trend for annual inflation, with the inflation rate now having fallen for five consecutive quarters. While inflation is still too high, this further suggests that some of the heat has come out from the inflation challenges over the past two years”.
Renney said “Food pricing drove the largest change, with prices for groceries increasing 11% annually, and the price of ready-to-eat food rising 9.4%. The cost of insurance also rose significantly with home and contents insurance both rising at nearly 20% annually. Recent petrol price increases were recognised with quarterly inflation showing a 16.5% increase in petrol costs. However, they were only 3.7% higher than this time last year”.
Renney said “While this data is encouraging, the fact that quarterly inflation lifted from 1.1% to 1.8% supports our view that now is not the right time for potentially inflationary tax cuts and other tax changes. Organisations such as Goldman Sachs have said these changes could further exacerbate inflation in New Zealand, causing the Reserve Bank to hold interest rates higher for longer. This data should make the incoming Minister of Finance pause and re-examine before delivering any changes that could make life harder in Aotearoa.
“We also know that many people are doing it tough right now with the cost of living. Many will be relying on essential public services to get through. The possible cuts to public services needed to pay for tax cuts will have to be deeper if inflation is made worse. The CPI data provided today should be seen as an early test of whether the incoming Minister of Finance is prepared to be pragmatic in the face of new evidence”.
