Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

NZ inflation probably slowed in 3Q as vehicle levies fell

NZ inflation probably slowed in 3rd qtr as vehicle levies fell, council rates rose

By Jonathan Underhill

Oct. 12 (BusinessDesk) - New Zealand inflation probably slowed in the third quarter, keeping the annual rate below the Reserve Bank's target band for a fourth straight quarter and giving the bank more reason to cut interest rates again as soon as this month.

The consumers price index fell to 0.2 percent in the third quarter from 0.4 percent three months earlier, according to a Reuters survey. The annual rate may also have slowed to 0.2 percent, the figures scheduled for release next Friday are expected to show.

Annual inflation hasn't been within the central bank's 1 percent-to-3 percent target range since the third quarter of last year, when it scraped in at 1 percent. The bank cut the official cash rate a quarter point to 2.75 percent at the Sept. 10 monetary policy statement and next reviews rates on Oct. 29, before the next full MPS on Dec. 10.

Helping keep a lid on consumer prices in the third quarter was the Accident Compensation Corp's change to “vehicle risk ratings” to calculate ACC motor vehicle levies on July 1, reducing the levy portion of vehicle registration by $40–$170. Subsidised doctor visits would also weigh on inflation. Against that is a hike in local authority rates, especially in Auckland and Wellington.

"New Zealand’s run of very subdued inflation is likely to continue with next Friday’s release of the September quarter CPI figures," said Michael Gordon, senior economist at Westpac Banking Corp. He is forecasting inflation of just 0.1 percent in the third quarter for an annual 0.2 percent rate, "which we think will mark the low point of this cycle."

There's a 78 percent chance of a cut to the OCR on Oct. 29, based on the overnight interest swap curve, with a total 38 basis points of reductions seen over the next 12 months.

Westpac doesn't expect a cut this month, given the recovery in dairy prices, while ASB Bank economists "marginally favour October ahead of the CPI" while saying it is a close call whether the Reserve Bank waits until the full MPS in December. Either way, ASB says deeper cuts may be needed to the OCR to nudge inflation back within the RBNZ target.

"Although reduced vehicle registration fees are a one-off pushing inflation down, the broader picture is still one of muted inflation pressures," said ASB chief economist Nick Tuffley. "Looking ahead to 2016 and 2017, we think inflation will struggle to sustain a pace close to 2 percent at an OCR setting of 2.5 percent. In particular, we are sceptical that tradable inflation will be anywhere near as strong as the RBNZ is banking on off the back of the fall in the New Zealand dollar."

The trade-weighted index fell as low as 68.08 in late September from as high as 72 a month earlier, and has since recovered to be at 71.60 recently.

Tuffley estimates the cut to vehicle registration fees will shave about 0.25 percentage points off inflation. he says. Against that, increases in council rates, led by gains of almost 10 percent in Auckland and Wellington, seasonal increases in food and vegetable prices and rising construction costs will contribute to rising prices, he said. The food price index for September, the last piece of data to be added to the September quarter CPI, is due for release on Tuesday.

Westpac's Gordon also expects competition for domestic flights, with the return of Jetstar to some regional routes, will contribute to a drop in passenger transport prices in the third quarter.

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Energy Resources Aotearoa: New Law On Decommissioning Could Be Costly Overkill
A new law on decommissioning oil and gas fields passed by Parliament today has good intentions but is overkill, according to Energy Resources Aotearoa. "We strongly support operators taking responsibility and paying the costs for decommissioning, which is what all good operators do," says chief executive John Carnegie... More>>


Commerce Commission: News Publishers’ Association Seeks Authorisation To Engage In Collective Bargaining

News Publishers’ Association of New Zealand Incorporated seeks authorisation and provisional authorisation to engage in collective bargaining with Facebook and Google. The Commerce Commission has received applications from News Publishers’ Association of New Zealand Incorporated (NPA) seeking authorisation and provisional authorisation on behalf of itself... More>>


Reserve Bank: MPC Continues To Reduce Monetary Stimulus
The Monetary Policy Committee agreed to raise the Official Cash Rate (OCR) to 0.75 per cent. The Committee agreed it remains appropriate to continue reducing monetary stimulus so as to maintain price stability and support maximum sustainable employment... More>>

PriceSpy: Producer Prices Increase
New Black Friday and Covid-19 Report* released by PriceSpy says people’s fear of stepping inside physical shops during big sales events like Black Friday has risen since last year; Kiwis are still planning to shop, but more than ever will do it online this year... More>>

NZ Skeptics Society: Announce Their 2021 Awards, And Dr Simon Thornley Wins The Bent Spoon

Every year the New Zealand Skeptics presents its awards to people and organisations who have impressed us or dismayed us, and this year it’s been hard to pick our winners because there have been so many choices!.. More>>



REINZ: Sales Volumes Leveling Out

Data released today by the Real Estate Institute of New Zealand (REINZ) shows there were 44 fewer lifestyle property sales (-2.6%) for the three months ended October 2021 than for the three months ended September 2021... More>>


BNZ: Auckland Retail Card Spending Bounces Back In Step Two
Bank of New Zealand (BNZ) card spending data released today shows one week of retail therapy at Alert Level 3 Step 2 has been enough to raise card spending in Auckland to levels greater than before the Delta lockdown... More>>