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Higher airfares and rents boost inflation

The consumers price index (CPI) rose 0.5 percent in the December 2019 quarter due to rising prices for both international and domestic airfares, rent, and petrol, Stats NZ said today.

The annual inflation rate was 1.9 percent.

Transport costs rose 2.1 percent in the December 2019 quarter. The rise in this group was largely driven by seasonal rises in international airfares, which increased 9.3 percent.

“International airfares usually hit their seasonal peak in the December quarter,” prices senior manager Paul Pascoe said.

“Over the last five years though, international airfares have generally trended downwards, and this quarter’s peak was 22 percent lower than it was in December 2014.”

Prices for accommodation services rose 4.4 percent in the December 2019 quarter. This is a typical seasonal pattern as demand for accommodation increases over the busy summer holiday period. The price rise was spread across various accommodation types such as hotels, motels, and private accommodation (for example, AirBnB), as well as overseas accommodation which is prepaid in New Zealand.

The cost of flying within New Zealand also rose over the quarter, with domestic airfares up 12 percent. Prices rose for routes between main centres, as well as many regional routes. Domestic airfares usually rise in December quarters.

Petrol prices rose 1.6 percent in the December 2019 quarter. The price of 1 litre of 91 octane petrol was $2.14, including the impact of fuel discounts, up slightly from $2.11 in the September 2019 quarter.

In the December 2019 quarter, petrol prices rose across the North Island:
• up 3.4 percent in Auckland
• up 2.9 percent in Wellington
• up 2.4 percent in the North Island excluding Auckland and Wellington.

Meanwhile, petrol prices fell across the South Island:
• down 3.6 percent in Canterbury
• down 1.0 percent in the South Island excluding Canterbury.

Annual rent movement highest in 11 years

Rents rose 0.8 percent in the December 2019 quarter, and 3.1 percent for the year. This is the highest annual increase since the September 2008 quarter.

“The rise in rent prices is likely to reflect the high demand for rental property in parts of the country,” Mr Pascoe said.

“Another factor was the Healthy Homes Standards introduced in July 2019. Some landlords have upgraded their properties in order to meet the new standards and may have passed on the costs to their tenants.”

The North Island excluding Auckland and Wellington experienced the largest annual increase in rent prices, up 4.9 percent. Wellington rents increased 4.5 percent, Auckland rents increased 1.9 percent, and Canterbury rents increased 1.3 percent.

Not all rents go up year to year, so the actual change felt by an individual renter may differ from the average.

Seasonal fall in vegetable prices

While prices for transport and rents were up, vegetable prices fell 13 percent in the December 2019 quarter. There were seasonal falls for tomatoes, cucumbers, lettuce, and capsicums. Prices for these vegetables usually fall in December quarters, as new season produce hits the shelves.

Domestic inflation tops 3 percent again

Domestic or non-tradable inflation remains close to its highest annual increase since 2011, increasing 3.1 percent in the year to December 2019. This follows an 8-year high of 3.2 percent in the year to September 2019. The latest annual increase was influenced by higher prices for rents, cigarettes and tobacco (which had a large tax increase in January 2019), local authority rates, and construction of new houses.

The latest tax increase for cigarettes and tobacco, in January 2020, will show up in the March 2020 quarter CPI.

Non-tradable inflation measures goods and services that do not face foreign competition. It includes many housing costs such as rent, construction, rates and electricity, as well as insurance, restaurant meals, and many services.

Correction to domestic airfares

Stats NZ has corrected prices for domestic air transport back to March 2017 in response to an error. The correction has no impact on the overall CPI, nor on price movements for domestic air transport for the December 2019 quarter.

See Consumers price index: December 2019 quarter for more information about this error.

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