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Inflation Eases Amid Volatile Global Environment

Hon Grant Robertson

Minister of Finance

Inflation has eased slightly in the New Zealand economy amid a volatile international environment that continues to put pressure on prices, meaning the Government’s balanced financial approach to target spending is needed now that the emergency Covid spending is over.

Stats NZ today reported that the Consumer Price Index was 2.2 percent in the September quarter, taking the annual inflation rate to 7.2 percent, down from 7.3 percent in the previous quarter.

“Inflation is continuing to be heavily influenced by global factors, with the Ukraine war and pandemic related supply constraints affecting fuel and imported food and building material prices,” Grant Robertson said.

“Food price rises of 8 percent for the year were not only influenced by global prices but also by severe weather events that affected growing conditions. Vegetable prices in the quarter rose 24 percent.

“The Government will continue to carefully target spending in these highly uncertain times. This is not the time to put that at risk by borrowing for tax cuts that benefit the wealthiest the most, as we have seen recently in the UK.

“This is why we aren’t spending the money saved on the deficit last year and tracking a carefully path back to surplus.

“Inflation globally is high, with forecasts showing other countries’ consumer prices are yet to peak. Australia is forecast to rise to 7.75 percent by the end of 2022. Inflation is running near 10 percent in the UK, over 9 percent in Europe and over 8 percent in the US. New Zealand is at the lower half of the pack in the 38-nation OECD.

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“We have taken action to take the sharp edges off cost of living pressures on Kiwis, particularly those on lower incomes. Our temporary and targeted cost of living payment, fuel tax cuts and halved priced public transport fares have helped ease the inflationary effects of the Ukraine war and supply chain disruptions.

“We continue to focus on ensuring that New Zealanders are paying a fair price at the pump and the supermarket checkout. We are also moving to strengthen our energy independence through our climate change investments, including initiatives like the Clean Car Discount to decarbonise our transport fleet.

“While the future is still highly uncertain, economists believe we are now past the peak of the cycle. However, inflation is expected to remain elevated for some time compared with what has been experienced in recent times. Demand and supply continue to be out of balance due to ongoing global supply constraints and the Ukraine war, affecting food and imported building material prices. Our reconnection strategy with the rest of world is attracting the workers we need to help fill vacancies and we have invested in skills development and training for New Zealanders.

“New Zealand cannot escape the global pressures affecting prices at the pump, supermarket and the hardware store but we find ourselves well positioned to respond. Unemployment is at a near record low, the economy is bigger than before COVID, the world wants the goods and services we produce and the Government’s books are among the world’s best, with debt at levels below those of the countries we compare ourselves with,” Grant Robertson said.

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