Source: MIL-OSI Submissions
Higher inflation in March quarter – Media release
20 April 2020
The consumers price index (CPI) rose 0.8 percent in the March 2020 quarter influenced by rising prices for cigarettes, and rentals for housing, Stats NZ said today.
The annual inflation rate was 2.5 percent, the highest since the September 2011 quarter when it was 4.6 percent. This was driven by domestic inflation, which remains above 3 percent.
“Measures to slow COVID-19 by closing non-essential businesses and telling people to stay at home from midnight 25 March, didn’t impact so much on the normal collection of prices this quarter,” consumer prices senior manager Paul Pascoe said.
Only the last week of March required an alternative approach to collect weekly food and fuel prices.
“The CPI is a quarterly measure and not all data is collected weekly. This means that some parts of the CPI may not fully capture COVID-19-related price movements later in the quarter,” Mr Pascoe said.
The annual tobacco tax increase on 1 January 2020 lifted cigarette and tobacco prices 11 percent this quarter. The tax increase is the fourth of four consecutive excise duty increases announced in the 2016 Budget. The Government increased excise tax on tobacco by 11.5 percent (see Tobacco excise increase on 1 January 2020), but not all products showed the full impact of the tax change in their prices.
“The average price of a pack of 25 cigarettes was $41.89 in March, up from $37.51 in December,” Mr Pascoe said.
“One cigarette now costs about $1.70 compared with $1.15 at the start of 2016. Ten years ago cigarettes cost about 54 cents each.”
Excluding the rise in cigarettes and tobacco, inflation rose 0.5 percent in the March 2020 quarter.
Rents up in year to March
Rents rose 1.2 percent in the March 2020 quarter, and 3.7 percent for the year. Rent accounts for around 9 percent of household expenditure, making it the highest-weighted item at the subgroup level in the CPI basket.
In the year to March 2020, Auckland rents increased 2.1 percent, Wellington rents increased 5.7 percent, and Canterbury rents increased 2.0 percent. The North Island excluding Auckland and Wellington increased 5.8 percent, and the South Island excluding Canterbury increased 5.3 percent.
“Around the country we’ve seen annual rent price increases above 5 percent everywhere except Auckland and Canterbury. Rent prices in those two areas are more in line with the overall rate of inflation,” Mr Pascoe said.
Strong rental inflation in recent quarters reflects several factors, including tight rental markets in parts of the country. It also reflects the introduction by Stats NZ in the June 2019 quarter of a new way of measuring rent prices. The new method uses the Ministry of Business, Innovation and Employment’s tenancy bond dataset to estimate price change and replaces a sample survey of landlords, improving data quality and reducing burden for respondents. The new method t