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Falling prices in June quarter amid COVID-19 uncertainty  Media release

16 July 2020

The consumers price index (CPI) fell 0.5 percent in the June 2020 quarter as the COVID-19 global pandemic saw cheaper petrol and falling hotel and motel prices, Stats NZ said today.

It was the first fall in quarterly inflation since the December 2015 quarter when there was also a drop of 0.5 percent.

“The COVID-19 pandemic has created a lot of volatility and uncertainty,” prices senior manager Aaron Beck said.

“These have resulted in some large price fluctuations as well as several measurement challenges.”

Petrol prices fell 12 percent over the quarter. This is the biggest quarterly fall in petrol prices since the December 2008 quarter.

“Global crude oil prices fell sharply over the first four months of 2020 reaching a low point in April,” Mr Beck said.

“International lockdown restrictions and global economic uncertainty have greatly reduced international demand for crude oil, driving prices down at the pump.”

The average price of 91 octane petrol was $1.83 a litre this quarter, down from $2.09 last quarter. The June 2020 quarter price is the lowest quarterly price since the September 2017 quarter.

Petrol excise duty and increases in road user charges were implemented on 1 July 2020 and will be reflected in the September 2020 quarter data.

A number of services were offered for free as a result of COVID-19 restrictions. Passenger transport services fell 2.9 percent. Some public transport services including buses, rail and ferries were free for at least part of the June 2020 quarter. This resulted in overall lower prices for these services. Admissions to some zoos were also free over the quarter, contributing to the 2.5 percent fall in cultural services prices.

The COVID-19 restrictions on domestic travel this quarter meant there were not enough airlines operating to publish domestic airfares. To prevent disclosing confidential information about that airline, Stats NZ suppressed the domestic airfares index for the June 2020 quarter. We also suppressed the road passenger transport index, which is in the same category as domestic airfares, so that it will not be possible to derive domestic airfare changes by subtracting others in the category. The road passenger transport index includes buses, taxis, and rental cars.

Hotel and motel prices fall

Domestic accommodation prices fell 14 percent in the June 2020 quarter, mainly due to large price falls in prices for hotel and motel accommodation.

In late March, New Zealand’s borders were closed to international visitors because of COVID-19 and the country went into alert level 4 lockdown. Non-essential workers were told to stay home, and there was little domestic travel.

“Domestic accommodation prices tend to fall in the June quarter after rising over summer. However, the fall this June was larger than usual, coinciding with travel restrictions,” Mr Beck said.

“These falls coincided with a campaign to entice domestic tourism within New Zealand once non-essential travel resumed in mid-May.”

Toilet paper rush leaves prices largely unmoved

A rush to stock up on toilet paper and other personal-hygiene products occurred in April as New Zealand moved into lockdown. Despite some products being unavailable at times, prices for personal care goods and services rose 0.3 percent overall in the June 2020 quarter. Rising prices for soap, toothpaste, disposable nappies, and toilet paper were offset by falling prices for foundation, sanitary pads, and tampons.

The weighted average price of a 12-roll pack of toilet paper was $6.37 in the June 2020 quarter, compared with $6.35 in the March quarter.

Prices for cleaning products rose 1.3 percent. Higher prices for surface cleaners and fly spray were partly offset by lower prices for laundry detergent.

The June 2020 quarter was a period of high uncertainty due to COVID-19. At the same time, a rent freeze was introduced for existing tenancies, but not new tenancies. This made estimating rent change more difficult than usual and we are working to understand the full impact. Excluding the full impact of the rental freeze, rent prices rose 0.6 percent over the quarter. This is lower than the 1.2 percent rise in the March 2020 quarter. Regionally, Wellington had the biggest price rise, up 1.0 percent. In Canterbury, prices rose 0.2 percent.

The initial estimate of the full impact of the rent freeze this quarter is that movement for rentals of housing would be approximately flat. The overestimation of rentals of housing had no material impact on the overall CPI movement on a quarterly or annual basis.

Higher vegetable costs push up food prices

Food prices rose 1.1 percent in the June 2020 the quarter. Vegetable prices were up 16 percent over the quarter, with prices for tomatoes, capsicum, and cucumber all up strongly. See Food price index: June 2020 for more details.

Annual domestic inflation tops 3 percent for fourth quarter in a row

Domestic or non-tradable inflation increased 3.1 percent in the year to June 2020. It is the fourth consecutive quarter where it was above 3 percent on an annual basis.

The latest annual increase was influenced by higher prices for rent, cigarettes and tobacco, restaurant meals and ready-to-eat food, and property rates.

Non-tradable inflation measures goods and services that do not face foreign competition. It includes housing-related costs such as rent, construction, property rates, and many domestic services.

Overall annual inflation increased 1.5 percent in the year to June, following a 2.5 percent increase in the year to March 2020. Increased prices for rent, and cigarettes and tobacco were partly offset by lower petrol prices.

Key travel restrictions and COVID-19 alert system timeline

19 March 2020: New Zealand’s borders close to almost all travellers, except for returning New Zealanders.

25 March 2020: New Zealand enters COVID-19 alert level 4.

26 March 2020: New Zealand enters rent freeze on residential rent increases and extension of no-cause terminations.

27 April 2020: New Zealand enters COVID-19 alert level 3.

13 May 2020: New Zealand enters COVID-19 alert level 2.

8 June 2020: New Zealand enters COVID-19 alert level 1.