Economists raise alarm bells as politicians savage Government over almost unchanged inflation of 7.2 percent

Economists and experts are deeply concerned after the latest figures showed inflation has barely budged. 

New Zealand's consumer price index (CPI) increased 7.2 percent annually in the September 2022 quarter, down slightly from 7.3 in the June quarter. 

While inflation did soften ever so slightly from its June peak it is still significantly higher than economists and analysts predicted. The major banks predicted it to fall to around 6.5 percent. 

The lack of change was driven mostly by housing and household utilities due to rising prices for construction, rentals and local authority rates.

Prices for building a new house increased 17 percent in the September quarter compared with the same quarter last year. 

Rental prices also had an annual increase of 4.6 percent, while local authority rates increased 7.3 percent annually. 

The next largest contributor to the annual increase was higher prices for petrol and diesel.

Petrol prices increased 19 percent in the year to the September 2022 quarter while diesel prices increased 72 percent over the same period.

Quarterly inflation was at 2.2 percent in the September quarter compared with June, mainly influenced by food, housing and household utilities. 

Non-tradable inflation was 6.6 percent in the year to September 2022 quarter, the highest since the series began in June 2000.

Non-tradable inflation measures goods and services that do not face foreign competition. It is an indicator of domestic demand and supply conditions. However, the input materials of these goods and services can be influenced by foreign competition.

The tradable inflation rate, which measures goods and services that are influenced by foreign markets, was at 8.1 percent compared with an annual rise of 8.7 percent in the June 2022 quarter.


Stubbornly high inflation is causing concern among economists and politicians. Informetrics principal economist Brad Olsen said the figures are "alarming". 

"The ingrained and intense level of inflation are alarming and will force interest rates to rise higher and faster to combat pervasive pricing pressures across the domestic economy. 

"Despite the relief from slightly lower fuel prices, inflation remains broad-based, with key household staples driving prices for Kiwi households higher."

Olsen said there's now "no question" the Official Cash Rate (OCR) will continue to rise as the Reserve Bank of New Zealand battles to get inflation under control. 

"We now think a 75 basis point increase to the OCR is necessary to get ahead of (or more realistically try and catch up to) inflation," he added. 

It was a view shared by independent economist Cameron Bagrie who told Newshub the latest figures were "a bad set of numbers for the economy". 

"It flags a deeper economic adjustment and a hit to growth is needed to get the inflationary thief back in jail," he said.

The Council of Trade Unions is also expressing concern about inflation with its economist Craig Renney calling for more to be done to "protect low and middle-income families". 

"Low- and middle-income families will be facing some tough choices as a consequence of this ongoing inflation. Government should be focussing on helping to protect these families during these challenging times."

Renney said the need to continue raising interest rates increases the risk of job losses and means households will be forking out more for their mortgage. 

"Together with a darkening position on the global economy, it indicates more economic turbulence for the New Zealand economy ahead.

"We should be planning now for how we respond to that challenge. If more workers are going to lose their jobs then we should protect their incomes as best we can. 

"Demand for public services spikes during tough times, so cutting the public sector aggravates problems. If low-paid workers are feeling inflation bite hardest, then giving tax cuts to the wealthy won't help. Instead, we should be investing in programmes that reduce our inflation pressures, as they will pay dividends both now and in the future," he concluded. 


Meanwhile, opposition politicians have used the numbers to savage the Government, with ACT leader David Seymour saying high domestic inflation shows international pressures aren't to blame. 

"The makeup of tradeable and non-tradeable inflation figures out today show that Labour can't keep blaming the rest of the world for inflation," Seymour said. 

"For a long time, Labour has said inflation isn't its fault, blaming overseas factors. Now that inflation of tradeable, things that can be bought and sold overseas, is easing, the attention turns to non-tradeable inflation, which is going up.

"In today's figures, inflation is down because tradeable inflation is down. Largely because the price of oil is down. If Grant Robertson wants to take the credit, he needs to explain how the New Zealand Government lowered the price of a barrel of Brent Crude."

Seymour blamed inflation on the "economic mismanagement" under the Labour Government. 

"On the other hand, the Government is completely responsible for non-tradeable inflation. The Government is entirely responsible for local conditions. This is the Government that indemnified the Reserve Bank after its insistence on a dual target helped encourage irresponsible monetary policy.

"The Reserve Bank distorted government policy-making by giving it cheap credit, now we are all paying the cost, literally in the rising price of everything.

"There's always a human cost to this sort of economic mismanagement, and sadly we are seeing it play out across New Zealand households as families decide whether to pay the rent or buy food."

It was a view shared by National with finance spokesperson Nicola Willis blaming inflation on Government spending. 

"Inflation has become embedded into the economy on Labour's watch, with prices rising faster than anyone expected. 

"Runaway prices are making a mockery of Labour's claims of a strong economy. In reality, out-of-control inflation means most Kiwis will be poorer tomorrow than they were today," Willis said. 

She said the figures are "worse than even the most pessimistic predictions and make the Reserve Bank's hopes of a slow-down look wildly out of touch". 

"Bottom line: New Zealanders must yet again brace for more pain in their back pockets. Perhaps most worryingly, domestic inflation rose to 6.6 percent, the largest rise since Stats NZ began the measurement."

Willis said this is the sixth quarter inflation has been above the 1 to 3 percent target showing inflation is now "entrenched in the New Zealand economy". 

"Price increases are now eroding the financial security New Zealanders have built up through years of effort.

"Widespread labour shortages and elevated Government spending is lighting a fire under inflation, but the Government still won't fix its broken immigration settings or impose fiscal discipline. 

"Labour is spending $1 billion more a week than when they entered office, pumping cash into the economy with too few results to show for it."

But Finance Miniter Grant Robertson took a different view, blaming international volatility for New Zealand's high inflation. 

"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," Robertson said. 

"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."

The Finance Minister said the Government isn't spending the money saved on the deficit last year and is tracking a careful path back to surplus.

He said the country is still well-placed to deal with the economic challenges. 

"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," he added. 

Robertson also pointed to economic measures introduced by the Government to help those struggling with the cost of living including a one-off payment, fuel tax cuts and reduced public transport costs.

The Finance Minister went on to say "the Government's books are among the world's best, with debt at levels below those of the countries we compare ourselves with".