Inflation drops to 16-year-low

  • 20/01/2016
Inflation drops to 16-year-low

By Paul McBeth

New Zealand consumer prices have risen at their slowest annual pace since 1999 as cheap petrol pushed inflation below the Reserve Bank's expectations, forcing the New Zealand dollar to drop half a cent.

The consumers price index increased just 0.1 percent in 2015, its smallest reading since September 1999 when prices fell, according to Statistics New Zealand.

That was short of the Reserve Bank's expectation for a 0.4 percent rise, and extended its run below the bank's target band of between 1 percent and 3 percent.

The CPI fell 0.5 percent in the three months ended December 31, the biggest quarterly decline since December 2008, from an increase of 0.3 percent in September.

Cheaper petrol drove both the quarterly and annual numbers, falling 7 percent in the final three months of 2015 for an annual drop of 8.1 percent.

The New Zealand dollar fell to 64.14 US cents, from 64.70 cents immediately before the release of the data.

Reserve Bank governor Graeme Wheeler cut the official cash rate to 2.5 percent in December, and indicated rates would stay on hold on the expectation inflation would return to the target band.

The RBNZ had predicted the CPI would climb back within the band in the March quarter of this year, but global oil prices have slumped to 12-year lows with a worldwide glut set to continue.