Inflation hits 32 year high

Inflation hits 7.3%, its highest peak in 32 years. The rise was driven by increasing rents and construction costs.

Prices rose 7.3% in the 12 months to June 30. That compares with a previous figure of 6.9% in the previous quarter.

This was announced when Stats NZ released its Consumers Price Index (CPI) a short time ago.

The main items contributing to the rise were housing and household utilities, due to rising prices for construction and rentals. Prices for the construction of new dwellings increased 18% in the June 2022 quarter compared with the June 2021 quarter.

Other things to go up in price were transport and especially petrol which went up 32%.

The annual CPI figure comprised partly a rise of 1.7% in the June quarter. Not even one-off rises in GST were able to push inflation this high.

The actual rise announced today compares with forecasts of 7.0% and 7.1% by the main bank economists.

One area of interest is the balance between imported inflation, which the New Zealand Government can't control, and the impetus to inflation coming from the domestic economy.

The news today is likely to add to pressure from the Reserve Bank to keep on raising the official cash rate (OCR).

The last big OCR rise was muted because many fixed rates had already been raised in anticipation.

But further rises in the OCR would eventually eat away this buffer, meaning homeowners would face higher mortgage bills.

The latest figure compared with inflation levels in the United States and the UK, at 9.1%, Canada at 7.7% and Australia at 5.1%, though its June quarter figure will not be out until late July and is expected to be higher.

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