New PM receives ‘baptism of inflation’

• Published date: 26 January 2023
• Publication title: Whanganui Chronicle

It follows months of high inflation where prices frequently rose faster than at any time since the early 1990s

The 7.2 per cent increase follows another 7.2 per cent annual increase in the September 2022 quarter, and a 7.3 per cent increase in the June 2022 quarter.

Housing and household utilities were the biggest contributors to the December 2022 annual inflation rate.

That was due to rising prices for both constructing and renting housing.

“Higher prices for ready-to-eat food, vegetables, and meat and poultry drove the overall increase in food prices,” Stats NZ said.

Transport was the next largest contributor, driven by rising prices for both international and domestic air fares.

The New Zealand dollar briefly rallied by about a quarter of a US cent on the back of the news.

In the minutes following the 10.45 am release, the Kiwi shot up to US65.23 cents from US65.0 cents. The currency later settled back to US65.08c. Wholesale interest rates were little changed.

BNZ economist Doug Steel said there was some volatility in the foreign exchange market immediately after the release, but the outcome was largely in line with expectations.

ANZ economists saw some promising signs in the data and lowered their expectations for the Reserve Bank OCR hike next month.

ANZ now predicted a 50 basis point hike, as opposed to 75 basis points.

“Encouragingly, non-tradables inflation was flat at 6.6 per cent (year-on-year), below our forecast of 6.9 per cent, and the RBNZ’s 7 per cent expectation,” economist Finn Robinson said.

“And core inflation was encouraging as well.”

Some bank economists had predicted inflation would be below the 7.5 per cent reading the Reserve Bank forecast in November.

But on the weekend, they weren’t all convinced that would be enough to persuade the central bank to ease aggressive official cash rate (OCR) hikes.

The data release also coincides with yesterday’s swearing-in of Chris Hipkins as the new Prime Minister.

Hipkins has said tackling inflation and rampant cost of living increases will be among his top priorities.

At the weekend, Hipkins said his Government would...