Photo: RNZ
Inflation is back to the top of the Reserve Bank's target band - but for households, the price rises might feel a lot sharper than that headline number suggests.
Stats NZ said the consumer price index lifted 3 percent in the 12 months to the September quarter.
But within that number were some rises that hit consumers hard.
Food prices were a big contributor, with vegetable prices up 12 percent compared to June and poultry prices up 4 percent. Food inflation was running at an annual rate of 4.6 percent in September, the highest since December 2023.
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Household energy costs were also up 2.9 percent from June.
Annual electricity inflation hit 11 percent, which was the highest level since 1989, when there were major electricity market reforms.
Infometrics economist Matthew Allman said there was strong growth in household essentials.
"Increasing costs for unavoidable, essential expenses are likely to continue to limit the household spending recovery in the near term. "
Westpac senior economist Satish Ranchhod agreed the inflation increase was heavily centred on essential and non-discretionary areas that households could not avoid.
"There have been large increases in food prices and household energy costs, along with continued large increases in local council rates.
"That's important because even though inflation has slowed over the past couple of years, households are spending more on essentials. That's leaving less for spending in discretionary areas that can have an important impact on your quality of life.
"The other thing to keep in mind is that, even though inflation has slowed from the rates of over 7 percent that we saw in recent years, the cost-of-living crisis hasn't ended for a lot of households. The level of consumer prices is around 25 percent higher than it was at the start of the pandemic. That's squeezing households' finances every time they go through the check out."
Local authority rates were up 8.8 percent.
"The annual increase in rates in the September 2025 quarter was lower than the 12.2 percent increase in the September 2024 quarter, but higher than the average increase of around 7.3 percent observed between 2018 and 2025," Stats NZ prices and deflators spokesperson Nicola Growden said.
ASB economists said education fees were also 2.5 percent higher because of lower Family Boost rebates.
The 2.6 percent increase in rents was the smallest annual increase in over four years. Rents increased 2.9 percent in the 12 months to June 2021.
Of the five broad regions measured by Stats NZ, rent prices in Canterbury and the rest of the South Island had the largest annual increases, both up 4.3 percent. Wellington had the smallest annual increase, up 0.1 percent.
But Miles Workman, senior economist at ANZ, said lower rent inflation would not unwind the rises experienced between 2021 and early 2024.
"In an absolute sense, many households will still be feeling the squeeze from past high inflation. That squeeze is something that can take a while to unwind: we need a sustained period of household incomes growing at a faster pace than consumer prices. That appears to be occurring, and is forecast to occur from here, but it was always going to be a gradual process.
"It's always true that individual experiences will differ from that presented in the CPI. That's because the CPI represents the consumption basket of all households put together, but not all households are the same: some are renting, some own their own house, some spend all of their income on necessities, some can afford to go on holiday…"
Allman said overall inflation at the top end of the Reserve Bank's forecast was not expected to persist.
Price rises are likely to pull back in the next quarter as food prices moderate.
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