Low inflation continues

Negligible inflation continues with the latest quarterly rate being 0.4%, and that is also the last 12 month rate.

This is a bit lower than expected and increases the chances of further interest rate cuts with the next announcement on that due on Thursday.

ODT: Inflation lower than expected

Statistics New Zealand noted higher petrol and housing-related prices were countered by lower prices for meat and domestic air fares.

Petrol prices showed the largest upward contribution, up 5.3% for the quarter, which followed declines in December and March of 7% and 7.7% respectively.

Housing and household utilities prices rose 1% for the quarter, influenced by higher prices for newly built houses, excluding land, which was up 2.1%. Electricity was up 1.8% and rentals for housing were up 0.6%.

Meat prices, down 2.7%, made the largest downward contribution for the quarter, followed by domestic air fares, down 9.9%. Domestic air fares have fallen 14% since the December 2015 quarter.

Inflation to June 2015 was also 0.4% (it went down 0.5% in the December quarter), down from 1.6% from 2014.

key-graph-inflation-since-1990

This hasn’t been updated with the latest quarter yet but shows the trend.

Very low inflation and record low interest rates (which are expected to drop further) means expenses are relatively low for people with mortgages, but those wanting to buy, first home buyers in particular, will be finding it tough with house price inflation continuing to run very high.

Inflation from 1920:

Inflation1920-2016

Those wanting to return to the good old days pre ‘neo-liberalism’ should consider the inflation rates through the 1970s and 80s.

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4 Comments

  1. Gezza

     /  19th July 2016

    No great joy for those whose incomes are in part derived from interest on savings, nor for those first home buyers wanting to buy while house prices are so inflated, as you say PG.

    Reply
    • David

       /  19th July 2016

      Now this is one of the major drivers in the housing market. If you want to retire on a decent income, even a 4% yield on houses looks a lot better than 0.5% in a savings account when there is expectation of good capital gain.

      Low interest rates are a double edged sword in that regard.

      Reply
  2. Blazer

     /  19th July 2016

    People grinding away working and trying to save money are wasting their time.A house in Auckland makes more in a week than they make in 2.Not to worry ,its not a problem,if you’re a speculator or parking ill gotten gains.

    Reply
  3. “In the past 12 months, Auckland’s population grew by more than 43,000 people and more than 1.57 million people now call Tāmaki Makaurau home.

    Auckland’s population grew 2.9 per cent, the fastest growth in the country, in the 12 months ended June 2015. The city, which now accounts for half of Aotearoa’s new residents, hasn’t seen this level of population growth in 12 years.

    More than two-thirds (67 per cent) of Auckland’s population growth came from new arrivals, with the remainder (33 percent) from natural increase. ” Auckland City Council June 2016.

    A politician’s equation, Of the 1.57 million people living in Auckland how many are qualified to vote in a general election? How many own their own homes? How many who own their own homes or are paying them off will vote for a Capital Gains Tax?

    My guess is that the numbers will answer the question as to who is going to win the next election, now that the Reserve Bank Governor has finally acted to protect house owners equity with his today’s intervention? More on Thursday?

    Reply

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