Inflation at 0.8%

October 16th, 2012 at 12:30 pm by David Farrar

The Herald reports:

Tradable , which covers items open to foreign competition, was unchanged in the quarter, due to falling prices for second-hand cars, petrol and dairy products. On an annual basis, tradable shrank 1.2 per cent.

Non-tradable inflation rose 0.5 per cent in the quarter at an annual pace of 2.3 per cent, mainly due to higher local authority rates.

Rates can not keep increasing as an unsustainable rate.

Transport prices fell 1.1 per cent in the quarter, with the price of petrol down 1 per cent, second-hand car prices down 2.8 per cent and domestic air fares falling 7.8 per cent. Fresh milk prices fell 3.8 per cent in the quarter, while telecommunication services prices declined 1.8 per cent.

Food prices rose 1.1 per cent in the September quarter, led by more expensive produce, while grocery food prices fell 1.6 per cent.

Dwelling insurance prices surged 17 per cent in the quarter, and are up 43 per cent on an annual basis as insurers pass on rising reinsurance costs in the wake of a series of earthquakes that levelled Christchurch, the country’s second-biggest city.

Yeah my building insurance costs have doubled, and our building is well above code.

What I find most interesting is the household energy costs. Do you recall earlier this year stories proclaiming massive increases in electricity prices, and the like. I was somewhat critical of those stories as they never gave any hard data as to what the actual increases were.

Well for the quarter, household energy costs increased a mere 0.3%. For the year a 3.9% increase. This compares to annual near 8% increases from 2002 to 2008.

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9 Responses to “Inflation at 0.8%”

  1. wreck1080 (3,912 comments) says:

    This also means house prices are not really increasing a great deal.

    So, cut 1% from the interest rate and get the economy going and the exchange rate corrected. There would appear to be plenty of slack in the economy.

    No need to print money yet .

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  2. hinamanu (2,352 comments) says:

    So are prices going to come down?

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  3. hmmokrightitis (1,590 comments) says:

    So, DPF:”Rates can not keep increasing as an unsustainable rate.”

    But…

    “Yeah my building insurance costs have doubled, and our building is well above code.”

    And for those Council owned assets that are NOT above code? The increased insurance costs and remediation costs to bring them to code, fairies should pay for those? Isnt that what you accuse the greens of?

    And again, note that the main items that Councils spend their money on – infrastructure such as roads and water assets – dont fit within the CPI. Households dont buy roads and water treament plants, the costs of which are huge, and those costs have risen by more than the CPI, as a result of international pricing pressure on those assets.

    Yes, Councils should keep costs down. But statements like the above are, WTGR, meaningless.

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  4. ex-golfer (161 comments) says:

    @ hinamanu
    It does not mean that at all.
    Inflation is a measure of the rate of price increases. Not a measure of any increase.
    Price decreases would lead to negative inflation.

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  5. campit (467 comments) says:

    Rates can not keep increasing as an unsustainable rate.

    Well it would help if the Govt stopped offloading costs on to ratepayers then, wouldn’t it.

    By transferring these roads to Auckland Transport, the NZTA are no longer responsible for maintaining them and while they would still provide some funding to help pay for things, at most it would only be 50%. That means that Auckland ratepayers now have 50km more worth of roads to look after while the NZTA has at worst cut its costs by half.

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  6. wreck1080 (3,912 comments) says:

    I think hinamanu was being sarcastic.

    I wonder what council rates will be at in around 20 years time.

    Given that council rates almost always increase faster than disposable income, I’m anticipating a tipping point where ratepayers simply cannot afford rates.

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  7. Mike Readman (363 comments) says:

    Here in Christchurch, the council says you can’t look at inflation when deciding how much rates should rise. You have to look at something called “council inflation”. Now I know what they mean, the councils are causing most of the inflation!

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  8. hmmokrightitis (1,590 comments) says:

    You dont read a lot do you Mike? As noted above, central gubbermint keeps offloading responsibility with no budget, or reduced budget for what they are doing. And then says oh, look, we cut costs!! Bullshit – they passed it from the taxpayer to the ratepayer. Almost the same person, but then you knew that, right?

    See what they did there? And then they play the lovely game of oh, look at local government costs, rising, nay, spiraling out of control, naughty naughty Councils.

    Please. JK, the public might be fooled by the old switcheroo, but FFS, those of us with half a brain, who voted for you last time, are looking at you in askance. Bloody stupid short term move responsibility with no money to cover the costs, and then blame. Childish. Councils dont cause inflation, just like farting doesnt cause global warming – sorry, my bad – “climate change”.

    Council costs for infrastructure are going up, as they are globally, becuase there is increased demand to build those assets. Households dont pay for roads or waste treament plants, and those costs are rising faster than the CPI.

    But then National – shame on you – hide that really well. Just like they STFU about the fact that Treasury have quietly withdrawn, with no explanation, the figures they used to start the review of local government. Because they were false, or largely incorrect.

    Funny that huh?

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  9. mavxp (483 comments) says:

    There are a few possible reasons for the insurance rises:

    1. Perception of risk due to earthquakes has risen in the immediate aftermath – so perfect opportunity to raise premiums, even though the calculated level of risk outside Christchurch has not changed at all.

    2. Insurance companies premiums to purchase reinsurance for New Zealand has gone up from the large international reinsurance companies (Munich Re, Swiss Re etc.). Who knows, perhaps they were undercharging us before Christchurch given our presence on a tectonic plate boundary? Most of the large quakes in the past have occurred in the middle of nowhere (Napier and Christchurch most notable exceptions). It was only a matter of time before a major urban area was hit.

    3. One of the lessons from Christchurch is that your building may be up to code or above code, but the building to your left is an old brick building from 1905 and to your right is a lightly reinforced concrete building from 1962 and below current code. They can render your building uninhabitable after a major quake due to partial collapse or even high risk of collapse onto your building.

    4. Another lesson is code designed buildings still need to be demolished as they are uneconomic to repair post quake. Engineers generally sell their business to developers on being as cheap as possible to build while still being code compliant. This means a lot of our buildings wont perform so well beyond (hopefully) life safety – they must be written off after the event. If developers smartened up and spent more on requiring better building performance in earthquakes there would be better outcomes – and insurance premiums *should* be lower. However, insurance companies currently offer no incentives in terms of offering cheaper premiums to demonstrably better designed buildings. It’s up to the developers to do it off their own good sense.

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