Inflation at 14 year low.

July 16th, 2013 at 2:02 pm by David Farrar

Stuff reports:

There is little in today’s numbers to suggest the Reserve Bank will be forced to change the official cash rate (OCR) earlier than forecast.

Annual inflation has dropped to just 0.7 per cent, the lowest level since 1999, with higher power and housing costs offset by lower petrol and car prices in the June quarter.

The OCR is at 2.5 per cent, a historic low and economists are not expecting to see any rise until early to mid 2014. The central bank releases its next interest rate review on Thursday next week.

Consumer price inflation has been one per cent or below for a year now, and low inflation has allowed the OCR to remain at 2.5 per cent for some time, TD Securities head of Asia Pacific research Annette Beacher said.

Inflation low, interest rates low, economy growing and jobs being created. Not too bad.

The average inflation rate since December 2008 has been 2.2%.  If you exclude the GST increase which had compensating tax cuts then it would be 1.7%.

In the previous 18 quarters, it was 3.3%. That means prices increased around 10% every three years.

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23 Responses to “Inflation at 14 year low.”

  1. Samuel Smith (276 comments) says:

    “compensating tax cuts” – Depends if your’e a high income earner or not.

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  2. wikiriwhis business (4,135 comments) says:

    And yet the economy is still going down the gurglar. The fight against inflation has been a huge fraud. GST will no doubt be rising with everything else in this nation which is the highest taxed in the OECD

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  3. Manolo (14,082 comments) says:

    When comes to taxation Labour Lite is as rapacious as its socialist predecessor.
    Not a iota of a difference.

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  4. RightNow (7,013 comments) says:

    And the price of ecstasy is half what it was a decade ago. Unfortunately, so is the quality.

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  5. wreck1080 (3,972 comments) says:

    It will be interesting to see if inflation applies to council rates and power prices.

    History would say not.

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  6. gump (1,662 comments) says:

    I’m concerned about the low rate of inflation.

    It will discourage further economic growth.

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  7. Sir Cullen's Sidekick (895 comments) says:

    Good to see Labour’s policies are having an impact.

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  8. dime (10,134 comments) says:

    “Depends if your’e a high income earner or not.” – and if youre not a high oncome earner, chances are you pay no tax but still receive the benefits kindly supplied by those who do earn high incomes.

    youre welcome.

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  9. lastmanstanding (1,304 comments) says:

    Auckland unemployment 7.3% and that doesn’t count those who are under employed ie either not able to find full time work when they want to and or unable to find a job that maximizes their experience training and qualifications.
    And that’s before we start on the age discrimination ie over 45 Too old for the 25 something female recruitment company person who wont put them forward for the job.

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  10. Inky_the_Red (761 comments) says:

    Low inflation may be a pointer to low demand.

    Therefore this may indicate low GDP growth

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  11. BigFish (132 comments) says:

    If it wasn’t for house price inflation in Auckland and Christchurch, does this mean we would be experiencing deflation overall?
    If that’s the case then that’s bad for borrowers, including I assume the government.

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  12. Rick Rowling (815 comments) says:

    Auckland unemployment 7.3%

    house price inflation in Auckland

    Well there’s a fairly obvious solution if Auckland is making you unemployed and is giving you high accommodation costs.

    The traffic’s better everywhere else, too.

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  13. wiseowl (936 comments) says:

    Yes.
    Interest rates should be reduced but the banksters are quick to come out and say we’ve reached the bottom interest rates will go up next year.

    We still have the highest interest rates in the western world and the very people we need to earn this countries income continue to get penalised.

    The banks are making a killing and no one gives a dam.If it was legitimate I wouldn’t care but the game we are playing is unacceptable.

    Bring the interest rates down. NOW.

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  14. liarbors a joke (1,069 comments) says:

    “Inflation at 14 year low.”

    Filled ya car up lately ?

    Paid an electricty bill lately ?

    Brought groceries lately ?

    Had a plumber around lately ?

    14 year low…bollocks

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  15. Manolo (14,082 comments) says:

    Labour Lite appears to be coming with more and more innovative spin.
    Give us less taxes and more economic activity. Pass the message upstairs, DPF.

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  16. deadrightkev (537 comments) says:

    Anyone who believes Farrar’s horseshit in this post deserve to be committed. The only reason inflation is at an all time low is because the NZ economy has been tanking for ages, average people and businesses are treading water to survive. It is not pretty out there in the SME commercial world.

    Just look at the global fundamentals – printing money, housing bubbles, massive debt and looming inflation which can not be avoided. Who seriously believes QE will work and that NZ will come out unscathed? We will go down big time too.

    As for this prime minister. Give me strength. Key has cranked up separatism in NZ to unheard of levels by approving fraudulent treaty claims, saddled us an ETS and horrendous power bills, whacked us with an increase in GST and petrol taxes.

    The guy is a socialist fraud.

    This prime minister is rubbish and so is the one in opposition.

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  17. Simon (763 comments) says:

    CPI is a gamed government number doesnt measure real inflation in the economy. CPI is for the brain washed.

    Aside Auckland housing which has experienced massive inflation over the last 2 yrs,

    Just check the latest bnz economic business confidence survey and word search price & costs.

    http://www.bnz.co.nz/static/www/docs/business-confidence/cs2013-02-11.pdf

    If inflation was lowest in then this wouldnt appear in business confidence survey. This took 2 minutes to check. If you really drilled down into industries you would see price increases everywhere whereas the govt would have you believe there no inflation.

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  18. Fisiani (1,048 comments) says:

    My oh my. Some people expect miracles.
    There are more people employed in NZ than at any time in history. The economy is growing faster than most countries and this in a country devastated by nine years of economic sabotage facing endless deficits. Wages are rising and people are investing. Low inflation is a good thing. It helps preserve the value of our assets. The moaners cannot accept that the economic transformation of NZ from basket case to betterment is upon us. They do not appreciate the genius of Bill English at the helm. The loony right and the loony left equal condemnation proves that we are on the right course.

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  19. thedavincimode (6,877 comments) says:

    Good to see Labour’s policies are having an impact.

    Outstanding. (But you didn’t say which Government)

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  20. wreck1080 (3,972 comments) says:

    @liarbors a joke

    I would presume that the recent small drop in the kiwi has yet to be felt in the inflation stats .

    Why do you say bollocks? You can buy a car pretty cheaply today — in fact, the price of cars has not really changed a lot.

    Beer — that is still pretty cheap, as is broccoli. I had a plumber around the other day, cost $80 for labour and a few small parts. Didn’t seem over the top. Broadband is so much cheaper when compared to even 3 years ago.

    Inflation also depends on where you live — If you live in Auckland and recently bought a house for 100% more than it cost 4 years ago, then that would blow that individuals inflation pain much higher than reported.

    Power prices/council rates are my bugbear. DPF keeps coming up with stats showing power prices are not increasing quickly but mine are.

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  21. Bogusnews (477 comments) says:

    Bang on Fisiani.

    We were rescued from the disastrous Labour Government just in the nick of time. I shudder to think what would have been in the “secret budget” Cullen and Clarke were going to release which they were deliberately delaying until after the election.

    Our export sector went into technical recession about 2005 and the whole economy into full blown recession 8 months before the GFC. We were spending an extra 16Bil a year on the state service without a damn thing to show for it, and the Treasury predictions on our never ending deficits meant we would inevitably become another Greece sooner rather than later.

    National’s turn around has been a stunning achievement, much better than I expected.

    I suspect though that because we were rescued just in the nick of time, most people are not observant enough to realise just how lucky we were to get rid of the last lot when we did and how just how well National has done.

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  22. liarbors a joke (1,069 comments) says:

    Dont know where you buy your broccoli wreck but Im sick of paying 2.50 a head ..

    Rates…dont even go there..

    Petrol, the most expensive its ever been…not much point in having a nice cheap car if it costs 20 per cent of your nett pay to fill it..

    Power prices…agree , we are getting mauled every year..

    On the good side flatscreens are 14% cheaper which is just as well because I cant afford to go anywhere..

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  23. Monty (980 comments) says:

    Inflation destroys savings and wealth. But it is like a sugar fix. No one was better off under Labour, and don’t forget they left the incoming National Government with decades of deficits. People only thought they were better off, but the worst impacted were the stupid and gullible who actually voted for Labour. The high inflation of 5.2% left by Cullen (over seven x higher than now) did not benefit anyone.

    And don’t forget the policies of the Labour socialist Party and the Green Taliban are all inflationary.

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