Government excise tax increase mostly responsible for CPI rise

The government, in ratcheting up tobacco taxes has caused the CPI to increase…albeit buy a tiny amount.

Inflation has edged up as higher cigarette prices offset cheaper fuel.

The Consumers Price Index (CPI) rose 0.2 percent in the three months ending March, reversing the previous quarter’s 0.5 percent decline. That pushed up the annual rate to 0.4 percent.

Statistics New Zealand consumer price manager Matt Haigh said prices for cigarettes, food, rents and newly built houses rose in the March quarter, while petrol and air fares fell.

Cigarettes and tobacco jumped 9.4 percent following an increase in excise duty in January.

“The average price of a pack of 25 cigarettes was $28.79 in the March 2016 quarter, more than double the price from six years ago when annual 10 percent excise tax increases were introduced,” Mr Haigh said.

Taking out cigarettes and tobacco, inflation actually fell 0.1 percent in the quarter. 

Petrol prices fell 7.7 percent, the largest downward contribution for the quarter.

Low oil prices and intense competition also contributed to lower airfares. International airfares fell 12 percent and domestic airfares 4.8 percent.

On an annual basis, inflation increased 0.4 percent, led by higher rents and building costs.

That followed a 0.1 percent in the December 2015 year, the lowest annual rate since 1999.

“Annual CPI inflation firmed to 0.4 percent, but was still the sixth consecutive out-turn below 1 percent and 18th successive sub-2 percent out-turn, “ANZ senior economist Mark Smith said.

The Reserve Bank has inflation well under control.

Surely Labour can find a crisis in there somewhere?


– Radio NZ


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  • cows4me

    Actually deflation is now the hidden demon with many countries now going into negative interests rates. Deflation heralds depression.As interest rates drop the demand for money drops this results in a downward spiral that feds upon itself. Falling prices match falling employment, unemployment decreases consumer demand and the cycle continues till it’s all over red rover.

    • Mr_Blobby

      Life would go on, yes there will be a reset of the economy, it is only a matter of time, the longer they artificially hold it off the greater the pain will be.

    • Andrewj

      I agree cows4, it’s a demand driven crisis.

  • Disinfectant

    Inflation is far greater than officially stated.
    Housing prices are excluded. There has been massive inflationary price increases in housing which all adds to the cost of living.

    • Mr_Blobby

      Unemployment is greater than reported, interest rates are held artificially low, Governments intervene in exchange rates,

  • contractor

    Taming inflation, aside from housing, is dead easy because the global economy is very weak, and getting weaker.
    In NZ we are fortunate to be doing well on various fronts; strengthening tourism (John Key’s fault as Tourism Minister), strengthening manufacturing (albeit from a lowered base but doing well through niches, expertise, innovation – no need for Labour thanks), some areas in agriculture doing well – meat, wine, immigration lifting domestic demand, govt infrastructure spend in roading and UFB, plus residential and commercial building boom.
    All these provide jobs, but the depressed global economy is constraining boom, inflation and bust risks, except in housing.
    Actually excessive house prices are necessary perversely to force freeing up land and to make high cost high risk development viable and attractive. Sorry but no free lunch easy fixes.

  • Mr_Blobby

    Surprise, surprise, surprise.

    Government TAX increase responsible for Inflation and CPI increase.

    1. The CPI index is not fixed, it is a basket of goods and services, changed all the time including retrospectively, although never publicly announced.

    The index is subject to manipulation.

    2. At 0.4 % it is well below the margin for error, even if you do not take into account that it is manipulated like exchange rates, libor, interest rates, unemployment rates, etc by Governments around the World.

  • CheesyEarWax

    Low inflation=low wage growth. Andy being a union man should declare a low inflation crisis. On a serious note, rising house prices is usually tied to inflation, but in Auckland its the opposite which means there is other factors at play, i.e. supply constraint and foreign money.

  • Keanne Lawrence

    Might be wise to make that hay while the dry financial weather as it could soon be cold and damp.
    Oil prices are soon to rebound as those with the golden goose in the form of oils resources are about to start force feeding hormones to increase the egg yield. While the rag head clan would like it to return to around the $85 levels it is more likely in the short term to rapidly reach the range of $65 – $70. Other countries who have a heavy dependence or expectations of high returns from their oil riches are in need of substantial increases as they have struggled to manage the resource. Made even more challenging as it has only provided a shrinking yield.
    The Greens might get their higher inflation without interference, mortgage rates will climb steeply but the biggest advantage will be a return of Auckland house prices to return to realistic levels. Again without the need for intervention. The catch is that there are at least 2 levels of inflation viewed and while some level of regular inflation increase will seem manageable the elephant in the room might be underlying inflation. Now that does have bigger drawback.
    While the nut bar brigade only see oil as an evil fossil fuel the majority have a better idea of the massive range of industrial and consumer goods that have an oil or oil based component.
    Another OCR cut soon?