18 Apr 2013

Inflation rises, boosted partially by higher rents

8:35 am on 18 April 2013

Inflation has risen, boosted in part by higher cigarette taxes, rents and construction costs.

Official figures show the Consumers Price Index increased 0.4% in the first three months of the year.

Statistics New Zealand said higher cigarette and tobacco taxes had contributed two-thirds of the overall increase in general prices, while the rebuilding of Christchurch had a marked effect on rents and the cost of building a new house, particularly in Christchurch.

On an annual basis, inflation rose 0.9% which is below the Reserve Bank's 1% to 3 % target band.

First NZ Capital director of economics and strategy Chris Green says those cost pressures are not spilling over into other regions.

He expects inflation to remain in the bottom half of the central bank's target zone over the next year and is not expecting the first interest rate increase until March 2014.

The high New Zealand dollar is making overseas-made goods like furniture, televisions and other electronic equipment cheaper, and Mr Green says the recent surge in the currency is likely to dampen inflation pressures from hot spots like housing in Canterbury and Auckland.

He says the key event lately has been the appreciation of the New Zealand dollar and he believes that has, on balance, tightened monetary conditions.

Mr Green says he believes it's quite a high hurdle before the Reserve Bank would look to cut rates on the back of a strengthening currency.