Cheap petrol has driven down the cost of living in the first three months of the year, pushing the annual inflation rate to a 15-year low.
The Consumers Price Index, a measure of inflation, declined by 0.3 per cent in the March quarter, Statistics New Zealand figures show.
Most economists were expecting quarterly inflation to have fallen by 0.2 percent, while the Reserve Bank was expecting a greater drop , pencilling in a decline of 0.4 percent.
Petrol prices were the biggest contributor to the drop. Fuel prices fell 11 percent in the three months to March, and 15 percent on an annual basis.
Excluding petrol, quarterly inflation rose 0.3 percent, and on an annual basis inflation would have risen by 1 percent.
Annual inflation is now at all but zero, rising just 0.1 per cent, the smallest rise in nearly 15 years
And, if it were not for an 11 per cent rise in duty on tobacco and cigarettes earlier this year, annual inflation would have actually fallen, by 0.2 percent.
Westpac senior economist Michael Gordon said the overall picture was slightly softer than he was expecting, especially in tradeable inflation.
"That's the stuff that's really affected by international prices and the exchange rate and it fell 2.8 percent which is the biggest drop since it started to be measured in 1999."
Mr Gordon said that that showed little inflation was being imported from the rest of the world.
CTU urges OCR reduction
The Council of Trade Unions said with inflation close to zero, the Reserve Bank should reduce the official cash rate.
CTU economist Bill Rosenberg said the Reserve Bank needs to look at interest rates.
He said it should take a significant step and cut the OCR from 3.5 percent to 3 percent.
The Reserve Bank's next announcement on the Official Cash Rate will be next week.