New Zealand Annual Inflation Slows to 4.7% in Q4 amid RBNZ Rate Hikes


  • Statistics New Zealand reports an annual inflation rate of 4.7% in Q4, a decrease from the 5.6% noted in Q3.
  • The Reserve Bank of New Zealand (RBNZ) elevated its policy interest rate to 5.5% in mid-2023 from 0.25% in October 2021 to suppress inflation.
  • Key contributors to the yearly inflation were food, alcohol, tobacco, and housing and household utilities.
  • Rent prices saw an increase of 4.5% from the end of 2022. A new house’s construction cost, though decreased to 3.6%, remains 41% higher than pre-pandemic levels.

Inflation Dynamics in New Zealand

Statistics New Zealand recently reported that the yearly inflation eased to 4.7% in the last quarter. This rate is lower than the 5.6% recorded in Q3 and now stands at the lowest point since mid-2021.

Reserve Bank of New Zealand’s Anti-Inflation Measures

RBNZ reacted to inflationary challenges by increasing the policy interest rate to 5.5% in 2023, up from a record low of 0.25% in October 2021. The central bank has since then maintained the rates as they await the economy’s absorption of higher rates, expected to lower inflation. The bank’s forecast in November predicted a 5.0% inflation rate for Q4 and a return to the target inflation band by H2 2024.

Main Inflation Factors

Food, alcohol and tobacco, together with housing and household utilities, were significant factors driving the annual inflation as noted by Statistics New Zealand. They also pointed out that the annual non-tradeable inflation is currently at 5.9%, a drop from 6.3%.

Housing and Rental Costs

“The cost of rent has risen by 4.5% compared to the close of 2022. The cost increase for building a new house, even though declining to 3.6%, is still 41% higher than the rates before the pandemic,” shed light senior manager in charge of consumer prices, Nicola Growden.

The observed changes in inflation and policy rates by RBNZ could influence forex markets, impacting the New Zealand dollar’s trading value.

PIP Penguin