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Higher airfares and rents boost inflation

The consumers price index rose 0.5 percent in the December 2019 quarter due to rising prices for both international and domestic airfares, rent, and petrol, Stats NZ has said.

The annual inflation rate was 1.9 per cent.

Transport costs rose 2.1 percent in the December 2019 quarter. The rise in this group was largely driven by seasonal rises in international airfares, which increased 9.3 per cent.

"International airfares usually hit their seasonal peak in the December quarter," prices senior manager Paul Pascoe says.

"Over the last five years though, international airfares have generally trended downwards, and this quarter’s peak was 22 per cent lower than it was in December 2014."

Prices for accommodation services rose 4.4 per cent in the December 2019 quarter. This is a typical seasonal pattern as demand for accommodation increases over the busy summer holiday period. The price rise was spread across various accommodation types such as hotels, motels, and private accommodation (for example, AirBnB), as well as overseas accommodation which is prepaid in New Zealand.

The cost of flying within New Zealand also rose over the quarter, with domestic airfares up 12 per cent.

Prices rose for routes between main centres, as well as many regional routes. Domestic airfares usually rise in December quarters.

Petrol prices rose 1.6 per cent in the December 2019 quarter. The price of 1 litre of 91 octane petrol was $2.14, including the impact of fuel discounts, up slightly from $2.11 in the September 2019 quarter.

Rents rose 0.8 per cent in the December 2019 quarter, and 3.1 per cent for the year. This is the highest annual increase since the September 2008 quarter.

"The rise in rent prices is likely to reflect the high demand for rental property in parts of the country," says Paul.

"Another factor was the Healthy Homes Standards introduced in July 2019. Some landlords have upgraded their properties in order to meet the new standards and may have passed on the costs to their tenants."

Stats NZ has corrected prices for domestic air transport back to March 2017 in response to an error. The correction has no impact on the overall CPI, nor on price movements for domestic air transport for the December 2019 quarter.

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