The consumers price index (CPI) has just been released, showing inflation rose just 0.3 percent for the June 2012 quarter, less than economists were predicting. This takes the annual rate to just 1 percent.
This is the smallest annual movement in the CPI since a 0.5 percent lift in the December 1999 quarter.
"The increase in the CPI reflects higher electricity prices and seasonally higher vegetable prices, partly offset by lower prices for things such as telecommunication services," Statistics NZ prices manager Chris Pike said.
The median pick among forecasters polled by Reuters was for a 0.5 percent rise in the CPI.
Today's figures mean the Reserve Bank won't have to worry about any inflationary pressures creeping in from the rebuild in Canterbury, allowing Governor Alan Bollard to keep the official cash rate lower for longer.
The kiwi dollar fell to 79.62 US cents after the numbers from 79.74 cents immediately before. Two-year interest rate swaps fell 0.9 basis points to 2.59 percent.
Earlier this week, traders were betting he will cut the official cash rate in the next 12 months, based on the Overnight Interest Swap curve, which shows 17 basis points of cuts priced in, according to Reuters data. They are seeing a chance that the central bank stands ready to act to stimulate growth should Europe's sovereign debt woes escalate and spread to the rest of the world.
Electricity prices rose 4.5 percent in the June 2012 quarter. Prices had fallen a total of 0.7 percent over the previous three quarters, due to customers switching suppliers and bigger prompt-payment discounts.
Electricity prices are now 3.7 percent higher than their previous peak in the June 2011 quarter.
Vegetable prices - up 11 percent - were the second-biggest contributor.
Other upward contributors to the CPI in the June 2012 quarter were: beer - up 2.7 percent, rentals for housing - up 0.5 percent, purchase of new housing -up 0.9 percent, international air fares - up 2.4 percent, overseas package holidays - up 2.8 percent, and petrol which was up 0.4 percent.
The main downward contribution in the June 2012 quarter was lower prices for telecommunication services, which reflected better broadband data caps and better-value cellphone services.
Fresh milk was down 4.6 percent, fruit was down 3.2 percent, audio-visual equipment was down 3.6 percent, and second-hand cars were down 1 percent.
Petrol prices rose 0.4 percent the quarter to their highest recorded level. Still, prices fell late in May and continued to decline through June. Petrol prices rose at an annual 0.2 percent pace.
"If petrol prices remained at their end-of-June level throughout the September quarter, this would shave 0.4 of a percentage point off the September quarter CPI movement," Statistics New Zealand said.
Non-tradable inflation slowed to quarterly pace of 0.5 percent and was 2.4 percent on an annual basis.
Tradable inflation, which covers items that are open to foreign competition, accelerated to a quarterly pace of 0.1 percent after shrinking 0.4 percent in the first three months of the year. Annual tradable consumer prices shrank 1.1 percent from the same quarter a year earlier
-NZ HERALD ONLINE / BUSINESSDESK
