Annual inflation is expected to have remained at 1.6% in the
12 months ended March but that will be only temporary, with
economists picking inflation to creep up to 2% in the next
couple of years.
Statistics New Zealand figures due out on Wednesday will be
scrutinised for evidence of home-grown inflation pressures as
the economy starts to use up its spare capacity.
Westpac senior economist Michael Gordon said there was
already a distinct housing-related flavour to the recent
increase in annual inflation, which had been strongest in
Canterbury but was increasingly spreading to the rest of the
The Reserve Bank was well aware domestically generated
inflation pressures tended to follow economic upswings with a
lag. Once allowed to develop, the home-grown pressures could
be difficult to drive out.
Westpac was forecasting quarterly inflation of 0.4%, a
''fairly normal'' seasonal increase that would leave annual
inflation at 1.6%.
The quarterly drivers of the consumers price index (CPI), the
official measure of inflation, were often idiosyncratic and
In March, the major positive contributions were expected to
come from another hefty increase in tobacco excise (up
11.3%), annual changes in tertiary education fees, and a
seasonal increase in food prices, Mr Gordon said.
Those should be partly offset by seasonal falls in items such
as overseas airfares, package holidays, books and stationery.
''We expect to see a further acceleration in prices for the
housing-related categories such as new dwellings, rents and
property maintenance. Housing construction costs have risen
particularly quickly in Canterbury, as have rents, as the
post-earthquake rebuild has picked up pace.''
But in the last few quarters, there had been signs of
housing-related price pressures starting to seep out into the
rest of the country as well and Mr Gordon expected that to
China's inflation rate accelerated to 2.4% year-on-year in
March, driven by higher food prices.
The increase in the CPI announced by the National Bureau of
Statistics (NBS) on Friday was up from the 2% recorded in
February, but marginally below economists' forecasts of 2.5%
reported by Dow Jones Newswires.
Food prices rose 4.1% in March from the year before, the NBS