Falling petrol prices will have kept inflation well below the Reserve Bank's target in year ended December, according to predictions released by economists.
Statistics New Zealand will release its December inflation figures on Wednesday and annual inflation is likely to be 0.3%, compared to the Reserve Bank's mid-point of 2%.
Food prices fell 1.3% in the month of December and 3% for the year ended December.
ASB chief economist Nick Tuffley said the December quarter was usually a seasonally weak quarter, largely due to the seasonal fall in fruit and vegetable prices.
Seasonality typically reduced headline consumer price index (CPI) inflation by 0.3% in the fourth quarter.
Also, a 6% fall in petrol prices over the quarter would lower inflation further.
‘‘Our headline forecast is slightly weaker than the Reserve Bank's but we don't anticipate the fourth-quarter result to prompt any change in policy stance from the central bank.
‘‘In saying that, the recent weakness in petrol prices will delay the lift in CPI back over 1% until the second half of the year.''
Consequently, inflation was likely to remain below the Reserve Bank's target band for about two years, he said.
Persistently weak inflation was expected to prompt two further 0.25% cuts in the official cash rate from mid-2016, taking it down to 2%.
In addition, some other temporary factors might also weigh on the December result.
The introduction of Jetstar to some regional routes in December was likely to limit the usual seasonal increase in domestic airfares in the fourth quarter, Mr Tuffley said.
Indicators suggest construction inflation probably slowed in December. That was expected to be temporary, with construction activity, capacity pressures and inflation pressures likely to reaccelerate early this year.
The main offsets to those drags included: a seasonal increase in international airfares, package holidays and accommodation; new bonds lodged point to a particularly strong increase in Auckland rents, some slight upward pressure on prices of imported goods due to the lower New Zealand dollar.
In the wake of the sharp and sudden fall in the dollar in the three months ended September, further price increases in imported goods were expected, he said.
Given the lag typically seen between exchange rate moves and retail prices on imported items, the brunt of the dollar impact was expected to appear at the retail level in the three months ended March.
‘‘There is some risks retailers pass these price hikes on earlier, given the speed and the sheer extent of the decline. On the other hand, the competitive retail environment may delay the pass through of the dollar decline.''
The ANZ monthly inflation gauge rose 0.2% in December, following a 0.2% rise in November and a 0.1% rise in October.
In December, prices rose in four groups and were unchanged in the remaining four.
ANZ senior economist Mark Smith said capacity pressures in the booming tourism sector had continued to manifest themselves, generating further increases for accommodation tariffs.
These, along with increases for newspaper and magazine prices, pushed up prices in the recreation and culture group.
The housing group remained the ‘‘inflationary beacon'', with increases in both construction costs and dwelling rents.
Higher charges for broadband internet pushed up communication group prices, while increases for vehicle insurance contributed to higher prices in the miscellaneous groups and services group, he said.
The month also had a scattering of price increases in other areas, including vehicle parking fees, tenpin bowling admissions and rail passenger and sea ferry fares.
There were also some modest price falls through the gauge, including for domestic air fares, health insurance and cinema admissions, Mr Smith said.
