Inflation through the year to March 2014 was 0.9 per cent, the lowest annual inflation since December 2010.
For annual inflation, a 2.2 per cent increase in food prices and a 26.7 per cent increase in tobacco prices (contributing 0.7 and 0.9 percentage points to total inflation) was partly offset by a 2.7 per cent fall in transport costs and a 1.6 per cent fall in housing costs (subtracting 0.5 and 0.2 percentage points from inflation respectively).
The underlying CPI dropped by 0.2 per cent over December quarter 2013 but increased by 0.4 per cent as compared to the March quarter 2013.
“Inflation in the March quarter continues a declining trend in inflation since March 2012. Indeed, it’s the lowest annual inflation since 2010, and well below the 10 year average inflation rate of 3.1 per cent,” said MFEM Economic Advisor James Webb. “This is good news for households, especially those who are non-smokers, as almost all of our annual inflation over the last year can be attributed to tobacco price increases.”
“Going forward we expect inflation to increase over the next quarters with the VAT changes, but stay relatively modest, before trending towards the long run average of 3.1 per cent.”
“In terms of the VAT changes, the low level of general inflation gives retailers less of an excuse to increase prices above the 2.2 per cent impact of the VAT. For example, if the VAT changes were implemented in the March quarter, inflation would have been 0.9 + 2.2 = 3.1 per cent for the year; obviously this is greater than 0.9 per cent, but in line with the historical inflation rate and well within the increased income increases contained in the tax, minimum wage and social welfare changes.”
“If consumers or retailers think that suppliers are unfairly increasing their prices, we advise you to notify the Consumer Commissioner at the Ministry of Internal Affairs.” - Release