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The Inflation Beast Is Back

The Inflation Beast Is Back

Kiwi inflation spiked higher in September, and is up nearly 5% over the year. Inflation is running at its fastest pace since 2011.


1 November 2021

Housing related costs were the latest contributor to the mix. House construction costs surged 12% over the year, with strong demand meeting significant supply disruption.

The largest contributor to September quarter inflation was housing and household utilities, rising 2.6% in the quarter alone. Housing costs climbed as home construction costs followed the second quarter’s lead with a 4.5% rise.

Builders are finding it difficult sourcing materials and labour to build the new houses New Zealand needs. The 7% September quarter spike in council rates also helped boost housing costs. And rents continued to rise with a 0.7% lift in the quarter – they and are up a massive 12% over the September 2020 quarter.

With ongoing supply chain disruptions and capacity constraints, firms are facing rising costs which are squeezing margins.

But there’s no signs yet of demand softening. Improved confidence around job security, a rampant housing market and the inability to travel (freely) overseas continues to support household consumption. In such an environment, firms are able to pass on the higher costs. Solid demand and constrained supply have created a perfect storm of higher prices.