October 19, 2016 9:00am by David Farrar

Annual inflation just 0.2%

CPI inflation was 0.2 percent in the year to the September 2016 quarter. This compares with 0.4 percent annually for both the June and March 2016 quarters, and the 16-year low of 0.1 percent in the year to December 2015.

Housing-related prices continued to be the main upward contributor, up 3.2 percent in the year. This increase was influenced by higher prices for purchase of new housing, excluding land (up 6.3 percent), and rentals for housing (up 2.1 percent). Property maintenance prices, such as painting and plumbing, have also increased steadily throughout the year and are now 3.1 percent higher than a year ago.

Transport prices made the largest downward contribution for the year, down 6.7 percent as prices for petrol and vehicle relicensing fell.

“Petrol prices in the September 2016 quarter were 11 percent lower than a year ago,” Mr Haigh said. Petrol makes up around 5 percent of the CPI basket.

Excluding petrol, the CPI showed a 0.8 percent increase in the year to the September 2016 quarter.

Low inflation is great for families. It means that they get to save and spend more of their income, which high inflation eats away at. A 2% wage increase with 0.4% inflation is better than a 3% wage increase with 2% inflation.

There is reason to not want deflation, but I don’t think we are in danger of that as CPI would be 0.8% if you exclude petrol.