Consumer prices rose 1.0% in the September quarter. That saw annual inflation rising to 3.0%, from 2.7% in the year to June. The result was in line with our forecast and close to the RBNZ’s forecast.
Consumers Price Index, September quarter 2025 – key stats
Headline inflation
- Quarterly change: +1.0% (prev: +0.5%)
- Westpac forecast: +1.0%, RBNZ (Aug MPS): +0.9%
- Market median: +0.9%, range +0.8% to. +1.1%
- Annual change: +3.0% (prev: +2.7%)
- Westpac forecast: +3.0%, RBNZ (Aug MPS): +3.0%, Market: +3.0%
Non-tradables
- Quarterly change: +1.1% (prev: +0.7%)
- Westpac forecast: +1.2%, RBNZ (Aug MPS): +1.0%
- Annual change: +3.5% (prev: +3.7%)
Tradables
- Quarterly change: +0.8% (prev: +0.3%)
- Westpac forecast: +0.8%, RBNZ (Aug MPS): +0.8%
- Annual change: +2.2% (prev: +1.2%)
Consumer prices rose 1.0% in the September quarter. That saw the annual inflation rate rising to 3.0%, up from 2.7% in the year to June.
The September quarter result was in line with our forecast.
Today’s result was slightly above the RBNZ’s August MPS forecast for a 0.9% rise. However, much of the recent pickup in inflation is likely to be temporary (for instance, the recent rise in food price inflation). Consequently, the result is unlikely to be a major concern for the RBNZ.
What contributed to inflation in the September quarter?
Underpinning September’s rise in consumer prices were large increases in two specific areas:
- Food prices (19% of the CPI) were the largest upside contributors to quarterly inflation, with prices up 1.8% over the quarter. As well as the usual seasonal increase in vegetable prices, recent months have also seen large increases in meat prices.
- The September quarter also saw an 8% increase in local council rates. That’s a bit lower than the past two years, but still a large rise.
On the downside, there was continued softness in the two big housing categories – housing rents and the cost of purchasing a newly built home, which together account for around 20% of the CPI.
- Housing rents were up just 0.3% in the September quarter. In annual terms, rental inflation has slowed to 2.6%, the lowest it’s been since 2019. That comes against a backdrop of low population growth and increases in supply. There’s been particular softness in Wellington.
- The cost of purchasing a newly built home was up 0.1% in the September quarter, and is up just 0.8% over the past year. That’s the smallest annual increase since 2009. This softness reflects the stark downturn in home building over the past year and related softness in existing home prices.
More generally, the September quarter saw muted price rises in a range of discretionary spending areas including clothing and household durables, consistent with the continued softness in retail spending.
Annual and core inflation
Annual inflation rose to 3.0% in the September quarter. That’s up from 2.7% in the year to June and at the top of the RBNZ’s target band.
In terms of the big CPI groups, the domestically oriented non-tradables group rose 1.1% over the quarter. That saw annual non-tradables inflation slowing to 3.5%, down from 3.7% last quarter and the lowest level since 2021.
Non-tradables inflation has been gradually cooling over the past couple of years, reflecting the softness in economic activity, and related muted growth in wages and service sector prices. However, domestic inflation is still lingering above historic averages due to the continued large increases in administered prices, like council rates. Excluding central and local government charges, non-tradables prices rose 2.6% over the past year.
On the imported front, tradables prices rose by 0.8% for the September quarter. That saw annual tradables inflation rising to 2.2%. That’s a stark change from the past year when tradable prices had been flat or falling, with much of that turnaround due to the recent rise in food prices.
Looking ahead, tradables inflation is likely to drop back from its current highs as food price inflation eases. Even so, tradables inflation isn’t likely to be as low as it was in recent years. That’s important as it will limit the downside for overall inflation over 2026.
While increases in the prices of volatile items like food have pushed inflation higher in recent months, the longer-term trend in prices remains contained. That was reflected in the various measures of core inflation, which smooth through the quarter-to-quarter swings in prices and instead track the underlying trend in inflation.
Most measures of core inflation have drifted back towards or inside the RBNZ’s 1% to 3% target band in recent months. However, they are generally flattening off at levels above 2%, rather than at low levels.
In terms of specifics:
- Inflation excluding food, fuel and energy costs eased to 2.5% from 2.7% previously.
- Inflation in the 30% trimmed mean eased to 2.2% from 2.4% previously.
- Weighted median inflation held steady at 2.2%.
Outlook
While overall inflation has picked up, this rise is concentrated in less cyclical areas and much of that rise is likely to be temporary.
We continue to expect that inflation will drop back to levels comfortably inside the RBNZ target band next year.
For the RBNZ, prices in discretionary spending areas or areas that are responsive to interest rates remains low. There was little in today’s release that would prompt them to change their projection for a moderation in inflation over the year ahead.
