New Zealand’s annual inflation rate eased to 3.7% in the September 2026 quarter, down from 4.1% in June, per Stats NZ. It’s still above the Reserve Bank’s 1 to 3% target band.
Prices rose 0.7% over the quarter. A 6.5% fall in petrol prices pulled the figure down, while international airfares rose 14.3%, the biggest quarterly jump since the December 2022 quarter, according to Stats NZ.
The track through 2026
Annual inflation was 3.1% in the December 2025 quarter and held at 3.1% in the March 2026 quarter. It jumped to 4.1% in the June quarter, when petrol prices rose 20.1% in three months. The Reserve Bank put that rise down to higher fuel prices from the conflict in the Middle East.
Petrol is still the biggest driver over the year, up 19.1% on the September 2025 quarter. Stats NZ says annual inflation would’ve been 3.2% if petrol prices hadn’t changed.
Electricity rose 9.3% over the year, council rates and payments 6.2%, and the cost of building a new house 3.2%. Stats NZ prices spokesperson Nicola Growden said survey respondents reported higher costs for materials, subcontractors, labour and fuel.
Price rises are spreading, too. Stats NZ says 54.9% of the CPI basket rose by more than 3% over the year, up from 38.5% in the year to June.
What bank economists expect
ASB senior economist Mark Smith expects fuel, airfares and construction costs to push annual inflation well above 4% by the end of the year. ASB has lifted its December quarter pick to 4.7%. “We do not expect annual CPI inflation to fall below 3 percent until the end of 2027,” Smith said.
BNZ senior economist Doug Steel said the September result came in a little under the Reserve Bank’s projection. He said the bigger question was the December quarter, which he expects to land well above what the Bank projected.
On pricing, Kiwibank economists Alexandra Turcu and Elliott Lowe said the last two quarters suggest domestic businesses can’t raise prices even when they want to. They said consumers are spending more on petrol and have less to spend on everything else.
Infometrics principal economist Brad Olsen said electricity and administered costs looked to be past their peak, but new drivers were emerging, including air travel, building costs and plastics.
Wages and borrowing
Pay rises haven’t kept up. Salary and wage rates rose 2.0% in the year to June 2026, per Stats NZ’s labour cost index, while prices rose 4.1% over the same year.
The Reserve Bank lifted the OCR to 2.5% in July and to 2.75% in September, its first increases since 2023. In its September Monetary Policy Statement, the Bank said higher wholesale rates had pushed up bank mortgage and business lending rates. It expects inflation back inside the target band by mid-2027.
The Bank also said strong export prices were supporting activity in the South Island and some North Island regions, while households and businesses more exposed to the domestic economy faced challenging conditions.
ANZ senior economist Miles Workman expects the Bank to revise up its near-term inflation forecast and raise the OCR by another 0.25 percentage points at its next review. Westpac NZ senior economist Satish Ranchhod now expects a hike too.
Turcu and Lowe don’t think one is needed. If it’s coming, they said, the Bank should take the OCR to 3% and hold it there.
The Reserve Bank’s next OCR decision is due on 28 October, and Stats NZ releases the December quarter CPI on 27 January 2027.
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