New Zealand’s annual inflation rate climbed to 4.1% in the year to the June 2026 quarter, up from 3.1% in March, with fuel the main driver. Petrol prices rose 27.5% and diesel 71% as conflict in the Middle East disrupted global supply.
The jump has revived a familiar complaint under a new name, excuseflation, the practice of using a tough economy as cover to lift prices well beyond what rising costs alone would justify.
Stats NZ figures show salary and wage rates grew just 2% in the year to June, less than half the rate of inflation. In practical terms, wage rates are falling behind prices.
Pay packets are rising, but not fast enough to keep up with the weekly shop, the power bill or the cost of filling the tank, and the gap between what Kiwis earn and what they pay keeps widening.
Business survey data stretching back to 1963, analysed in a Reserve Bank discussion paper this year, shows how much pricing behaviour has shifted. With inflation running at 7%, businesses facing rising costs and rising demand now lift prices roughly 85% of the time. When costs fall and demand dries up, only around 9% cut prices in response.
Before 2011, the gap was far narrower, with 61% of businesses raising prices against 37% cutting them. Prices, in other words, have become much quicker to go up than to come down.
The research found the pattern is strongest among service and merchant firms, the sectors that deal most directly with households. One possible reason is structural. When a firm buys from another firm, checking the invoice against the agreed price is someone’s job, which keeps pricing disciplined.
Consumers rarely have that scrutiny built into a trip to the supermarket or the petrol station, and the imbalance in bargaining power appears to be part of what allows the practice to persist.
The cost of living remains New Zealanders’ number one concern in the Ipsos New Zealand Issues Monitor, and a Consumer NZ survey in June found 71% of shoppers who had changed their grocery habits were buying more budget or home-brand products.
That scrutiny may become part of the correction, as households shop around, switch brands or delay purchases rather than absorb every increase.
Businesses that lift prices faster than their own costs are also taking a risk, because customers who leave over price are not guaranteed to come back.
The Reserve Bank expects headline inflation to return to its 1 to 3% target band by mid-2027 as the effect of higher fuel prices drops out of the annual figures, helped by spare capacity in the economy and the gradual removal of monetary stimulus.
That forecast leans heavily on fuel costs not climbing further, and on the assumption that price rises seen this year do not become baked into how businesses set prices from here on.
Whether the wage and price gap closes will depend on how willing businesses are to pass falling costs back to customers rather than bank the margin.
Households will be watching the next round of Stats NZ figures for early signs of relief, and for evidence that shelf prices are as quick to fall as they were to rise.
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