Inflation
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PHOTO: Inflation is still running at the fastest pace since the 1990s. RAWPIXEL

New Zealand’s annual inflation rate has barely slowed, according to the latest figures released by Statistics New Zealand. The official inflation rate for the year ending in March 2023 was 6.7 percent, down only slightly from the 7.0 percent recorded in the previous quarter. This is the highest annual inflation rate New Zealand has experienced in more than a decade.

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The rise in inflation has been driven by several factors, including a global surge in demand for goods and services as economies recover from the COVID-19 pandemic, as well as supply chain disruptions and rising energy costs. In particular, the cost of petrol and housing have increased significantly in recent months, contributing to the higher inflation rate.

The Reserve Bank of New Zealand has been closely monitoring inflation and has already taken action to address the issue. In November 2022, the bank increased the Official Cash Rate (OCR) by 0.25 percent to 0.5 percent, the first time the OCR had been raised since 2014. The bank has indicated that it may need to raise interest rates further in the coming months to keep inflation under control.

The high inflation rate is not just a problem for the Reserve Bank, but for the wider New Zealand economy. High inflation can erode the value of people’s savings, making it more difficult for households to save for the future. It can also lead to higher interest rates and a slowdown in economic growth.

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Despite the challenges posed by high inflation, there are some positive signs for the New Zealand economy. GDP growth has remained strong, with the economy expanding by 1.1 percent in the final quarter of 2022. Unemployment has also fallen, with the latest figures showing the unemployment rate at 3.7 percent, down from 4.2 percent in the previous quarter.

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In conclusion, the latest inflation figures show that New Zealand is facing a challenging economic environment, with high inflation rates posing a significant risk to the country’s economic stability. However, there are also signs of resilience and strength in the economy, with strong GDP growth and falling unemployment rates. The Reserve Bank and the government will need to continue working together to address the challenges posed by inflation and ensure the long-term health of the New Zealand economy.

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