New Zealand’s consumer price index rose 2.7% annually in the June 2025 quarter, marking the highest inflation rate in twelve months but coming in below market expectations, according to official data released by Stats NZ.
The quarterly increase of 0.5% was also lower than the 0.9% recorded in the previous quarter, providing some relief for policymakers concerned about persistent price pressures.
Key Takeaways
- Annual inflation reached 2.7%, up from 2.5% in Q1 but below economist forecasts of 2.8-2.9%
- Quarterly CPI rose 0.5%, decelerating from the previous quarter’s 0.9% increase
- Non-tradeable inflation slowed to 3.7% annually, the slowest pace in four years, indicating moderating domestic price pressures
- Tradeable inflation remained subdued at 1.2% annually, reflecting weak international price conditions
- Cultural services drove quarterly gains, rising 9.5% primarily due to streaming service subscription increases
- Petrol prices provided significant offset, falling 8.0% annually and contributing -69.1% to tradeable inflation
The largest contributor to annual inflation remained local authority rates and payments, which surged 12.2% and accounted for 13% of the overall 2.7% annual increase. However, this was partially offset by the substantial decline in petrol prices, which fell 8.0% annually and helped contain broader inflationary pressures.
Non-tradeable inflation, which reflects domestic demand and supply conditions, decelerated to 3.7% annually from higher levels earlier in the cycle, marking the slowest pace in four years.
Link to official New Zealand Q2 2025 CPI
Only 55% of CPI components recorded quarterly price increases – the lowest proportion since the COVID-19 lockdown period in June 2020. Perhaps more significantly, 36% of components declined in price, representing the largest proportion to record falls since 2014.
Market Reactions
New Zealand Dollar vs. Major Currencies: 5-min
Overlay of NZD vs. Major Currencies Chart by TradingView
The New Zealand dollar weakened across major currency pairs following the inflation release. The Kiwi declined 0.25% against the US dollar to approximately 59.45 cents, while showing more pronounced weakness against the Japanese yen (-0.38%) and Canadian dollar (-0.29%).
The market response suggests traders view the softer-than-expected quarterly reading as providing the central bank with additional room to cut the Official Cash Rate from its current 3.25% level. The central bank has previously indicated its willingness to ease policy settings if medium-term inflation pressures continue to moderate as projected.
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