Consumer price index

IBISWorld forecasts the CPI to increase by 2.4% in 2025-26, to reach 1,182.0 index points, continuing the recent trend of lower inflation following the elevated rates experienced between 2021–22 and 2023–24. The easing in CPI growth reflects the impact of the Reserve Bank of New Zealand's (Te Putea Matua) (RBNZ) previously elevated cash rate, which helped rein in inflation. With inflation now returning to within the RBNZ's 1–3% target band, monetary policy has begun to shift, with the cash rate now being lowered to support broader economic activity. Falling petrol prices have also helped contain inflationary pressures, contributing to the softer CPI growth in 2025–26.

Over the two years through 2022–23, supply chain disruptions and rising oil prices drove up input costs, contributing to significantly elevated inflation. In particular, rising retail petrol and diesel prices increased transport costs and ultimately drove up the CPI. The RBNZ raised the cash rate in an attempt to maintain price stability and facilitate sustainable employment. Higher interest rates made it more expensive to borrow, while restricting spending on goods and services. This helped limit growth in spending despite strong population growth driving up aggregate demand, reducing CPI growth during 2024-25. The RBNZ has stated the difficulties that strong population growth has created in limiting inflation, and despite a cooling labour market, is still among the most hawkish reserve banks in maintaining the cash rate.

The aim of the RBNZ inflation-wise is to keep future CPI inflation outcomes between 1.0% and 3.0% on average over the medium term. Furthermore, there is a focus on keeping average inflation near the 2.0% target midpoint. The RBNZ tries to accomplish that goal by using a number of monetary policy instruments, like through setting the cash rate. After increasing the cash rate from October 2021 to May 2023, the RBNZ held the rate at a peak level until August 2024. With inflation easing and economic conditions softening, it has since begun lowering the cash rate to support growth.

New Zealand's inflation rate has been high over the past five years, by historical standards, almost double the RBNZ's average inflation target. The RBNZ, like many reserve banks around the world, has been required to perform some of the most rapid rate increases in decades, after a near-zero cash rate during the pandemic. Overall, IBISWorld forecasts the CPI will increase at a compound annual rate of 4.5% over the five years through 2025-26.