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Inflation climbed at its slowest rate in over five years due mostly to lower transport related prices, according to Statistics New Zealand's Consumer Price Index (CPI).
The annual rate of inflation rose 1.7% for the year to the end of September compared with 1.9% for the year to June and 3% for the year to March.
The rate was slowed by lower costs for petrol which fell by nearly 20%, as well as diesel, down 38%, and international transport, down 15%.
However, these falls were partly offset by a 5.4% increase in the cost of food, with Statistics New Zealand saying this group made up over half of the annual inflation rise.
Higher prices for vegetables accounted for two-thirds of the increase in food prices, though prices rose across all food groups.
"Vegetable prices are up quite strongly, now that's partly seasonal, but it's also partly related to the fact that we had a cold start to the winter," says Statistics New Zealand spokesperson Chris Pike.
Petrol prices bucked the trend and are down from their record highs. While the cost of long-haul flights is beginning to take off again, it is still much less than this time last year.
Brent Thomas from House of Travel says that's because low prices
are no longer sustainable.
"We will start to see those prices potentially moving up over the
next 12 months."
There's not much pressure from the housing market either. Rent has increased the smallest amount in seven years, while house inflation is the lowest in a decade.
The cost of household utilities, however, did swing upwards, with electricity prices rising 4.5% and local authority rates increasing 6.6%.
The rate of annual inflation growth was slightly higher than expected with market expectations lying in the range of 1.1% to 1.3%.
TVNZ business editor Corin Dann says the good news for consumers is that overall prices are not rising rapidly.
However, while inflation is still within the Reserve Bank's target inflation rate of 1-3% it has risen more than thought and may put pressure on Reserve Bank governor Alan Bollard to raise interest rates sooner than expected.
"This just ratchets up the pressure on him a little bit perhaps. Some argue he is understating the strength in the economy and may have to hike rates sooner because of a fear that inflation rates could take off again," says Dann.
This would flow on to higher mortgage rates.
For the September quarter, inflation rose 1.3% compared with 0.6% and 0.3% in the June and March quarters respectively.
Chief Economist at ANZ National Cameron Bagrie says the Reserve Bank's hand might be forced.
"Imagine a scenario if we get another quarterly big increase in inflation similar to what we've seen this quarter. That's going to put them into a bit of a bind," he says.
However, others argue that there is no need to raise rates yet due to rising unemployment .
