Petrol pumping inflation

Record petrol prices are likely to stoke household inflation, with economists warning annual cost of living increases could be headed above 2 per cent for only the second time since 2011.

Yesterday, Statistics New Zealand revealed a sharp climb in petrol prices pushed inflation to 1.9 per cent in the year to the end of September, a faster increase than economists were expecting.

‘‘Petrol prices increased 19 per cent in the September 2018 year,’’ Statistics NZ spokesman Paul Pascoe said. ‘‘This is the highest annual increase since June 2011.’’

In the September quarter alone, petrol prices increased 5.5 per cent.

Economists were, on average, expecting inflation to rise to 1.7 per cent. The New Zealand dollar jumped on the news, rising about half a cent against the US dollar, buying just under US66c.

The figures released by Stats NZ suggest the impact of stronger prices in inflation is likely to continue into the latest quarter.

While inflation remains below the middle of the 1 per cent to 3 per cent band the Reserve Bank is meant to target, economists see inflation climbing over 2 per cent in the coming months.

A hike in GST to 15 per cent in 2010 saw inflation climb above 5 per cent in early 2011; however, since then it has only been above 2 per cent briefly at the start of 2017, when it hit 2.2 per cent.

Bank of New Zealand said on Monday that it expected inflation could hit 2.5 per cent by the middle of 2019.

ASB warned, however, higher fuel prices were likely to have a cooling impact on the economy overall. ‘‘A key risk now is the impact higher fuel prices could have on demand in other sectors of the economy, given that a higher proportion of consumers’ wages each week are now being spent at the pump,’’ ASB chief economist Nick Tuffley said.