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New CPI non-tradables analytical series

This article introduces three new analytical non-tradable series:

  • non-tradables less central & local government charges
  • non-tradables less cigarettes & tobacco subgroup
  • non-tradables less central & local government charges and cigarettes & tobacco subgroup.

These series will allow customers to better understand non-tradable inflation without the influence of government charges and tobacco. These series are inclusive of GST, which increased from 12.5 percent to 15 percent on 1 October 2010.

The average annual non-tradables inflation has been 3.1 percent since the June 2006 quarter, compared with 2.6 percent after we exclude government charges and tobacco.

Non-tradables are goods and services that do not face foreign competition. The central and local government charges series includes items such as:

  • electricity
  • local authority rates
  • vehicle relicensing fees
  • general practitioner fees.

When we implemented the latest review of the CPI weights in the June 2014 quarter, central and local government charges made up 10.78 percent of the CPI and 19.11 percent of non-tradables.

See data quality section of the CPI release for further details.

Movements in non-tradable inflation

In the June 2015 quarter, annual non-tradable inflation was 1.5 percent after excluding government charges and tobacco, compared with 2.1 percent for the standard non-tradables series.

Figure 1

 

Annual non-tradable inflation excluding government charges and tobacco has been below 2 percent since the September 2014 quarter, and at 1.5 percent for the most-recent three quarters.  The last time annual non-tradable inflation excluding government charges and tobacco was above the Reserve Bank’s 1 to 3 percent target band for the overall CPI was the September 2011 quarter (4.0 percent). In that same quarter, annual non-tradable inflation was 4.5 percent. Both increases were influenced by the increase in GST on 1 October 2010.

Since the June 2006 quarter, the standard non-tradables series has increased 32 percent, while the non-tradables less central & local government charges and cigarettes & tobacco subgroup series has increased 26 percent.

In the June 2015 quarter, quarterly non-tradable inflation was 0.1 percent for both series, the smallest movements since the December 2009 quarter.

Figure 2

 

The series showed similar price movements when excluding government charges and tobacco from 2006 until the June 2009 quarter when they diverge. Since the June 2009 quarter non-tradables have increased 18 percent; when we exclude government charges and tobacco the increase is 13 percent. 

 

 Non-tradables

 Non-tradables less central & local government changes and cigarettes & tobacco subgroup

 Index

 Percentage change

 Index

 Percentage change

 From previous quarter

 From same quarter of previous year

 From previous quarter

 From same quarter of previous year

 Series ref: CPIQ

 SE9NS6500

 SE9NS6590
 2012  Mar  1219  1.2  2.5  1188  0.8  1.9
   Jun  1225  0.5  2.4  1191  0.3  1.7
   Sep  1231  0.5  2.3  1194  0.3  1.4
   Dec  1235  0.3  2.5  1198  0.3  1.6
 2013  Mar  1248  1.1  2.4  1205  0.6  1.4
   Jun  1256  0.6  2.5  1212  0.6  1.8
   Sep  1265  0.7  2.8  1218  0.5  2.0
   Dec  1271  0.5  2.9  1227  0.7  2.4
 2014  Mar  1285  1.1  3.0  1235  0.7  2.5
   Jun  1290  0.4  2.7  1237  0.2  2.1
   Sep  1297  0.5  2.5  1241  0.3  1.9
   Dec  1301  0.3  2.4  1246  0.4  1.5
 2015  Mar  1316  1.2  2.4  1254  0.6  1.5
   Jun  1317  0.1  2.1  1255  0.1  1.5

Key differences between the series

The recent difference between the two series since 2009 is largely explained by excluding the excise duty increase for cigarettes and tobacco. Each year, usually on 1 January, the government adjusts excise duty on cigarettes and tobacco. The rises appear in the March quarter CPI. The rise is based on the 'CPI less credit services' index and a 10 percent increase – as set out in the Excise and Excise-equivalent Duties Table (Tobacco Products) Amendment Order 2014 and applied since 2009. These increases are scheduled to continue until 2016.

Compared with the series that excludes government charges and tobacco, the average price rise for non-tradables is about 0.4 percentage points higher in each March quarter.

Annual local authority rate increases affect series

From government charges, the largest upward influence has been the annual increase in local authority rates and water rates, which show in September quarters.

Figure 3

 

 

The largest difference between the series was in the September 2010 quarter when non-tradables increased 1.2 percent overall, while the non-tradables less central & local government charges and cigarettes & tobacco subgroup series increased 0.5 percent. This smaller increase reflected rises in local authority rates, vehicle relicensing fees, and electricity being excluded.

While the series excluding government charges and tobacco has generally increased less than the non-tradables series, in some instances non-tradables have shown a weaker movement. This is due to the downwards influence of increases in government subsidies.

Subsidies influence on the series

A notable difference occurred in the September 2007 quarter when lower non-tradable prices were influenced by lower prices for pharmaceutical products and general practitioner (GP) fees due to an increase in government subsidies to primary health organisations (PHOs). The non-tradables series rose 0.6 percent, while without the influence of the increased government subsidy, the non-tradables less central & local government charges and cigarettes & tobacco subgroup rose 0.9 percent.

For non-tradables, the rises in local authority rates in the September 2006 and 2007 quarters were largely offset by increased government subsidies for GP fees. The September 2009 and September 2010 quarters’ movements were influenced by rises in vehicle relicensing fees.

Significant rises in electricity prices in the September 2010 and June 2014 quarters have also contributed to the two series diverging more recently.

Changes for the September 2015 quarter

Several price movements for central and local government charges in the September 2015 quarter will be excluded from the new series:

  • the annual rise in local authority rates and water rates
  • price decreases for vehicle relicensing fees
  • price increase for road user charges
  • increased subsidies for GP fees, and pharmaceutical products for 6 to 12 year olds.

Where to find the new series

The new analytical non-tradables series will appears in the CPI information release tables 3.01, 3.02, and 3.03, with the figures for the September 2015 quarter, when the CPI is released on 16 October.

Access the new analytical non-tradables time series on Infoshare by selecting the following from the homepage:

Subject category: Economic indicators
Group: Consumers Price Index
        CPI Non-standard Selected Quarterly Groupings for New Zealand

  • Non-tradables less central & local government charges and cigarettes & tobacco subgroup: CPIQ.SE9NS6590
  • Non-tradables less central and local government charges: CPIQ.SE9NS6570
  • Non-tradables less cigarettes & tobacco subgroup: CPIQ.SE9NS6580

We will update these series with the figures for the September 2015 quarter when the CPI is released on 16 October.

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