About the Inflation Calculator
- The Consumers Price Index ("CPI") published by Statistics New Zealand (“SNZ”) records the change in the price of the "basket" of goods and services purchased by an "average" New Zealand household. The rate of change between the CPI price level today and the CPI price level one year ago is commonly referred to as the inflation rate, or sometimes "headline CPI inflation". To “deflate” or “inflation adjust” an amount of money by the CPI specify the “General” category in the drop down menu of the Calculator.
- When using the headline CPI to measure price changes, the calculator may not
give a good estimate of the inflationary impact on assets (e.g. house prices) or
the prices of individual goods/services whose price levels have on average
changed significantly more or less than the change in the CPI between the
specified years. Although the CPI is the most commonly used and recognised
measure of inflation in New Zealand, various other price indices are published
by Statistics New Zealand. These provide an estimate of the inflationary effect
of a price change applicable to a particular type of good, service or business
cost. Several of these have now been included in the Calculator and may be
selected from the “Category” drop down menu:
- “General” CPI
- Food prices
- Clothing prices
- House prices (source Quotable Value Limited)
- Transportation prices
- Note: although CPI indices take into account the changing consumption patterns of consumers over time, adjusting for the changing nature and quality of goods is inherently more difficult to measure. To the extent that such changes are not captured in the indices the “true” inflation rate may be slightly overstated.
- "Total percentage change" represents the total growth in the price of the index over the period selected. Also calculated is the average annual (compound) growth rate in prices.
- “Decrease (increase) in purchasing power” expresses the concept of inflation in terms of the percentage loss or gain in the dollar’s ability to purchase a similar bundle of goods and services between two dates.
The decline in purchasing power of $1 since decimalization in 1967
- Under the “General” category, only partial official CPI data exists between 1914 and 1925. Interpolated figures have been inserted for quarters where no official CPI value is available between these dates. Official CPI data is not available prior to 1914. However, an index of the prices of food and rent, averaged for the four main centres, was once published by SNZ (see Official 1990 Yearbook). Indices for this series have been used for the dates between 1891 and 1913, and linked to the official CPI series beginning in June 1914. Furthermore, in 1911, James W. McIlraith published price indices for general prices (as opposed to consumer prices) from the early 1860s to 1910. We have used this index for the years between 1862 and 1890. It should be noted that the construction of McIlraith’s series is more akin to that of a GDP deflator.
- We stress that these series are not as comprehensive in their coverage as the official CPI and should not be regarded as being of the same quality as the official series. In both cases a quarterly track has been interpolated from annual estimates and rebased to the current CPI base (June 2006 quarter=1000). For more information on these and other early price data, see Looking at Numbers – a view of New Zealand’s economic history, by Phil Briggs, NZIER, Wellington, 2003.
- An article published in the December 2003 issue of the Reserve Bank Bulletin further discusses the functionality of the calculator (PDF 78KB) and gives examples of its uses and limitations, with specific reference to CPI inflation.
The figures produced by the Calculator are offered as guides only and should not be regarded as 'official' Reserve Bank calculations. While every effort is made to ensure that the calculations used to generate the Calculator's outputs are correct, the Reserve Bank will accept no liability or responsibility for any errors or for any use to which the resulting figures may be put. The data used prior to 1914 does not form part of the official Consumers Price Index - the Reserve Bank makes no claims as to the accuracy or reliability of these figures.