Inflation is the term used to describe a rise of average prices through the economy. It means that money is losing its value. This section provides a variety of resources that explain inflation and deflation. This connects to how the Reserve Bank uses monetary policy to maintain price stability.
Inflation — a thief in your wallet
Head of Economics, John McDermott, explains how inflation is measured and how it manifests itself in everyday life. He also explains the importance of maintaining price stability.
New Zealand's Consumers Price Index (CPI)
Since 2000, New Zealand CPI (Consumers Price Index) inflation has averaged around 2.7 percent. This compares with averages of 2.4 percent in the 1990s, and averages of over 11 percent for the previous two decades. Since September 2002, the inflation target has been to keep inflation within a range of 1–3 percent on average over the medium term.
Go to the Inflation key graph page for more historical information on inflation.
Notes: CPI is published on a base of 2006 Q2=1000. The plotted series excludes interest rates, which were removed from the CPI regimen in 1999, but includes GST effects.
Inflation and deflation in the New Zealand context.
A brochure explaining how monetary policy works in New Zealand, and the Reserve Bank’s role in implementing it.
The Reserve Bank Act requires that price stability be defined in a specific and public contract, negotiated between the government and the Reserve Bank. This is called the Policy Targets Agreement (PTA). The current PTA, signed in March 2018, defines price stability as annual increases in the Consumers Price Index (CPI) of between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint.
The Reserve Bank publishes its Monetary Policy Statement (MPS) quarterly. Each Monetary Policy Statement must set out: how the Reserve Bank proposes to achieve its targets; how it proposes to formulate and implement monetary policy during the next five years; and how monetary policy has been implemented since the last Monetary Policy Statement.