Prices in New Zealand rose by 1.72 percent in 2020. Central bankers at the Reserve Bank of New Zealand were surely relieved to see the rebound from the dangerously low .29 percent inflation in 2015.
What is inflation?
Inflation is the rise in price levels in an economy. 2 percent inflation means 100 New Zealand dollars will be worth 98 dollars in one year. While the precise inflation target varies, most economists agree that inflation between 2 to 3 percent is optimal for an economy. High inflation can lead to higher unemployment because firms would rather wait and higher workers at the same price using future dollars, making the labor relatively cheaper. However, it affects the trade balance because of the relatively higher purchasing power of foreign currencies.
Other risks of inflation and deflation
Inflation helps a country with higher national debt when the debt is in the local currency, because the country can repay with the future dollars which are relatively cheaper. Deflation, then, helps when debts are in a foreign currency. The main problem with deflation is that investors prefer to hold their money, waiting to invest until it is worth more. This is particularly true of countries like New Zealand, where the lion’s share of employment is in the services sector.
New Zealand: Inflation rate from 1987 to 2029
(compared to the previous year)
Characteristic
Inflation rate compared to previous year
2029*
2.02%
2028*
2.02%
2027*
2.02%
2026*
2.12%
2025*
2.22%
2024*
2.72%
2023
5.73%
2022
7.17%
2021
3.94%
2020
1.72%
2019
1.62%
2018
1.6%
2017
1.85%
2016
0.65%
2015
0.29%
2014
1.23%
2013
1.13%
2012
1.06%
2011
4.03%
2010
2.3%
2009
2.12%
2008
3.96%
2007
2.38%
2006
3.37%
2005
3.04%
2004
2.29%
2003
1.75%
2002
2.68%
2001
2.63%
2000
2.62%
1999
-0.11%
1998
1.27%
1997
1.19%
1996
2.29%
1995
3.76%
1994
1.75%
1993
1.29%
1992
1.02%
1991
2.6%
1990
6.1%
1989
5.72%
1988
6.35%
1987
15.76%
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IMF. (October 22, 2024). New Zealand: Inflation rate from 1987 to 2029 (compared to the previous year) [Graph]. In Statista. Retrieved December 15, 2024, from https://www.statista.com/statistics/375265/inflation-rate-in-new-zealand/
IMF. "New Zealand: Inflation rate from 1987 to 2029 (compared to the previous year)." Chart. October 22, 2024. Statista. Accessed December 15, 2024. https://www.statista.com/statistics/375265/inflation-rate-in-new-zealand/
IMF. (2024). New Zealand: Inflation rate from 1987 to 2029 (compared to the previous year). Statista. Statista Inc.. Accessed: December 15, 2024. https://www.statista.com/statistics/375265/inflation-rate-in-new-zealand/
IMF. "New Zealand: Inflation Rate from 1987 to 2029 (Compared to The Previous Year)." Statista, Statista Inc., 22 Oct 2024, https://www.statista.com/statistics/375265/inflation-rate-in-new-zealand/
IMF, New Zealand: Inflation rate from 1987 to 2029 (compared to the previous year) Statista, https://www.statista.com/statistics/375265/inflation-rate-in-new-zealand/ (last visited December 15, 2024)
New Zealand: Inflation rate from 1987 to 2029 (compared to the previous year) [Graph], IMF, October 22, 2024. [Online]. Available: https://www.statista.com/statistics/375265/inflation-rate-in-new-zealand/