Annual inflation at 14-year low

The cost of living has risen at its slowest annual pace in 14 years.

Official figures released on Tuesday show annual inflation is 0.7% - the lowest level since 1999 - and is below the Reserve Bank's target band.

The Consumer Price Index rose 0.2% in the three months to June. Statistics New Zealand says lower petrol and car prices mostly offset higher electricity costs, and rents and building costs in Christchurch and Auckland.

The inflation figure is below the central bank's 1% to 3% target band, but ANZ senior economist Mark Smith says the pick-up in house building indicates that inflation is set to start rising again. Prices have also risen in insurance and electricity, he says.

Over the past year inflation had been declining, partly due to the high New Zealand dollar which has made imported goods including fuel, cars and electronic goods cheaper.

However, economists say recent falls in the exchange rate and higher global oil prices have already pushed fuel prices higher.

They say a lower New Zealand dollar, the gathering pace of the Canterbury rebuild after damaging earthquakes and new housing in Auckland will push inflation above the 1% mark over the rest of this year.