Tradables and non-tradables inflation in Australia and New Zealand

This article presents a detailed comparison of price changes for non-tradable and tradable items in the CPI across Australia and New Zealand. The main result is that relative price movements in Australia and New Zealand are highly correlated in the medium term, although not in the very short term. Sectors that have had large price increases in New Zealand have tended to have large price increases in Australia, and sectors that have had small price increases in New Zealand have tended to have small price increases in Australia. In both countries, price increases for non-tradable items have generally outpaced price increases for tradable items. However, the article finds that non-tradable price increases have not been noticeably higher in New Zealand than in Australia. Moreover, price changes have been high relative to Australia’s in several of New Zealand’s ‘tradable’ sectors since June 1998, particularly for non-food retail items.