NZ inflation stays red-hot 7.2 per cent

New Zealand banks have revised downwards their official cash rate tracks after a lower-than-expected inflation rate of 7.2 per cent in 2022.

Stats NZ released fresh inflation data on Wednesday, reporting quarterly consumers price index (CPI) growth of 1.4 per cent in the December quarter, and 7.2 per cent for the year.

The result is below Australia's CPI, also released on Wednesday, of 7.8 per cent in the 12 months to December.

New Zealand's headline 12-month result is steady on September figures, and just off a 30-year peak of 7.3 per cent, recorded in June.

The cost of housing is fuelling the red-hot inflation, with house-building costing 14 per cent more than it did a year ago.

"Respondents reported more expensive materials and higher labour costs are driving the increase of building a new home," Stats NZ spokeswoman Nicola Growden said.

The next biggest contributor was food, with ready-to-eat meals, vegetables and meat and poultry also up.

Food prices were 11.3 per cent higher in December 2022 than December 2021, the biggest annual increase in 32 years, with fruit and vegetables costing 20 per cent more in that time.

Offsetting the inflation was a reduction in petrol prices of 7.2 per cent in the last three months.

The headline CPI result was slightly above market expectations at 7.1 per cent, but below the Reserve Bank of New Zealand (RBNZ)'s forecast of 7.5 per cent.

Both Kiwibank and ANZ believe the result will prompt a re-think at the central bank, which has aggressively raised the official cash rate (OCR) at every meeting since October 2021.

The OCR now sits at 4.25 per cent.

In December, the RBNZ foreshadowed an OCR peak of 5.5 per cent this year as it attempts to bring inflation back within its target band of 1-3 per cent.

Kiwibank's economist team, headed by Jarrod Kerr, say the fresh data should give RBNZ Governor Adrian Orr food for thought.

"We have seen more than enough to justify a reduction in the pace and extent of future rate rises. Enough is enough," Mr Kerr said, changing his bank's OCR peak to 5 per cent.

At ANZ, chief economist Sharon Zollner said the "downside surprise" on non-tradeables inflation meant "the RBNZ can ease off a little".

"We now expect a 50bp hike in February and two 25bp follow-up hikes taking the OCR to a peak of 5.25 per cent," she said.

The fresh CPI data comes as the government, under new Prime Minister Chris Hipkins, promises a "bread and butter" approach and focus on the economy amid forecasts of a recession in 2023.

Finance Minister Grant Robertson said "the government's focus will narrow to support New Zealanders struggling to pay their grocery bills and mortgages".

He pointed to a fall in quarterly CPI rises from 2.2 per cent in the September quarter to 1.4 per cent as evidence inflation has peaked.

Opposition finance spokeswoman Nicola Willis said Kiwis would pay the "ever-higher price" of inflation, which has now been outside the RBNZ's target band for two years.