Wellington, Oct 18 NZPA - A 2.4 percent rise in food prices in the September quarter is raising concerns about the long term impact of higher global food costs.

Data from Statistics New Zealand (SNZ) today show higher food prices were a key factor in a 1.1 percent rise in the consumers price index (CPI) in the September quarter, although the annual rate fell to its lowest level since March 2004 at 1.5 percent.

ANZ economists said the food prices contributed 0.4 percentage points to the September quarter CPI rise.

Of that two-thirds was due to higher fruit and vegetable prices, with the 19.7 percent increase in that category a result of wet winter weather.

"With food prices moving higher around the world, the concern will be that they may remain high and continue to erode any boost to consumers' purchasing power from the October income tax cuts," the economists said.

Despite the increase in food prices in the September quarter, they are only 0.1 percent ahead of the level of a year ago after falls in food prices were recorded in two of the past three quarters, including a 2.4 percent fall in the December quarter.

The rise in the three months to December did also include a 5.2 percent increase in the milk, cheese and eggs category, while fresh milk was up 5.8 percent. Over the year to September the milk, cheese and eggs group lifted 10.1 percent.

The Engineering, Printing and Manufacturing Union (EPMU) said that along with food, the rise in the CPI came mostly from fuel and electricity price rises, and it said pressure for higher wages would continue.

"Every time our members fill up their supermarket trolleys or their cars they're feeling the pinch and the only answer to that is to ensure that they're getting high enough wages to keep ahead of the game," EPMU national secretary Andrew Little said.

SNZ said prices in the housing and household utilities group rose 1.4 percent in the September quarter, with local authority rates rising 4.4 percent and electricity prices rising 2.8 percent.

About one-quarter of the electricity increase was due to retailers charging 15 percent GST on electricity consumed in the September month and invoiced in October, SNZ said.

The alcoholic beverages and tobacco group rose 2.3 percent, reflecting a 4 percent rise in cigarette and tobacco prices, and a 1.6 percent rise in alcoholic beverage prices. Both increases were affected by higher excise duty.

The transport group rose 1 percent with prices for the other private transport services category up 8.4 percent, influenced by increases in vehicle relicensing and driver licensing fees. Petrol prices fell 1.3 percent.

The ANZ economists said annual inflation was set to move higher, so the result for the year to September was as low as it would get for the current cycle.

"The true test will be what happens over the next 12 months," they said.

With GST-induced rises from October 1, they expected annual CPI inflation to exceed 5 percent by mid 2011.