Despite an increase in petrol prices in recent months, domestic air fares fell almost 10 per cent in the June quarter.

A sharp drop in the price of domestic air fares kept inflation well below target, despite a recovery in petrol prices.

Statistics New Zealand announced on Monday that the consumer price index rose by 0.4 per cent in the June quarter, meaning annual inflation also remained at 0.4 per cent for the year to June 30.

Much of the gain came from a recovery in petrol prices, which rose 5.3 per cent in the three months to June 30. Petrol, which accounts for about 5 per cent of the overall inflation basket, dropped significantly in both the December and March quarters.

But the recent gains in petrol were offset by drops elsewhere, including a 9.9 per cent drop in domestic air fares. Domestic air fares are down 14 per cent since the start of the year.

READ MORE: Inflation figures could deepen Reserve Bank's dilemma

Figures from the department showed that domestic air fares are now almost exactly what they were back in mid-2006.

In recent months Jetstar, the budget wing of Australian airline Qantas, began flying a number of new regional routes in New Zealand, including Napier to Auckland and Nelson to Wellington.

Air New Zealand has long been accused of profiting on key regional routes, with competition prompting a substantial and immediate fall in fares.

Also dropping in recent months was the price of meat, which dropped 2.7 per cent in the June quarter.

This meant food prices contributed just 0.06 per cent to the CPI.

The Reserve Bank is meant to target annual inflation of 1-3 per cent, with emphasis on the middle of the target band.

However, the annual increase in the CPI has now been below 1 per cent for seven quarters in a row, and since the start of July the New Zealand dollar has been climbing, pushing down the price of imported goods, notably petrol.

Economists were expecting annual inflation to be around 0.5 per cent, while the last set of Reserve Bank forecasts predicted annual inflation of 0.6 per cent in the June quarter.

Governor Graeme Wheeler will update the bank's economic figures later this week, with the Reserve Bark reviewing the official cash rate (OCR) on August 11.