Latest / Best of Business / Gareth Kiernan: Infometrics Chief Forecaster warns of risk to rise in inflation

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Gareth Kiernan: Infometrics Chief Forecaster warns of risk to rise in inflation · Best of Business

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  Speaker 2: Wow, fascinating you. Forecast for our economy infometrics thinks the
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  Speaker 2: Reserve Bank's going to cut next month. Well, hopefully done,
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  Speaker 2: we all, but that impact won't flow through until mid
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  Speaker 2: next year. Right by that time, they argue, your expert
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  Speaker 2: returns an earlier rate carts, they'll have kicked in, growth
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  Speaker 2: will have fired up, and all of a sudden we
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  Speaker 2: face the prospect of a bit of overheating. So Gareth
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  Speaker 2: Kennan's the infometrics to forecaster, of course, and it's back
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  Speaker 2: with us. Gareth, Morning morning, Mike. Haven't talked to you
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  Speaker 2: for ages. You're feeling good?
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  Speaker 3: Well, I've been taking the happy pills, haven't I. It's
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  Speaker 3: been a little while since we've talked about upside risks to.
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  Speaker 2: Them bring on some overheating. I'm looking well to the winds.
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  Speaker 3: It arrived well, yeah, probably the sort of middle to
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  Speaker 3: the latter part of next year. We think the growth
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  Speaker 3: will be pushing out towards over two percent. I mean,
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  Speaker 3: there's not rapid growth, but we're still looking at a
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  Speaker 3: picture where population growth is relatively weak and as you say,
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  Speaker 3: over the last couple of years, we've had nothing going backwards,
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  Speaker 3: so it is looking like better times coming through. But
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  Speaker 3: the warriors you get through to twenty twenty seven and
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  Speaker 3: then Reserve Bank probably need to start hiking rates up again.
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  Speaker 2: Now we're talking next week, we get to read on
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  Speaker 2: the inflation, which may well breach three. Is that part
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  Speaker 2: of this or do we look through that but for
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  Speaker 2: now and still wait for some real growth to come
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  Speaker 2: through in twenty six.
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  Speaker 3: Yeah. I don't see a lot of concern around that
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  Speaker 3: sort of inflation number next week, although you're right it's
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  Speaker 3: close to the top of the target band for the bank.
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  Speaker 3: When you look past the sort of electricity, the insurance,
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  Speaker 3: the rates right through most of the rest of the CPI,
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  Speaker 3: there's not a lot of price pressures there. It reflects
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  Speaker 3: the weak demand across the economy. So quite different to
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  Speaker 3: what we were seeing three or four years ago.
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  Speaker 2: How confident in this forecast are you?
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  Speaker 3: There's still a lot of uncertainty out there, let's be honest,
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  Speaker 3: and that does factor through into the Reserve banks thinking
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  Speaker 3: and their decision making. At the moment, you know, you've
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  Speaker 3: still got the international situation rumbling on with tariffs, and
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  Speaker 3: you know what Trump is doing in that space. You've
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  Speaker 3: had a little bit of weakness coming through, not a lot,
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  Speaker 3: but just a little bit of cautionary signs in terms
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  Speaker 3: of dairy prices and horticulture prices recently as well. And
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  Speaker 3: you know, anyone who listens to economists over the last
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  Speaker 3: eighteen months or have been told several times that the
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  Speaker 3: economy is going to be improving and they get to
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  Speaker 3: see it.
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  Speaker 2: Of course, yeah, exactly. Cash rate you say, back two three, so,
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  Speaker 2: remembering its low tows cash right back to three by
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  Speaker 2: the end of twenty seven. So what you're arguing is
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  Speaker 2: we're down and then we're going to fire up, and
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  Speaker 2: by firing up, we're back up to three. So it's down,
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  Speaker 2: then it's up.
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  Speaker 3: That's right. Then, let's be honest, three percent doesn't really
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  Speaker 3: concern us. That's kind of getting back to neutral. The
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  Speaker 3: risk for us, and this is not our central forecast,
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  Speaker 3: but the risk that we're increasingly starting to become concerned about,
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  Speaker 3: is that rather than going to three percent by the
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  Speaker 3: end of twenty twenty seven, you're back up to four percent,
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  Speaker 3: and then you've got mortgage rates up over six percent.
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  Speaker 2: YEA, interesting all right mate, go well, appreciate it. Gareth Kernan,
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  Speaker 2: Out of Infometrics.
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