Latest / Early Edition with Ryan Bridge / Mike Jones: BNZ Chief Economist on the latest inflation figures being released today

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Mike Jones: BNZ Chief Economist on the latest inflation figures being released today · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: And it is CPI Day here in New Zealand. Inflation,
• 0:04
  Speaker 1: this is the year to September. Most expecting we'll get
• 0:06
  Speaker 1: between 3.7% and 4%, currently at 4.1%. Prediction for the
• 0:11
  Speaker 1: final quarter, anywhere up to 4.5%. Mike Jones, BNZ Chief Economist.
• 0:15
  Speaker 2: Morning, Mike. How are you? Good morning, Ryan.
• 0:18
  Speaker 1: So you're picking sort of the higher end, 3.9%.
• 0:20
  Speaker 2: Why is that? Yeah, 3.9. It's probably at the higher
• 0:26
  Speaker 2: end of the annual rates, but we're the same, I think,
• 0:28
  Speaker 2: as most others and certainly the Reserve Bank on the quarterlies.
• 0:31
  Speaker 2: So there's probably a bit of rounding going on there.
• 0:34
  Speaker 2: But I think the bigger picture is the reprieve that
• 0:37
  Speaker 2: we might get today, if you call it that, is
• 0:40
  Speaker 2: going to be pretty brief and perhaps pretty hollow because
• 0:42
  Speaker 2: we know that in the current quarter and the fourth quarter,
• 0:45
  Speaker 2: we're going to see inflation spike back up again to
• 0:48
  Speaker 2: a pretty nasty rate, we think.
• 0:50
  Speaker 1: How nasty will it get?
• 0:53
  Speaker 2: Well, we've run the numbers again this week, and we're
• 0:58
  Speaker 2: getting 4.7 for the current quarter. So, of course, most
• 1:02
  Speaker 2: of that is the spike back up we're seeing in
• 1:06
  Speaker 2: fuel prices. And so that's an element, of course, that
• 1:09
  Speaker 2: Reserve Bank should, in theory, be looking through. But, of course,
• 1:12
  Speaker 2: doing that's getting harder and harder, given the volatility that
• 1:15
  Speaker 2: we're seeing, and also given that That underlying or core
• 1:19
  Speaker 2: inflation also seems to be a bit strong. I think
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  Speaker 2: we'll see today some of those core inflation measures up
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  Speaker 2: again and up sitting around the top end of Reserve
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  Speaker 2: Bank's 1% to 3% band. It's interesting.
• 1:31
  Speaker 1: I was reading about the Aussies yesterday. They reckon that
• 1:34
  Speaker 1: they are... probably heading for another hike too. They've already
• 1:37
  Speaker 1: had four this year, but probably having to do another
• 1:39
  Speaker 1: one too because inflation is higher than they thought it
• 1:42
  Speaker 1: would be. I think that's probably the case for most
• 1:45
  Speaker 1: central banks. It's higher now than they thought it would
• 1:48
  Speaker 1: be a few months ago, right?
• 1:50
  Speaker 2: Yeah, you're right. I mean, the Reserve Bank of Australia's
• 1:53
  Speaker 2: language seems to have shifted a bit just in the
• 1:55
  Speaker 2: last couple of weeks, basically saying some of these risks
• 1:59
  Speaker 2: about inflation that we're worried about are crystallising and it's
• 2:03
  Speaker 2: certainly got the market going. suggesting that rates could go
• 2:06
  Speaker 2: higher still, and they're already at 4.6 over the end
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  Speaker 2: and potentially heading higher. So it's a bit of a
• 2:12
  Speaker 2: contrast to where we are at 2.75 for the official
• 2:16
  Speaker 2: cash rate, but of course highlights the upside risks to that.
• 2:20
  Speaker 1: When does it all start flowing through? Are we in
• 2:21
  Speaker 1: the secondary round, or is it all still the primaries
• 2:24
  Speaker 1: that we're worried about?
• 2:27
  Speaker 2: I think it's still the case. that you're not really
• 2:32
  Speaker 2: sort of juggling those direct first-round impacts. But when we
• 2:36
  Speaker 2: look at the most recent inflation numbers, and we got
• 2:39
  Speaker 2: a smattering last week, there is some evidence or more
• 2:43
  Speaker 2: evidence there that you're starting to get that pass-through happening
• 2:47
  Speaker 2: from fuel costs into others, airfares, freight, construction, even things
• 2:52
  Speaker 2: like that. So that's the stuff. that the RBA has
• 2:55
  Speaker 2: said they're worried about and that the Reserve Bank here
• 2:58
  Speaker 2: has got a pretty close eye on as well. So
• 3:00
  Speaker 2: when we put it all together, we think the Reserve
• 3:03
  Speaker 2: Bank here in New Zealand is going to raise the
• 3:05
  Speaker 2: official cash rate next week and again most likely in December.
• 3:11
  Speaker 1: Two more before Christmas and one, as you say, right
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  Speaker 1: smack bang before an election. Thank you very much for that.
• 3:18
  Speaker 1: That is Mike Jones, BNZ Chief Economist.
• 3:21
  Speaker 2: For more from Early Edition with Ryan Bridge, listen live
• 3:24
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• 3:26
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