Latest / Best of Business / Liam Dann: New Zealand Herald Business Editor-at-large discusses annual inflation peak

Transcript

Liam Dann: New Zealand Herald Business Editor-at-large discusses annual inflation peak · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talk sed be
• 0:12
  Speaker 1: follow this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: As you heard in our news, annual inflation has arisen
• 0:20
  Speaker 2: to a fifteen month high of three percent. Economists had
• 0:24
  Speaker 2: been expecting inflation to reach that also pass the three
• 0:27
  Speaker 2: percent upper limit of the Reserve Banks target band. The
• 0:30
  Speaker 2: Central Banks expected to look past this current spike when
• 0:34
  Speaker 2: it reviews the ocr next month. It reckons the economy
• 0:37
  Speaker 2: has been weak enough to start pushing inflation down. New
• 0:41
  Speaker 2: Zealand Herald Business Editor at large Liam Dan joins me, Now,
• 0:48
  Speaker 2: good morning, some late breaking news coming into your phone.
• 0:50
  Speaker 3: Your phone ping shouldn't be get near that. It shouldn't
• 0:52
  Speaker 3: be on. It's okay, but I'm reading the latest news
• 0:55
  Speaker 3: off it because it's all just coming out. Really yeah,
• 0:58
  Speaker 3: So look bang on. Expectations not great, but that the
• 1:03
  Speaker 3: big headline has got to be power prices. So in
• 1:07
  Speaker 3: terms of driving up inflation, the worst power prices we've
• 1:12
  Speaker 3: had in this country since March nineteen eighty nine, the
• 1:16
  Speaker 3: biggest annual increase sorry yeah, yeah, since March nineteen eighty nine,
• 1:20
  Speaker 3: when there was some I can't really remember, but there
• 1:23
  Speaker 3: was a bigger Foteste going through at that time, and
• 1:25
  Speaker 3: that spiked it. So that is pretty is this the
• 1:29
  Speaker 3: gas again will be that there's actually just short well
• 1:34
  Speaker 3: it's not all the wholesale price. It's to do with distribution.
• 1:39
  Speaker 3: I'm not an expert in this very complicated industry, but
• 1:45
  Speaker 3: you know, like for example, companies like Genesis, the retailers
• 1:49
  Speaker 3: have said, look, you know they every five years, retailers
• 1:55
  Speaker 3: pass on the costs that they've been accumulating from increases
• 1:59
  Speaker 3: from the lines company. So that that was included in
• 2:01
  Speaker 3: that quarter, I think. But yeah, there was also you know,
• 2:06
  Speaker 3: the lakes are full now and wholesale power prices have
• 2:10
  Speaker 3: come down, but they were spiking earlier in the year
• 2:14
  Speaker 3: and we all felt it right through winter unfortunately, and
• 2:17
  Speaker 3: so that that was a big one food where we
• 2:19
  Speaker 3: got food on. You know, food's been up around four
• 2:21
  Speaker 3: or five percent so and rates have been high as well.
• 2:26
  Speaker 3: So you know, if you look at they are things
• 2:29
  Speaker 3: that you just can't avoid rates, and so people feel it,
• 2:37
  Speaker 3: and they feel more acutely than the three percent because
• 2:41
  Speaker 3: some of those other things that are keeping keeping it
• 2:44
  Speaker 3: sort of pushing down the other way. You know, it
• 2:46
  Speaker 3: can be anything from international travel to you know the
• 2:51
  Speaker 3: price of getting an accountant or something like that. You know,
• 2:53
  Speaker 3: things that services and things that we don't necessarily have
• 2:57
  Speaker 3: to spend on. So if you're just you know and that,
• 3:00
  Speaker 3: so that affects people who are spending more of their
• 3:03
  Speaker 3: income to survive and makes it pretty tough. So you know,
• 3:07
  Speaker 3: that is all horrible, but it's also already happened. So
• 3:14
  Speaker 3: it's worth remembering that this is the third quarter. We've
• 3:16
  Speaker 3: already paid these prices, and there are some positive signs.
• 3:20
  Speaker 3: As economists mentioned, it's bang on the target. The power
• 3:24
  Speaker 3: prices won't be going up or anything like that. Again,
• 3:27
  Speaker 3: rents well not not in this current quarter because you
• 3:31
  Speaker 3: know you're not going to get the lines companies, the
• 3:35
  Speaker 3: distribution charges and wholesale prices are down a lot. So
• 3:40
  Speaker 3: you know, I can't can't promise further out or next winter,
• 3:42
  Speaker 3: but so that'll be promising. Food prices have already started
• 3:46
  Speaker 3: to come off. Butter's down. Yeah, yeah, I mean that genuinely.
• 3:52
  Speaker 3: You know, I see it at the supermarket already, butter
• 3:55
  Speaker 3: not cheese. I got to say, I've watched these things
• 3:57
  Speaker 3: very closely, so.
• 3:58
  Speaker 2: I know these things.
• 3:59
  Speaker 3: But butter prices has definitely started to improve, and so
• 4:06
  Speaker 3: I think from a big macro economic point of view,
• 4:09
  Speaker 3: this isn't going to change anything for the Reserve Bank.
• 4:12
  Speaker 3: So we're still going to get another rate cut, possibly
• 4:15
  Speaker 3: one after that if things are still really bad.
• 4:18
  Speaker 2: You don't think they'll go hard before Christ. I mean,
• 4:20
  Speaker 2: because this drip feeding of the rate cuts means that
• 4:23
  Speaker 2: everybody just waits. Yeah, and I've got a lot of
• 4:26
  Speaker 2: employers who are telling me that they are not going
• 4:29
  Speaker 2: to invest or grow while they've got the fear of
• 4:33
  Speaker 2: a left block coming in, which means it's going to
• 4:36
  Speaker 2: be a self fulfilling prophecy if they don't start growing.
• 4:39
  Speaker 3: They have to be careful though, because they have, as
• 4:41
  Speaker 3: we know, a single mandate. It's this government is brought
• 4:44
  Speaker 3: in which says only inflation is their only only target.
• 4:47
  Speaker 3: So previously they could have gone, oh, unemployment's looking bad,
• 4:51
  Speaker 3: we'll factor that in and do a double but they
• 4:54
  Speaker 3: do have to look at inflation.
• 4:55
  Speaker 2: And the two tier economy.
• 4:56
  Speaker 3: Yeah, and I mean, you know, I've argued that I
• 4:58
  Speaker 3: can see the logic for that, but in terms of
• 5:02
  Speaker 3: timing it hasn't been fantastic for this government. It's almost
• 5:05
  Speaker 3: I suggested It's almost an own goal because they could
• 5:08
  Speaker 3: have moved faster with a dual mandate, quite possibly.
• 5:13
  Speaker 2: But I suppose they were so busy trying to fix
• 5:15
  Speaker 2: everything at once with the night, as you've said, with
• 5:17
  Speaker 2: the Night of the future, and they're not going to
• 5:19
  Speaker 2: be thanked for that unless things start to improve in
• 5:21
  Speaker 2: the short term.
• 5:22
  Speaker 3: Yeah, I mean, it wasn't it was. It was an
• 5:25
  Speaker 3: odd one to prioritize it was that in their tax
• 5:28
  Speaker 3: So I struggled.
• 5:29
  Speaker 2: Struggle struggled with they remember those Well.
• 5:32
  Speaker 3: No one's going to remember them at the voting booth
• 5:34
  Speaker 3: next year, and and and it's unfortunately so yeah, look
• 5:40
  Speaker 3: it'll I guess this is good news in a way
• 5:45
  Speaker 3: that it's bang on target. The economists have got it right.
• 5:48
  Speaker 3: Nobody's going to be panicking. The markets are unmoved, so
• 5:51
  Speaker 3: we've still got the seeds of the recovery starting starting
• 5:55
  Speaker 3: to roll. I mean, as you say, it is, it
• 5:58
  Speaker 3: is a very slow process. If people think the rates
• 6:00
  Speaker 3: are going to be down lower in February, they hold
• 6:02
  Speaker 3: off even longer. But I wouldn't. I mean, you know,
• 6:05
  Speaker 3: there's plenty of economists who are warning that you're not
• 6:09
  Speaker 3: going to see that much more on the mortgage, you know,
• 6:13
  Speaker 3: the retail mortgage end.
• 6:16
  Speaker 2: There's a bit of there's a bit of riggle room
• 6:17
  Speaker 2: within the different trading links though, isn't there a little?
• 6:21
  Speaker 3: They move pretty fast to keep there one year, two
• 6:23
  Speaker 3: year and six months about the same. Yeah, I guess
• 6:29
  Speaker 3: you know, people have held off and to me, what
• 6:33
  Speaker 3: is keeping people from spending is not it's not that
• 6:36
  Speaker 3: so much the locking and the rates. It's the still
• 6:39
  Speaker 3: the fear around jobs. And in the next piece of
• 6:41
  Speaker 3: ugly economic data that we get is going to be
• 6:43
  Speaker 3: the unemployment numbers.
• 6:45
  Speaker 2: You know, I could have done with your column quite frankly,
• 6:48
  Speaker 2: well that was really that was the sub editors with
• 6:51
  Speaker 2: the headline the economy is recovering, Brace yourself. There's bad
• 6:54
  Speaker 2: news coming Liam Dan, Good on you.
• 6:56
  Speaker 3: But there is the point of that, though, is that
• 6:59
  Speaker 3: I think we've got a recovery happening, and you're going
• 7:01
  Speaker 3: to get but we're going to have, you know, news
• 7:04
  Speaker 3: about horrible power prices and things. Today, we're going to
• 7:08
  Speaker 3: get an ugly unemployment number, they're all historic, and then
• 7:10
  Speaker 3: we're going to get right before Christmas, we're going to
• 7:12
  Speaker 3: get a GDP number that could say that we were
• 7:14
  Speaker 3: back in recession. And that's the way it works. The
• 7:18
  Speaker 3: headlines come later, and we just don't want to let
• 7:21
  Speaker 3: them disrail derail us in terms of confidence, because you
• 7:26
  Speaker 3: have to think about what we're in right now, and
• 7:28
  Speaker 3: hopefully there are some signs that there are some signs
• 7:31
  Speaker 3: around consumer spending. Some towns are doing better than others.
• 7:35
  Speaker 3: I was in christ Church in the weekend, better and
• 7:38
  Speaker 3: better and better. Although I talked to people in christ Church.
• 7:42
  Speaker 3: I've got friends who were made redundant, you know, from
• 7:45
  Speaker 3: tech industry and things. And I've got a family member
• 7:48
  Speaker 3: who runs a small business working with a large number
• 7:51
  Speaker 3: of other small businesses at B to B accounting type thing,
• 7:55
  Speaker 3: and they're saying that they've had the toughest year they
• 7:59
  Speaker 3: can remember in terms of, you know, their clients. And
• 8:01
  Speaker 3: so even the cities that are supposedly doing well have
• 8:04
  Speaker 3: had a tough year. So a stretch to say that,
• 8:07
  Speaker 3: you know, you don't want to assume that it's all Auckland
• 8:11
  Speaker 3: and Wellington's blues.
• 8:14
  Speaker 2: No. Somebody says too that the white cuttle regional rates
• 8:17
  Speaker 2: and increase of twenty three percent. Somebody else says the
• 8:21
  Speaker 2: food prices only go up. They never come down. Same
• 8:23
  Speaker 2: for power and rates. No signs of green shoots whatsoever.
• 8:27
  Speaker 2: Economist government and Hosking are dreaming.
• 8:30
  Speaker 3: Yeah, I mean it's not true though, because food prices
• 8:33
  Speaker 3: do come down. I mean so so much of our
• 8:36
  Speaker 3: food is based on commodity prices, and right now beef
• 8:39
  Speaker 3: prices are very high, so beef lam vegetables are up
• 8:43
  Speaker 3: a lot in the last quarter. I mean it's seasonal.
• 8:46
  Speaker 3: They will come down. Yeah, And I'm watching butter come
• 8:49
  Speaker 3: down and cheese will come down again, because we can
• 8:52
  Speaker 3: see it in the commodity prices that are coming through,
• 8:55
  Speaker 3: you know, six weeks two months ahead of where it
• 8:58
  Speaker 3: ends up in the retail. So probably never feels like it.
• 9:03
  Speaker 3: There's always something, you know, coffee prices or chocolate prices.
• 9:06
  Speaker 3: Someone else is having a problem with their growing season
• 9:10
  Speaker 3: somewhere in the world, so that that is an issue.
• 9:13
  Speaker 3: But I think we will. I think we'll see some
• 9:16
  Speaker 3: positive stuff there over the coming.
• 9:18
  Speaker 2: Now somebody else has conflated a text. I think this
• 9:21
  Speaker 2: headline inflation number is a nonsense. The inflation experienced by
• 9:24
  Speaker 2: most of us, who spend most of what we earn
• 9:27
  Speaker 2: on essentials as well above three percent. New Zealand is
• 9:30
  Speaker 2: teetering on the edge of stagflation. I would argue, we're
• 9:32
  Speaker 2: already there, aren't we. Yeah, ask Lee if the New
• 9:35
  Speaker 2: Zealand economy is now the sausage that has dropped through
• 9:38
  Speaker 2: the grill.
• 9:39
  Speaker 3: I don't know about the sausage analogy, but I agree
• 9:41
  Speaker 3: about the stagflation. I mean, a simple definition of stagflation
• 9:45
  Speaker 3: is when you're worrying about your job and price and
• 9:47
  Speaker 3: the supermarket bill. You know, inflation and rising unemployment and
• 9:51
  Speaker 3: rising inflation. And we've definitely had a bit of that.
• 9:56
  Speaker 3: And yeah, I take that point entirely. I think it's
• 9:58
  Speaker 3: what we were saying earlier that you know, your lived
• 10:01
  Speaker 3: experience of the cost of living. If you're spending most
• 10:05
  Speaker 3: of your income to just get by a week to
• 10:08
  Speaker 3: week and that's going on rent, food power and and
• 10:14
  Speaker 3: or rates, and you know, you know that that is
• 10:18
  Speaker 3: going to be clearly higher than the top line inflation rate.
• 10:23
  Speaker 3: But it's two different things. The Reserve Bank, in terms
• 10:27
  Speaker 3: of controlling the money supply, needs to know what the
• 10:29
  Speaker 3: overall amount of inflation in the economy is, and it
• 10:34
  Speaker 3: has some capacity to look through things that go up
• 10:37
  Speaker 3: and down a bit like so, you know, petrol prices
• 10:40
  Speaker 3: up and down a lot, and again they've come down
• 10:42
  Speaker 3: again in the last week or so, and so you know,
• 10:47
  Speaker 3: that's probably not going to be causing too much problems
• 10:49
  Speaker 3: in the in the fourth quarter, so we you know.
• 10:53
  Speaker 3: So so those things, you know, you live with it.
• 10:56
  Speaker 3: It goes up and down. The Reserve Bank has to
• 10:58
  Speaker 3: take a longer term view.
• 11:00
  Speaker 2: They will be this will be doctor Anna Bremen's first one,
• 11:04
  Speaker 2: won't it after after this meeting, then before Smiths she was.
• 11:09
  Speaker 3: Touched on just before Christmas anyway, and December one, and she'll.
• 11:13
  Speaker 2: Certainly be Surely she'll be looking at what happens next
• 11:17
  Speaker 2: next month.
• 11:18
  Speaker 3: Yeah, yeah, well that they are meeting. I think it's
• 11:22
  Speaker 3: November twenty so I'm not sure, but it would only
• 11:25
  Speaker 3: be she wouldn't take a formal role because they're very
• 11:28
  Speaker 3: vigorous about that sort of stuff. But yeah, maybe certainly
• 11:31
  Speaker 3: be looking at it closely and hopefully you know, my
• 11:34
  Speaker 3: hope is that she comes in and we've got a
• 11:36
  Speaker 3: fairly stable economy and recovery and she doesn't have to
• 11:40
  Speaker 3: do too much, like maybe if the rates are in
• 11:42
  Speaker 3: the right place, it might be not moving them at
• 11:45
  Speaker 3: all next year.
• 11:46
  Speaker 2: That'd be nice. Wouldn't it be nice to have a
• 11:48
  Speaker 2: nice period of boredom around money and money rates? All right,
• 11:51
  Speaker 2: Liam lovely to talk as always, the New Zealand Herald's
• 11:54
  Speaker 2: business editor at largely im Dan talking the annual inflation
• 11:58
  Speaker 2: rates was into a fifteen month I have three percent.
• 12:01
  Speaker 2: But you know, he keeps saying, Liam, does that the
• 12:05
  Speaker 2: worst is behind us. Really, it's all in the rearview mirror.
• 12:08
  Speaker 2: Good times are ahead. You see little e Or bouncing
• 12:12
  Speaker 2: in like a tigger next year.
• 12:14
  Speaker 1: For more from News Talks at b listen live on
• 12:16
  Speaker 1: air or online, and keep our shows with you wherever
• 12:19
  Speaker 1: you go with our podcasts on iHeartRadio