Latest / Best of Business / Gareth Kiernan: Infometrics Chief Forecaster on what Donald Trump's tariffs could mean for inflation going forward

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Gareth Kiernan: Infometrics Chief Forecaster on what Donald Trump's tariffs could mean for inflation going forward · Best of Business

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  Speaker 2: Hey, good afternoon. Inflation has ticked up again. It's coming
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  Speaker 2: at two and a half percent in the first three
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  Speaker 2: months of the year. Gareth Kennan is Informetric's chief forecast
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  Speaker 2: to Gareth.
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  Speaker 3: Hello, Hi, Heather.
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  Speaker 2: Now this is only marginally higher than what was forecast, right,
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  Speaker 2: it was forecast to coming at two point four. It's
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  Speaker 2: coming at two point five. Is this worth worrying about?
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  Speaker 3: Look, it's just the sort of general sentiment and direction
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  Speaker 3: of travel that we're a little bit concerned about. At
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  Speaker 3: the moment. There were already expectations that inflation was going
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  Speaker 3: to be picking up through the course of this year
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  Speaker 3: to some degree of Reserve Bank has I think it
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  Speaker 3: peaking at two point seven percent later this year. I
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  Speaker 3: guess the issue really is that we've come from a
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  Speaker 3: period of very high inflation over the last few years,
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  Speaker 3: and the Reserve Bank is only just regaining its inflation
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  Speaker 3: fighting credibility. So there'll be, you know, some concerns there that,
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  Speaker 3: you know, if we're too slow off the mark again
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  Speaker 3: or a little bit too relaxed about how inflation is going,
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  Speaker 3: then you know where do we end up in eighteen
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  Speaker 3: months time.
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  Speaker 2: Although on the other hand, Gareth, the consensus appears to
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  Speaker 2: be growing that what's going on with the tariffs will
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  Speaker 2: drop inflation back down.
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  Speaker 3: Right, Yeah, Look, it's pretty ambiguous at the moment. I
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  Speaker 3: think the general sentiment you're right, seems to be pushing
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  Speaker 3: in the direction of a disinflationary pressure. So less inflation
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  Speaker 3: in the system because weaker world growth, less demand means
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  Speaker 3: there'll be sort of more discounting going on and products
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  Speaker 3: available more cheaply. But at the same time, there is
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  Speaker 3: still pockets of the sort of lingering price pressure. Before
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  Speaker 3: the tariffs that were out coming out, there was concerns
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  Speaker 3: about American inflation just holding up a bit more strongly,
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  Speaker 3: and we know there will be some cost pressures that
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  Speaker 3: do rise because of the changing trade situation. So it's mixed,
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  Speaker 3: But you're right, the sentiment is pushing towards maybe a
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  Speaker 3: little less inflation from the tariffs.
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  Speaker 2: As a result, we had A and Z yesterday saying
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  Speaker 2: that they thought the ocr which is sitting at three
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  Speaker 2: point five at the moment, is going to bottom out
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  Speaker 2: at two point five. Would you agree with that.
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  Speaker 3: Our forecast at the moment is for the OCR to
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  Speaker 3: get down to three percent over the next three months.
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  Speaker 3: But we think the Reserve being does need to just
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  Speaker 3: sort of take a cautious approach and see how the
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  Speaker 3: data unfolds beyond that as to whether further rate cuts
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  Speaker 3: are possible. If inflation comes in and it's more below
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  Speaker 3: expectation and coming quarters, there will be more room to cut.
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  Speaker 3: But at the moment it is a mixed situation. I
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  Speaker 3: think the reality is the banks core mandate is keeping
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  Speaker 3: inflation under control. Yes, we know that prospects around economic
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  Speaker 3: growth are weakening and softening as a result of the
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  Speaker 3: global situation, but that's not their core mandate. It's effectively inflation.
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  Speaker 2: Yeah. Now, listen on the GDP growth. I see that
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  Speaker 2: you guys have gone from forecasting for next year GDP
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  Speaker 2: growth of two point four percent down now to one percent.
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  Speaker 2: That's a reasonably significant reduction. Do you think that this
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  Speaker 2: is I mean, are we now at the point where
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  Speaker 2: Nicola Willis needs to start thinking very carefully in preparing
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  Speaker 2: this budget.
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  Speaker 3: Well, so, certainly on the revenue side of you experiencing
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  Speaker 3: economy that's growing at one percent rather than close to
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  Speaker 3: two and a half percent. That does have implications on
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  Speaker 3: the tax site. I don't know if it's going to
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  Speaker 3: make too much difference on the other side of the
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  Speaker 3: equation because we know that those fits. That fiscal position
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  Speaker 3: is very tight for the government. They're running a surplus
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  Speaker 3: for the next four a deficit for the next four
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  Speaker 3: or five years. Surpluses nowhere to be seen, and so
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  Speaker 3: it's difficult for them to offer a great deal of
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  Speaker 3: support for the economy. Obviously they've talked a lot about infrastructure.
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  Speaker 3: That's great, but it's also not something that necessarily stimulates
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  Speaker 3: a lot of economic activity, particularly quickly.
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  Speaker 2: Good stuff. Gareth, thanks so much, appreciate it. Happy Easter,
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  Speaker 2: Gareth Kennan of Informetric's chief forecaster.
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