Latest / Early Edition with Ryan Bridge / Mike Jones: BNZ Chief Economist on food costs reaching 4.5%, Treasury's worst case scenario for inflation

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Mike Jones: BNZ Chief Economist on food costs reaching 4.5%, Treasury's worst case scenario for inflation · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Beef mint steak driving the latest spike and food prices.
• 0:02
  Speaker 1: Annual food inflation hit four and a half percent for February.
• 0:05
  Speaker 1: That's up from four point two percent in January. Mintce
• 0:08
  Speaker 1: had a record twenty four to forty six a kilo,
• 0:11
  Speaker 1: fruit and veggies up nearly ten percent for the year.
• 0:13
  Speaker 1: Mike Jones benz In Chief Economists on US this morning, Morning, Mike,
• 0:17
  Speaker 1: good morning. The beef mints thing is a basic supply
• 0:19
  Speaker 1: demand one, isn't it.
• 0:22
  Speaker 2: Yeah, the global meat prices have been on the up
• 0:24
  Speaker 2: in In fact, beef prices are at record levels, largely driven
• 0:28
  Speaker 2: out of very short supply in the US. You've got
• 0:32
  Speaker 2: US beef heard at the lowest level since nineteen fifty one.
• 0:35
  Speaker 2: You've got demand in the US and China at pretty
• 0:38
  Speaker 2: good sorts of levels, and that's squeezing prices up. Obviously
• 0:41
  Speaker 2: good for our beef producers and exporters, but but not
• 0:44
  Speaker 2: secret shoppers.
• 0:45
  Speaker 1: What does it mean for because this is the SPI,
• 0:48
  Speaker 1: not the CPI, So what does it mean for inflation?
• 0:51
  Speaker 1: Because it feeds into it.
• 0:52
  Speaker 2: Right, it does. Yeah, I mean there's always a few
• 0:55
  Speaker 2: sort overs and unders in the SPI. It's taken as
• 0:58
  Speaker 2: a whole. It wasn't anything in the number yesterday to
• 1:02
  Speaker 2: change our overall inflation view. So we've got a two
• 1:05
  Speaker 2: point nine percent CPI forecast or the first quarter that
• 1:10
  Speaker 2: hasn't changed. Obviously, it's been overtaken by events somewhat because
• 1:14
  Speaker 2: we know it's the second quarter that's really going to
• 1:16
  Speaker 2: be at the brunt of the spike and petrol prices
• 1:18
  Speaker 2: that we are seeing. So we've got three point eight
• 1:21
  Speaker 2: percent forecast for Q two and then inflation stays above
• 1:25
  Speaker 2: three percent now for the rest of the year on our.
• 1:27
  Speaker 1: Numbers, do you think the governments I saw some economists
• 1:30
  Speaker 1: es today saying the government's worst case scenario are too conservative.
• 1:33
  Speaker 1: Do you agree with them?
• 1:36
  Speaker 2: On inflation? The worst case was was three point seven.
• 1:41
  Speaker 2: Now our sort of central view now, as I said,
• 1:43
  Speaker 2: is three point eighth. So on that basis, three point
• 1:47
  Speaker 2: seven could be a bit light. Of course, we've probably
• 1:51
  Speaker 2: had the benefit of a few more days and maybe
• 1:53
  Speaker 2: even a week of information, and what we've seen in
• 1:55
  Speaker 2: the current environment is that forecasts and assumptions that are
• 1:58
  Speaker 2: going out of date pretty quickly.
• 2:00
  Speaker 1: You said above three for the rest of the year,
• 2:03
  Speaker 1: how far above three? Above four?
• 2:07
  Speaker 2: Not above four? I mean, things are moving around, but
• 2:10
  Speaker 2: we have the peak in the second court at three
• 2:13
  Speaker 2: point eight and then coming down to just a smidge
• 2:15
  Speaker 2: above three by the end of this year. But as
• 2:18
  Speaker 2: I say, these things can and probably will change again
• 2:22
  Speaker 2: as we go through.
• 2:23
  Speaker 1: Mike, the RBA put the rate up use today, but
• 2:25
  Speaker 1: there are a different kettle of fish with their inflation rate.
• 2:28
  Speaker 1: What do you think. I mean, although you're expecting inflation
• 2:31
  Speaker 1: to go high, does that necessarily mean the Reserve Bank
• 2:34
  Speaker 1: here will hike or hike higher faster or sooner.
• 2:39
  Speaker 2: No. I think the ABA was interesting, and we know
• 2:43
  Speaker 2: that the Reserve Bank here of course, is looking to
• 2:46
  Speaker 2: what offshore central banks do to respond to this shock.
• 2:49
  Speaker 2: I mean, there's a pretty live debate about what you
• 2:51
  Speaker 2: can and should do in response to a supply shock
• 2:55
  Speaker 2: like this. I think what we'll see from the Reserve
• 2:57
  Speaker 2: Bank of New Zealand is basically a period of watching
• 3:00
  Speaker 2: and waiting. They've got the luxury to some extent of
• 3:03
  Speaker 2: not having to meet and announce interest rates for another
• 3:07
  Speaker 2: three weeks or so, so the will could be quite
• 3:09
  Speaker 2: different in three weeks time. But look, we are expecting
• 3:13
  Speaker 2: a move up in indust rates, but not till much later.
• 3:16
  Speaker 1: In the year in September, Mike, appreciate your analysis this morning.
• 3:19
  Speaker 1: Thank you, Mike Jones being Z Chief Economy.
• 3:23
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• 3:26
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• 3:29
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