Latest / Best of Business / Brad Olsen: Infometrics Principal Economist ahead of the CPI announcement

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Brad Olsen: Infometrics Principal Economist ahead of the CPI announcement · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk sed B.
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• 0:17
  Speaker 2: Hugh Matt on the texts, flicking a message, Jack, I
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  Speaker 2: reckon that CPI data is going to be a bit
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  Speaker 2: of a shock tomorrow, inflation coming in three point nine
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  Speaker 2: four point one percent. Maybe Matt say it ain't. So
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  Speaker 2: let's go to CEO of Informetris brad Olsen, who is
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  Speaker 2: counting down the ours to Statistics New Zealand and their
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  Speaker 2: latest CPI data. Tell me Matt's wrong. Brad, tell me
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  Speaker 2: he's wrong.
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  Speaker 3: Look, I think it'd be pretty heroic for the inflation
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  Speaker 3: numbers to remain at that level. We're actually picking an
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  Speaker 3: annual rate of three point three percent, so we think
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  Speaker 3: it's actually going.
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  Speaker 2: To be you're proving quite a bit yeah, the same right,
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  Speaker 2: picking three point three Yeah, around.
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  Speaker 3: That sort of level. But I mean, I think the
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  Speaker 3: thing that we're looking at now and the piece of
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  Speaker 3: a puzzle, we're a bit unsure about it. Even if
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  Speaker 3: that headline number comes down, do we see enough track
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  Speaker 3: on the non tradable and domestically based inflation front, Because
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  Speaker 3: that's what the Reserve Bank is worried about. But you
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  Speaker 3: look at some of the numbers recently that have come out,
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  Speaker 3: food prices dropping for the first time in the month
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  Speaker 3: of June in about six years. You know, that's encouraging.
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  Speaker 3: You look at the likes of the pace of rental growth.
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  Speaker 3: It's high, but it seems to be sort of curving
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  Speaker 3: around the other side. So there's some encouraging signs I
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  Speaker 3: think that are coming through. The inflation is starting to
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  Speaker 3: move into closer to where we want it to be.
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  Speaker 3: The challenge all I think the difficulty writes for households
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  Speaker 3: is that, sure, three point three percent is a good number,
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  Speaker 3: and it is important for monetary policy. It will help,
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  Speaker 3: you know, with the Reserve Bank when they want to
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  Speaker 3: set interest rates slower. But if I'm a household, three
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  Speaker 3: point three percent still feels harsh. When it's three point
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  Speaker 3: three on top of you know, some pretty big numbers
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  Speaker 3: the last couple of years. You've had like a twenty
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  Speaker 3: five percent increase in inflation over the last couple of years,
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  Speaker 3: So households are still hurting.
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  Speaker 2: Yeah, yeah, absolutely, yeah, And in terms of baseline figures,
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  Speaker 2: stuff is certainly expensive, but I mean they're closer to
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  Speaker 2: three It is the more likely surely that the Reserve
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  Speaker 2: Bank is going to cut sooner.
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  Speaker 3: Yeah, I mean definitely, given their sort of pivot in
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  Speaker 3: the last couple of weeks and you know, moving from
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  Speaker 3: or moving to a bit of a softer view, if
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  Speaker 3: you will, of the economy. And that's sort of consistent
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  Speaker 3: with other business surveys as well, which businesses themselves are saying, look,
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  Speaker 3: there's not that great domestic trading conditions out there. As
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  Speaker 3: a business, I can't get great numbers of sales. If
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  Speaker 3: that's the case, I'm pretty reluctant to put up my
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  Speaker 3: prices because they don't want to scare away even more consumers.
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  Speaker 3: And so that is, you know, all of that is
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  Speaker 3: starting to work in the economy, and I think, you know,
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  Speaker 3: when we look at the Reserve Bank's outlook, we do
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  Speaker 3: think that could change around the challenge of the question,
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  Speaker 3: I think, and this is always a struggle. We'd also hate, though,
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  Speaker 3: to start jumping sort of from one data lease to another.
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  Speaker 3: So we'd hate to see a business survey out a
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  Speaker 3: couple of weeks ago turn softer and then all of
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  Speaker 3: a sudden everyone's like, well it's time to cut. If
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  Speaker 3: inflation came in a bit hotter than expected. You know
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  Speaker 3: tomorrow you'd or equally sort of hate it. If everyone
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  Speaker 3: then moved back to to a it's going to take
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  Speaker 3: longer to cut interest rates position. So I think we're
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  Speaker 3: trying to sort of hold our nerve a little bit,
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  Speaker 3: looking through all the bits of dark to try and go.
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  Speaker 3: Is this sort of persistent? Are we actually sort of
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  Speaker 3: properly back towards the goal zone? But gosh, if we
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  Speaker 3: can get to three point three, that also says that
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  Speaker 3: come through to the end of this year, you should
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  Speaker 3: be back within that one to three target band. If
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  Speaker 3: that's the case, that certainly should give the Reserve Bank
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  Speaker 3: a lot more confidence. So we're building that strong picture
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  Speaker 3: for interest rate cuts at the moment.
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  Speaker 2: Yeah, very good. Fingers crossed. Thanks Brad. That is Brad
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  Speaker 2: Olsen from Informetrics.
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