Latest / Best of Business / Jarrod Kerr: Kiwibank Chief Economist previews inflation data from December quarter

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Jarrod Kerr: Kiwibank Chief Economist previews inflation data from December quarter · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk ZEDB. Follow
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• 0:16
  Speaker 2: We have Jared Kerr on the line and he is
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  Speaker 2: Kiwibanks Chief Economists. Welcome to the program, Jared, and Happy
• 0:23
  Speaker 2: new year, Happy new Year. It's time to look at
• 0:26
  Speaker 2: this year and to look at the economy and look
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  Speaker 2: at the backus. I've been rereading this slightly for a
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  Speaker 2: little while now because I've had such a happy time
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  Speaker 2: over Somemon with my holiday, but there we go. So
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  Speaker 2: the latest one is the inflation data, which for the
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  Speaker 2: December quarter is out on Wednesday. We have a dollar
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  Speaker 2: that's tanking, in petrol that's going up, and all sorts
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  Speaker 2: of things. So what do you think is going to
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  Speaker 2: look like?
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  Speaker 3: Well, we think it's going to be quite good. Actually,
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  Speaker 3: the annual rate's going to fall to about two point
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  Speaker 3: one percent, which from the Reserve banks perspective, you know,
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  Speaker 3: that's job done. There's a few things happening beneath the
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  Speaker 3: surface there. We're seeing like petrol port petrol prices are
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  Speaker 3: actually down. A lot of imported goods are down and
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  Speaker 3: which is nice, and it's just the homegrown inflation that's
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  Speaker 3: still a little sticky, but it looks to be heading
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  Speaker 3: in the right direction.
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  Speaker 2: You talk about that homegrown that's that's the that's a
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  Speaker 2: non tradable, right, that's the stuff like what we've got
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  Speaker 2: their rates and rents and electricity charges and supermarket charges
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  Speaker 2: and all sorts of things. And that's a never ending,
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  Speaker 2: you know, saga of increasing costs and increasing prices. Don't
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  Speaker 2: we have more control over that than than the tradable inflation,
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  Speaker 2: which is overseas based.
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  Speaker 3: Yeah, exactly right. So the Reserve Bank does target, you know,
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  Speaker 3: with a with an eye on domestic inflation because that's
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  Speaker 3: what they can control. It has fallen quite sharply over
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  Speaker 3: the last couple of years. It's got a little bit
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  Speaker 3: further to go. Like you say, there's some frustrating stuff
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  Speaker 3: in there, like rates, council rates, insurance costs. There's a
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  Speaker 3: few things in there that are quite that are running
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  Speaker 3: at quite a high rate. That will start to ease
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  Speaker 3: off this year.
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  Speaker 2: But last time we measured that was a five percent.
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  Speaker 2: That's that's the inflation rate from hell.
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  Speaker 3: What's in the falls now, and we expect it to
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  Speaker 3: come to come down to about three percent this year,
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  Speaker 3: which is in line with its longer run average. So
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  Speaker 3: we have had a really strong bout of inflation. But
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  Speaker 3: the good news is that we're on top of it
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  Speaker 3: and it's getting back to longer term averages.
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  Speaker 2: Very good. Meanwhile, as I mentioned before, the New Zealand
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  Speaker 2: dial is looking terrible. What do you make of that?
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  Speaker 3: It's a double edged sword. So on the one hand,
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  Speaker 3: it's it's really useful in making New Zealand detractive. New
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  Speaker 3: Zealand goes on sale when the currency falls makes our
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  Speaker 3: goods and services and travel cheaper to foreigners, so you
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  Speaker 3: know that's nice. We need more tourists here and our
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  Speaker 3: farmers could always do with a few extra dollars in pay.
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  Speaker 3: The other side is one of Kivi frustration, where it
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  Speaker 3: costs US more to buy foreign goods, costs US more
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  Speaker 3: to travel over seas. So the falling dollar, you know,
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  Speaker 3: good on one hand, bad on the other. I'm an economist,
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  Speaker 3: you know, I stay down the middle. It is. It
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  Speaker 3: is a bit better for us as an economy when
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  Speaker 3: it does come off.
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  Speaker 2: But the thing is it also affects things like oil
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  Speaker 2: prices and petrol prices, and rather than worrying about going overseas,
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  Speaker 2: I think most people are more worried about the fact
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  Speaker 2: that it's going to cost an awful lot more to
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  Speaker 2: deliver their goods to market.
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  Speaker 3: Yeah, that's true. So as petrol prices lift, petrol prices
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  Speaker 3: are actually down at the moment. But if they if
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  Speaker 3: they lift on the back of this floor in the currency,
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  Speaker 3: then that that acts like attacks on households, and it
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  Speaker 3: affects us all, anyone with a car or transport, It hurts, right.
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  Speaker 2: Jared, Well, look, I thank you very much and we'll
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  Speaker 2: talk again soon and have a great year. It's a
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  Speaker 2: year of grace.
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