Latest / Best of Business / Liam Dann: NZ Herald business editor at large on the CPI rising to 2.7 percent in June

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Liam Dann: NZ Herald business editor at large on the CPI rising to 2.7 percent in June · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from news Talk st be
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  Speaker 1: follow this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: The latest news, which came out twenty two minutes ago
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  Speaker 2: was our inflation figures and the latest stats New Zealand
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  Speaker 2: figures showed the consumer's price in the NEX rows two
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  Speaker 2: point seven percent in the year to June. The two
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  Speaker 2: point seven percent increase follows a two point five percent
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  Speaker 2: annual increase in the twelve months to the March twenty
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  Speaker 2: twenty five quarter. Now the largest contributor upwards to the
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  Speaker 2: annual inflation rate was local authority rates and payments and
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  Speaker 2: Brace Yourself twelve point two percent. So New Zealand Herald
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  Speaker 2: Business Editor at Large Liam dan is joining me in
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  Speaker 2: our commodity Iliam.
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  Speaker 3: Hey, Andrew.
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  Speaker 2: So, I heard people predicting two point nine. I know
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  Speaker 2: some said two point six. If it comes in two
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  Speaker 2: point seven, good news or bad.
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  Speaker 3: Yeah, I think it's good news. I mean it doesn't
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  Speaker 3: change what you're paying at the supermarket for your butter
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  Speaker 3: and your minced beef and all the rest of it,
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  Speaker 3: so that pain's still there. But it does provide a
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  Speaker 3: little bit of comfort for the Reserve Bank, which is
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  Speaker 3: you know, trying to get interest rates down so we
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  Speaker 3: can get the economy going again, and is up against
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  Speaker 3: this risk that inflation is getting up towards their three
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  Speaker 3: percent upper target. So it you know, one of the
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  Speaker 3: things is that you know, the annual rate is you know,
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  Speaker 3: looking backwards quite a lot. So some of the food
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  Speaker 3: prices weren't as bad a year ago. The quarterly figure though,
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  Speaker 3: was only zero point five and that that's lower than
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  Speaker 3: the previous quarterly figure, but it was flatted by petrol
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  Speaker 3: prices which were down quite substantially eight percent or something
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  Speaker 3: like that, so fuel costs were down. We might not
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  Speaker 3: get that in the current quarter we're in, but yeah,
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  Speaker 3: the things that annoy people were certainly there, you know,
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  Speaker 3: so rates.
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  Speaker 2: And yeah, of course we're talking about that in just
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  Speaker 2: a second. In the last six months, we've had the
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  Speaker 2: government going well, inflation has been has been beaten, the
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  Speaker 2: beast is beaten, and it's all good. But we've also
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  Speaker 2: heard people warning about a thing called lag. And it's
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  Speaker 2: the same with recessions. That you think you've turned the corner,
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  Speaker 2: that the green shoots are there, you think you've turned
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  Speaker 2: the corner. The inflation is down, but it often takes
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  Speaker 2: a lot longer to actually cement itself down than you
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  Speaker 2: would hope.
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  Speaker 3: Yeah. Yeah, So that the inflation coming out of the economy,
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  Speaker 3: which it still is, is in that core domestic end
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  Speaker 3: of it, what we call non tradables. We all learned
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  Speaker 3: a couple of years ago the difference between non tradables
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  Speaker 3: and tradeables and that sort of stuff. But so that
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  Speaker 3: you know, the cost of getting a plumber in or
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  Speaker 3: something like that, all those services costs are sort of
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  Speaker 3: coming out and that's partly more largely because the economy
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  Speaker 3: is so little demand in the economy. The economy is
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  Speaker 3: so stuffed to use a shorthand that it's disinflationary, and
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  Speaker 3: that's continuing to happen. Meanwhile, in the short term, we've
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  Speaker 3: had a big spike in global commodity prices for basically
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  Speaker 3: for proteins, dairy. Yeah, all the dairy prices and the
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  Speaker 3: meat prices. Now I spend a lot of time trying
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  Speaker 3: to explain to people that this is good for New
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  Speaker 3: Zealand as a net equation, but it isn't good for
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  Speaker 3: you if you're at the supermarket and struggling with your
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  Speaker 3: food price bills. Because we saw last week with the
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  Speaker 3: food price inflation numbers that they've been pretty ugly in
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  Speaker 3: the in the past, were really in the past couple
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  Speaker 3: of quarters, you know, and they're not going to come
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  Speaker 3: down real fast because the dairy prices are staying elevated,
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  Speaker 3: the meat prices are elevated, and we've seen fruit and
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  Speaker 3: vege ten percent in the quarter, some of that seasonal,
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  Speaker 3: but that's not going to be great in the next
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  Speaker 3: few months because of the flooding we've had, you know. Unfortunately,
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  Speaker 3: whenever we have flooding in places where they grow our
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  Speaker 3: potatoes and stuff, it's no good.
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  Speaker 2: You talked about the tradables and the non tradables, and
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  Speaker 2: in the non tradables is things like rates, you know.
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  Speaker 2: In the non tradables is things like electricity powers, yeah,
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  Speaker 2: power prices. In the non tradables is things like insurance,
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  Speaker 2: which is being driven up by fears of change and
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  Speaker 2: as you quite quite rightly say, disasters, whether it's earthquake
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  Speaker 2: or floods, and so the insurance is going up. So
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  Speaker 2: those non tradables cannot really be affected by a reserve bank.
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  Speaker 2: And seeing that the annual inflation rate for local rates
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  Speaker 2: and stuff is twelve point two percent, that shows there
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  Speaker 2: is a level of inflation that is severely baked in.
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  Speaker 3: Yeah, you mentioned the lag effect. I mean the problem is,
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  Speaker 3: you know, those particularly those three areas, the rates, the
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  Speaker 3: power prices, and the insurance we all got hit with
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  Speaker 3: price rises. And add another one which is probably non tradables,
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  Speaker 3: although it sort of is. I'm not quite sure how
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  Speaker 3: they measure it, but it's it's your Netflix subscription, so
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  Speaker 3: it's cultural services. And I was stretching my head on
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  Speaker 3: that category, but then you know, it's streaming. Prices all
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  Speaker 3: went up a lot in the last quarter, and they
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  Speaker 3: were the biggest driver of the increase in the last quarter.
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  Speaker 2: I know. So I wanted to go to the Lenny
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  Speaker 2: Kravitz co concert. I had tickets to the last Letny
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  Speaker 2: Craditz concept canceled by COVID. He finally says he's coming
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  Speaker 2: back after five years of me going, Lenny, where are you?
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  Speaker 2: And when he comes back, you know, four ticket, two
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  Speaker 2: hundred and sixty bucks. So love you, love you, Lenny,
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  Speaker 2: but not that much.
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  Speaker 3: But I don't know, I don't know whether it's or not.
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  Speaker 3: I mean, this is what they bleed into each other
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  Speaker 3: a little bit. In the real world, tradeables and non
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  Speaker 3: tradeables bleed into each other because it's not that simple.
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  Speaker 3: You know, he's we're importing Lenny Craven's I guess. But
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  Speaker 3: then spark Arena is providing a service. I don't know
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  Speaker 3: how that works. H yeah, yeah, but but those things, yeah,
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  Speaker 3: are outside the control of the Reserve Bank to some extent,
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  Speaker 3: include and so are petrol prices and food prices. So
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  Speaker 3: they they are allowed to look through to a certain
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  Speaker 3: extent and look at core inflation, the things that aren't
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  Speaker 3: so volatile, and looking at that, there should be some
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  Speaker 3: comfort for them. You know, I think we could say
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  Speaker 3: this makes it more likely someone some smart economists might
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  Speaker 3: say locked in. But you know, it looks like we'll
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  Speaker 3: get another rate cut in August.
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  Speaker 2: Well, I've got I've got an opinion on that, and
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  Speaker 2: I'm going to mention that, you know, very very shortly.
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  Speaker 2: But the thing being, if the non tradables cannot be fixed,
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  Speaker 2: therefore the inflation is always there, and those non tradables
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  Speaker 2: are often catch up, you know, so rate catch up.
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  Speaker 2: Our rates are up there. It's not going to be solved.
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  Speaker 2: Those non tradables aren't going to be solved, particularly rates
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  Speaker 2: and power until we have proper infrastructure development to fix
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  Speaker 2: those systemic problems there, which means, you know, we've branded
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  Speaker 2: the whole inflation thing is a cost of living crisis.
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  Speaker 2: And while we may be able to cut down your
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  Speaker 2: basic inflation, there's other costs of living things like rates,
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  Speaker 2: insurance and all that that we are unable to touch
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  Speaker 2: until we get this place moving.
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  Speaker 3: Yeah, essentially the bit where we where they do have control,
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  Speaker 3: it's making us poorer so that non tradables so wage
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  Speaker 3: growth will come down. You know, it's not ideal really
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  Speaker 3: when you think about it, but you don't want wage
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  Speaker 3: inflation spiraling. But but but you know, if it's wages
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  Speaker 3: coming down and we're getting poorer, I mean, that is
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  Speaker 3: what inflation is, is people getting poorer and we're sort
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  Speaker 3: of is paying that cost for all the all the
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  Speaker 3: you know, stimulus and all that sort of stuff. But
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  Speaker 3: you know, that's where the disinflationary stuff is. It's it's
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  Speaker 3: it's in the in the services costs we're charging each other.
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  Speaker 3: That these costs that we can't seem to control that
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  Speaker 3: we're hoping the government might do something about, like power,
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  Speaker 3: are a bit of a bug bear in the whole system.
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  Speaker 2: Actually, you know, you're telling me, you are telling me.
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  Speaker 3: And then there's the butter. You know, everyone's really animated
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  Speaker 3: about butter. But but food prices are a big chunk
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  Speaker 3: of inflation for those people who are poorer, because the
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  Speaker 3: food bill is a bigger part of their total, you
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  Speaker 3: know experience.
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  Speaker 2: I don't care about butter because butter is making money
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  Speaker 2: for the farmers, and the farmers are spending with the services,
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  Speaker 2: and that's all good. And if you don't like it,
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  Speaker 2: just go to margarine.
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  Speaker 3: Yeah, well, yeah, country soft these a little bit of Yeah.
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  Speaker 3: I do worry about the beef and things like you
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  Speaker 3: can't feed your fair you know. Mincemeat is really like
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  Speaker 3: a classic working class food and if that's getting out
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  Speaker 3: of a range of people's that's tough.
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  Speaker 2: That's it. I bought two chicken thigh cutlets, bone in
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  Speaker 2: because I was on my own over the course of
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  Speaker 2: the weekend. And you keep the bones in because it
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  Speaker 2: adds the taste.
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  Speaker 3: A dollar thirty chickens remains in dollar thirty sort of
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  Speaker 3: unnervingly cheap.
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  Speaker 2: Really gosh, And so I just lived on chicken all weekend.
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  Speaker 3: And we don't export the stuff, so I guess that
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  Speaker 3: maybe plays a part very good.
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  Speaker 2: So just in conclusion, you think the Reserve Bank will
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  Speaker 2: go yeah, I think actually inflation is still under control
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  Speaker 2: and so in August there may be the possibility of
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  Speaker 2: another rate cut. Yes, I do think that That's a
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  Speaker 2: nice way to finish the interviewing and I thank you Andrew.
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  Speaker 2: That is Liam dan Our, hair old business editor at Larger.
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