Latest / Early Edition with Ryan Bridge / Satish Ranchhod: Westpac Senior Economist on inflation remaining flat

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Satish Ranchhod: Westpac Senior Economist on inflation remaining flat · Early Edition with Ryan Bridge

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  Speaker 1: Right.
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  Speaker 2: Inflation has remained steady, increasing two point two percent in
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  Speaker 2: the year to December, the same increase as the previous
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  Speaker 2: September update. Quarterly inflation increased by point five percent. The
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  Speaker 2: biggest driver was rent, up four point two percent, accounting
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  Speaker 2: for a fifth of the increase, followed by local authority
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  Speaker 2: rates which were up twelve point two percent. Domestic non
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  Speaker 2: tradable inflation increase by four point five percent annually, also
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  Speaker 2: driven by rent. So a lot of numbers. What does
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  Speaker 2: it all mean? Westpac Senior economist Satish Renhood is with
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  Speaker 2: me now, thank you for your time this morning.
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  Speaker 1: Good morning, Francesca.
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  Speaker 2: Can you tell me what does the rise and non
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  Speaker 2: tradable inflation mean.
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  Speaker 1: What we've been seeing are some strong pressures the domestic economy.
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  Speaker 1: A lot of households have been feeling that. The good
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  Speaker 1: news though, is that those pressures are coming off, especially
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  Speaker 1: in areas like hospitality, and that meant healthhold should like
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  Speaker 1: to see a little less pressure on their finances this year.
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  Speaker 2: Okay, so rent was a big driver of this increase, Well,
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  Speaker 2: we see that can continue into the year.
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  Speaker 1: I think we're likely to see a bit less push
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  Speaker 1: on rents this year. We've seen population growth slow down
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  Speaker 1: and big increase in the housing's plat over the past year,
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  Speaker 1: and we're already hearing about reduced pressure on rents in
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  Speaker 1: areas like Larrington, which often think big increases.
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  Speaker 2: Okay, so we shouldn't be too concerned about rents rising
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  Speaker 2: throughout twenty twenty five.
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  Speaker 1: I think it's still a pretty important concern for a
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  Speaker 1: lot of households. It's a big share of this spending,
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  Speaker 1: but hopefully those increases that we see will be more
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  Speaker 1: moderate over the coming year.
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  Speaker 2: What else would household be thinking about heading into twenty
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  Speaker 2: twenty five and what these numbers can tell us.
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  Speaker 1: We've had a lot of pressure on households finances over
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  Speaker 1: the last couple of years. That's been a big squeeze
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  Speaker 1: on this spending. But what we're seeing now is a
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  Speaker 1: much bitter contained inflation environment. It means that their paychecks
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  Speaker 1: aren't going to be eroded at the same pace. This
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  Speaker 1: will also be very important for the Reserve Bank.
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  Speaker 2: Yeah, so how does this impact a February o c
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  Speaker 2: R cut.
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  Speaker 1: We now that inflation that's very close to the rbn
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  Speaker 1: to target, we're still looking a bit soft. I think
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  Speaker 1: put that together and it's a green light for another
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  Speaker 1: big fifty basis point cut in February, and politely more
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  Speaker 1: seed further rate cuts beyond that.
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  Speaker 2: Ye, if we're looking further beyond that, what are you anticipating.
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  Speaker 1: I think beyond February, we're likely to see probably a
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  Speaker 1: twenty five basis point cut at each of the two
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  Speaker 1: following meetings. They'll take cash right down to three twenty
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  Speaker 1: five the lost it's been in a long time.
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  Speaker 2: So I suppose if you're if you're you've got a
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  Speaker 2: mortgage out there, and maybe this year you've got a
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  Speaker 2: chance to sort of refix that. Where would you seduce
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  Speaker 2: that you kind of start thinking about that if you
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  Speaker 2: wouldn't mind just you know, looking into your crystal ball
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  Speaker 2: there situation.
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  Speaker 1: I think it's a great time to relook at where
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  Speaker 1: you're mortgage at that. I can't say exactly what a
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  Speaker 1: household could do, but think the big drops over the
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  Speaker 1: past year. So if you had fixed us a one
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  Speaker 1: or two years a couple of years back, you could
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  Speaker 1: see a mortgage rate that's now about one hundred basis
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  Speaker 1: points world when you look last fixed. So that could
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  Speaker 1: be a big saving for your finances.
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  Speaker 2: So when you look at all those inflation figures that
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  Speaker 2: were released yesterday. How how are you feeling? How positive
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  Speaker 2: are you feeling about twenty twenty five.
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  Speaker 1: I think this is a really important it's a really
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  Speaker 1: positive development to the economic inflation that's contains me. We'll
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  Speaker 1: see a less pressure on household's finances have really been
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  Speaker 1: pressured over the last couple of years. But importantly the
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  Speaker 1: related reduction and interest rate to put a lot of
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  Speaker 1: money back in the house of back pockets, and that
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  Speaker 1: will also be positive for economic growth and employment more
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  Speaker 1: broadly as we go through twenty twenty five, we.
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  Speaker 2: Shall take that positivity. Satish, thank you very much for
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  Speaker 2: your time this morning. That was respect seeing the economist
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  Speaker 2: Satish Rancherd. For more from Early edition with Ryan Bridge,
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  Speaker 2: listen live to News Talks it be from five am weekdays,
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  Speaker 2: or follow the podcast on iHeartRadio.