If there's one thing I can say with any degree of confidence regarding the economy, it is that the pick of 3.07% inflation for New Zealand in two years' time in the latest quarterly Reserve Bank Survey of Expectations will be 'wrong'.
These surveys of a small group (normally 30ish) professional forecasters and business leaders have a track record that includes a forecast made two years ago that the inflation rate as of right now would be 1.43%.
It is 7.3%.
Well, that's quite a miss, isn't it.
Fire the lot of them and never bother looking at this survey again.
Yeah, but hold on...
What is the point of this survey, really?
I can assure you that it is not to glean predictions of figures that will prove to be 'correct' within one decimal point.
The Reserve Bank (RBNZ) does not take this stuff as gospel. It will not be looking at the results of the latest survey and pencilling in 3.07% inflation as the figure we will be seeing in 2024.
No.
What the RBNZ will be doing is breathing a huge sigh of relief that the two-years-out forecast for inflation has dropped significantly from the previous survey's 3.29% forecast. In terms of the types of movement in predictions normally seen in this survey series, that's a big one to occur just in the space of one survey.
What the RBNZ can take from the latest survey is that its vigorous jawboning, anti-inflation talk, coupled with super-aggressive Official Cash Rate hikes is starting to change views out there about what will happen to inflation.
And that's the point. The survey takes the pulse and finds out how people are feeling. The predictions as such are merely a way of expressing the feeling.
I'm not sure the central bank would necessarily agree with this assessment, but these surveys can actually be seen as kind of evaluation of the bank and the job its doing with monetary policy, and specifically with how it is going in regard to keeping inflation within its targeted range of 1% to 3%. It's actually about credibility and whether the wider populace thinks the RBNZ is doing its monetary policy job. It's about whether people believe the RBNZ when it says it will get inflation down.
That 3.29% inflation 'forecast' in the previous quarter was the survey respondents in effect saying to the RBNZ: "Hey, guys, we don't think you've got this."
The very sharp reduction to 3.07% this time could be seen as something like: "That's much better. You're not there yet, but you are on the right track now."
The RBNZ itself, as per its May forecasts, has an inflation rate of 2.2% in two years' time. So, the punters aren't entirely believing the central bank yet, but they are getting closer to the page the RBNZ is on.
The thing to remember about predictions of future inflation is that the predictions themselves can help to influence the outcome.
If you are running a business and you expect that your costs will be 20% higher in a years' time (heaven forbid!) then it is only sensible to start front-loading the prices you charge. And guess what? Your actions then fuel inflation.
If, however, you think Mr Reserve Bank's got it all sorted and a life of carefree 2% inflation is ahead, then your future pricing will reflect that.
And so far as the RBNZ is concerned, remember it looks very closely at these survey results and will be influenced with its interest rate movements by them.
If the latest survey had shown those inflation expectations rising again - despite the interest rate hikes and the RBNZ jawboning that's occurred in the last quarter - then we can be very confident that a 75-point OCR hike would have come into the picture at next week's (August 17) OCR review.
One of the most watched things at next week's review (and I would say, actually the MOST watched) will be what the RBNZ comes up with in terms of forward forecasts (over the next three years) of the OCR.
Now, again, this is not actually the RBNZ predicting what the OCR will be. This is the RBNZ's best guess, all things equal, of the kind of level the OCR might need to be at in order to meet the central bank's inflation target.
If inflation suddenly disappears off a cliff, the RBNZ ain't still going to be doggedly sticking to a 4% OCR in three year's time (well, I hope not!) just because it forecast such a level. No. It will drop the OCR. The RBNZ will be happy to be 'wrong' or 'inaccurate' with its OCR forecasts. Very happy!
The fact is though, that by hiking those forecast levels when it last issued an OCR forecast 'track' (in May) the RBNZ did a lot to hammer home the message that it really was serious about knocking inflation. And that in turn has knocked those pesky inflation expectations.
In turn, it means the RBNZ might not need to raise the OCR as high as it forecast back in May - although that's by no means clear as yet (and I'm not forecasting that!)
The inflation shocks of the 1970s and 1980s left a lot of ingrained inflation expectations among the public. People just expected prices to rise and so based wage rise expectations etc on those inflationary expectations. It was one of the great triumphs of the modern inflation-targetting era that these expectations were - over time - snuffed out.
Inflation has been back with us in a serious way for only about a year, but already it is showing signs of getting its feet under the table and making itself comfortable. The latest labour market figures for the June quarter showed that wage increases are taking off - not surprising in the face of 7.3% inflation.
But how do employers react to these wage increases? Particularly if they don't believe inflation will come down? Well, put prices up of course, which makes goods more expensive for their employees, who then come looking for higher wages, etc, etc.
The upshot is the RBNZ has not got very long to 'kill' inflation expectations before we face a likely scenario of ongoing elevated inflation.
Economists think 7.3% will prove to be the peak of our inflation - but that doesn't mean that the inflation monster will now run back into the hole and leave us with a nice benign 2% again. No. Imagine if inflation were to be still 6% in five years time? Whole new generations of people will find out how unpleasant and pervasive such enduring inflation is.
So, to go back to the very beginning. Hey, I admit I might have fibbed a bit. For all I know the inflation rate might be 3.07% in two years' time. I don't know. Nobody does.
What I do know is that the real story is that people are starting to believe inflation will come down. And that's what matters.
The RBNZ will not be relaxing though. Nor should it.
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61 Comments
When we say "inflation", we usually mean consumer price rises. However, inflation really means debasing the currency, i.e. creating more currency units (for example, via quantitative easing or ultra-low interest rates). This creation of new currency units out of thin air (fiat money) is, of course, going to lead to price rises later.
The NZD has been massively debased in the past years, via quantitative easing and ultra-low official cash rates (when people borrow, the money they borrow from banks is created out of thin air - it is not backed by other people's deposits). As a result of the massive debasing of our currency and also because of supply shortages, we now see consumer prices rising. This is no surprise.
A better measure of "inflation" (as in price rises) would be a combination of consumer prices and house prices. A consumer price index on such a basis would have signaled high inflation many years before, and thus via official cash rate increases, the house price bubble and now the resulting consumer price inflation could have been prevented.
Currently, we are facing a deflationary storm regarding house prices, combined with rising consumer prices - the worst of both worlds. Mortgagee sales are already beginning, we are at the start of a massive financial crisis in New Zealand.
In addressing this dilemma, the Reserve Bank must keep an eye on house prices, business lending, insolvencies, mortgagee sales - not on consumer prices only. Any further increases of the official cash rate, at this point, may trigger economic disaster in New Zealand.
So far, the actions of our government and our Reserve Bank have mainly been reactive. They "print" all this money, then they wonder where consumer price inflation comes from. Now they are hiking the official cash rate when the property market is already falling sharply and many are overindebted, soon they will wonder where all the insolvencies and financial crises come from. Will they then start printing again?
How about looking ahead a little, and taking a broader view? By broader view, I mean include house prices in the picture.
Apparently price rises in property makes us richer though so nobody wants to admit that their tokens are actually buying less. Bigger mortgages and debt creation hides the problem, feeds the FIRE economy and creates the need to artificially inflate asset prices. This is wealth creation. It's what we all want and demand isn't it?
Broader view: house prices need to be significantly lower to be better aligned with incomes. The Reserve Bank can't address the issues well simply by trying to protect house prices by perpetuating the ongoing wealth transfers from wages and savings to property values.
Yes, housing should be part of the CPI picture. But the baseline cannot be a stratospheric one, that would be nonsensical and unsustainable.
Yes, I agree, RBNZ has blown its credibility. Unfortunately, they steer the wellbeing of our country much more than politicians do, via their 'official cash rate' (OCR). The OCR does not have much effect on consumer prices, but it drives lending and thus economic activity.
With the currently stubborn attempts of the RBNZ to fight inflation via OCR hikes, lending has dried up, the property market is falling, mortgagee sales are beginning and mass insolvencies seem to be just around the corner. We may have stopped listening to the RBNZ, but they do control our economy, and what we are facing is outright frightening.
By the way, by fighting inflation, the RBNZ are fighting the very problem that they helped create - via an ultra-low OCR of 0.25%, whilst encouraging borrowing by removing loan-to-value restrictions! So how can people who borrowed at an OCR of 0.25% afford the current tenfold OCR of 2.5%? They can't, so we are beginning to see mortgagee sales. An economic roller coaster ride and now outright destruction, partially caused by the RBNZ.
God defend New Zealand!
Long term interest rate rises will have the desired effect.
More people are less affected by the OCR than the vested interest brigade report. 51% of the population live in the 35% of the houses which are rentals (I'm trying to find the source of this, if it's incorrect, feel free to call out with the actual stats!). And 2/3 of mortgages are half the average rent, according to ANZ.
If the OCR helps keep the dollar higher, then nominally imported inflation is reduced for all (but only in that the overall price is reduced, it's still increased compared to what it would've otherwise been).
If the OCR causes lots of over-leveraged to either sell houses at lower prices, or rent -> both cause an increase in supply, putting downwards pressure on most people's largest expense -> mortgages or rent. Which increases their discretionary income available, particularly if they are paying more than 50% of their take-home pay for accommodation.
But it's not a quick process. However, I'm already seeing significant increases in both supply of, and significant decreases in price of, rentals in my 5-suburb block of Auckland. If further OCR increases accelerate that, this can only be a good thing - because even now the average rental price takes most of a minimum wage earners income.
It's just a shame the law doesn't allow tenants to call landlords out on dropping rents at their yearly review - the only way to get rents to drop currently is to move house (or maybe threatening to move works for some now?), with all the expenses that entails. But landlords have long been able to raise rents at no additional cost to themselves.
When interest rates were near zero, the RBNZ themselves indicated that they would stay low. They even talked of negative interest rates and encouraged high debt borrowing by removing the loan to value restrictions. First home buyers who did borrow at that time (just about two years ago) are now trapped, they are bankrupt through negative equity.
Brock Lenders, please do not worry about my finances. Worry about growing up, mentally, yourself.
I am not a first home buyer, and my debt level has never exceeded 40% at any point in time (always a minimum of 60% equity). I bought my first home in New Zealand in 2011, having come from overseas at middle age. I am only saying this to address your snarky comments, I am not normally inclined to discuss my personal finances.
Brock, from all your mostly cynical and unconstructive comments on this forum I have the impression you are in more need than I am to take responsibility and to grow up. You have been mentioning, for a long time, you are looking to move to Australia. If you take action (rather than talking), this may be a good idea for you and for us here on this forum, something that has been pointed out to you before by someone else.
My concern is mainly about the wider economy of New Zealand. I feel we are at the brink of a financial crisis worse than 2008 and I consider the steep interest rate raises by the RBNZ to be possibly destructive.
Sorry Markus, you have zero credibility. Every one of your posts focuses on the need to protect property prices. We haven't even seen prices revert to pre-covid levels, let alone get anywhere near "crash" level. We still have record low unemployment, sky high inflation, and property prices still above a sustainable level. Yet somehow if property prices fall any further its a disaster and urgent cuts to the OCR are needed?
We get it, you are exposed to the property sector, so your preference is that pain should be spread across the wider population (via inflation), rather than on property owners.
My posts have zero credibility? Are you saying that I am lying?? An outrage. Start with yourself!! All of my factual statements here on this forum are true to the best of my knowledge, I do not lie. And I know my personal finance situation very well. Some of my thoughts are merely opinions, as I am very worried about what might be coming in New Zealand.
This forum is supposed to help making financial decisions. I have always held the anglosphere in high respect in terms of financial knowledge. However, what has been posted here on this forum is a mixture of deep financial insights (by some) and outright spiteful glee and leftist idiocy (by others). I cannot understand how posters like Brock Lenders get so many likes, when there is next to nothing constructive in them. I guess people are prone to fall for socialist ideas and envy and mockery, even though socialism does not work (I know this from experience).
Now, addressing the content of your post: Yes, it is true, the property market has, so far, only corrected about 20%. However, the speed of the fall alongside the speed and extent of the OCR hikes are frightening. Remember that New Zealanders are highly indebted, remember that we had a massive property bubble like nowhere else in the world, and it is crucial that some sort of soft landing is engineered. For example, stagnant or mildly falling house prices would make houses more affordable over the years via inflation, whilst preventing an economic crash.
Remember also that a property price correction of some 30% in the US (if memory serves) in 2007 triggered a global financial crisis. If unchecked, this would have led to a collapse of the entire financial sector in 2008 (globally) and consequently a breakdown of supply chains (supermarkets closed) and civil unrest. It took a massive effort of global leaders to stop the 2008 financial crisis in its tracks. Politicians had to step up in front of TV cameras to try to calm people down, in an effort to prevent bank runs.
However, what we are seeing today in New Zealand, appears to be worse than 2007/08 - higher overall indebtedness here compared even to notorious spenders like the Greek etc. in 2007/08, the speed of the house price crash exceeding that of the US and Ireland, Spain, Greece, etc. in 2007 and 2008. Remember all these European countries had to be bailed out by the European Union.
Who is going to bail out our banks? The European Union?
Can't you see that this is not just about whether you want to buy a house at a lower price? This is about our entire economy, which appears to be at a cliff. And why people can't see this is beyond me. Are you prepared to lose your savings in a banking crash? Do you really think you can buy a house, if the market crashes 50%? If the market crashes in that fashion, you may not even have a job.
I can't understand why so few people seem to see the danger. Sometimes I wonder if this all engineered, to bring in a huge crisis so the system can take even more control.
God defend New Zealand!
Serious envy problems on this forum because there is now a massive social divide. Those that cannot made it can only vent on here and are looking for anyone to vent their anger and frustration at. New Zealand's trajectory is not to a happy place for an ever increasing number of people.
Yes, Carlos, I understand that, I understand anger and frustration, the housing bubble we have seen was not funny for those who do not own a house. But I am personally not a target for venting of anger and frustration.
I also agree with you that our country's trajectory is not a happy place for an ever increasing number of people. However, many, perhaps young and naiive, seem to think that more state control and some form of socialism will help. It would only make things worse.
What we need is a less interventionist Central Bank (less oversteering in both directions). The house price index should form part of the consumer price index. This would better control true inflation whilst also keeping house prices in check.
Less government would mean more sustainable house prices, that's usually the case. Liberalised zoning to let people build on their own land, no welfare subsidies for yields and prices, no raiding of superannuation funds, no stimulatory monetary policy to keep prices going up or staying up, and perhaps evenhanded taxation of earned and unearned income.
House prices only make sense as part of the CPI if we're starting from an economically reasonable baseline. Which is not 10-12 times income.
Less socialism might also mean not taking the young working folks' wages to pay a universal pension to the elderly too, our only universal welfare benefit. Which would leave the young'uns more income to use on life.
What is happening right now is actually pretty fun for people that is not leveraged in housing.
I find it immensely entertaining.
You Carlos and TTP can agree with each other as much as you guys want, anyways.
Please, just stop mentioning "God" in your comments. It's really bad.
No Carlos it’s that people have the ability to see how unsustainable it is to build an economy that relies on house prices growing faster than incomes. I’m well aware you only advocate for things that are in your own self interest, but not everyone is wired that way. The fact you believe the only reason people could object to our housing ponzi is because “they cannot make it” says more about you, than anything else. You can’t even conceive that someone would advocate for something that is not in their narrow self interest
Remember also that a property price correction of some 30% in the US (if memory serves) in 2007 triggered a global financial crisis.
No it didn't. GFC was caused by CDO’s and the resulting contagion - not falling house prices. And the problem was not house prices falling back to their long term valuations, it was the fact they allowed to rises excessively due to using increasing private debt in housing speculation to "juice" the economy. The same problem we have in NZ now.
If you had been posting here regularly, for a long time, pointing out that running our economy purely on housing debt you'd have a more credibility. If you had been arguing to include house prices in the CPI 10 years ago, so we didn't create the problems we have now, you'd have more credibility. If you had been warning that the RBNZ's behavior during covid was irresponsible, you'd have more credibility.
But your only goal doesn't seem to be the wellbeing of the system, you only seem concerned with ensuring property prices don't fall. You come up with alarmist statements that are so far from reality its laughable.
Again ill reiterate, the problems have already been caused. We have allocated massive amounts of capital away from productive enterprises and instead plowed it all into a housing ponzi scheme. We will pay the price for this one way or another, the only question is who will pay?
Should it be future generations who get saddled with massive debts to justify overinflated house prices? Only to pay high prices and likely see little increase in value as prices return to normal levels? No, I don't think so
Should it be all New Zealanders (renters, retirees, homeowners, business owners) who pay the price through massive inflation, erosion of their savings, retirement funds etc, just so we can keep house prices high? No, I don't think so
Or should the people who benefitted from rising house prices take the hit? Sounds far more fair
Should FHB be given some assistance? Sure. They are victims of all this. But the deflation of the bubble needs to hit those who benefitted from it first and foremost.
The GFC was triggered by falling house prices, in particular in relation to non-performing loans that had been handed out as 'subprime lending'. Subprime lending was mainly defined as interest-only lending (no principal repayments), with very low equity (low deposits on purchase). This is very similar to the lending pattern that we have seen in New Zealand in the last few years.
I admit that I have not been posting here when the OCR was being lowered, although I had been speaking to my wife regularly about how a housing crash would collapse our entire economy and how worried I am about this, since 2016. I remember that, because we made a big financial decision then. I did say to my wife that the house price index should be included in the CPI, even in 2016. Even back then I thought New Zealand is way overleveraged and housing market-dependent. Little to no industry here (just a statement of fact, no criticism, it is a lovely country) - we both come from industrial countries.
What triggered me to open an account here (something I tend to avoid because I am an IT noob)? It was when the Central Bank started to hike the OCR aggressively when the housing market was already falling. This reminds me of 1929 - central banks' interest rate hikes when the stock market was already falling. What followed become known as the Great Depression 1929-1932. Massive hardship all around, followed by world war.
I am very worried these days about New Zealand. No, it should not be future generations who get saddled with debt.
You have to understand that the inflationary act is the money printing (via lending at ultra-low rates, bank lending is not backed by other peoples' bank deposits unlike many people believe), bank lending means creating fiat money out of thin air (by the commercial bank who borrows from the Central Bank who 'prints' the money on a computer). Yes, I agree, the problems have already been caused.
Now there are two ways forward: A deflationary collapse (think 1929, or 2008 if unchecked by governments) - bankrupt banks, mass poverty. Or allowing the debt mountain to be devalued over time via (hopefully controlled) inflation. The latter is the path of least regret! The first means massive hurt. Of course, I realise that rising prices also hurt (wage earners and savers). However, over time property becomes more affordable and a new balance is achieved. This was the path of the 70ies, much preferred to 1929 followed by world war.
Your diagnosis of 1929 and 2008 are wildly off base. You need to separate the housing downturn from the financial contagion.
In 2008 the contagion of residential mortgages being packaged into CDO caused the wider issues. There was also the lower capital ratios and higher leverage, more reliance on short term funding models
In 1929 it was banks exposure to leveraged stock market bets and failure to separate retail banks from investment firms
When the housing market in NZ corrects it will likely create a recession, but it will not create the sorts of situations you envisage. You are scaremonger about something you do not fully understand
And again you think everyone should pay for the excesses of the housing market. The old privatise the gains, socialise the losses. Pathetic
"This forum is supposed to help making financial decisions". I wish it was!
"however, what has been posted here on this forum is a mixture of deep financial insights (by some) and outright spiteful glee and leftist idiocy (by others)." Indeed, and there is vastly more of the latter, just look at the "likes",
I cannot understand how posters like Brock Lenders get so many likes, when there is next to nothing constructive in them. I guess people are prone to fall for socialist ideas and envy and mockery, even though socialism does not work
Jesus H Christ. I'm a socialist for advocating personal responsibility now?
I've spent the last few years warning the stupidity of borrowing to the eyeballs for the worlds biggest housing bubble. Got called plenty of names for it too. Some people just hate the truth.
By the way its Brock LANDERS.
I love how you claim socialism doesn’t work (trust me know from experience!) and then you proceed to describe the financial collapse under capitalism that was prevented by what …. by government intervention where risk was in effect socialised. Then to add to the absurdity you call for even less government regulation when that is the cause of the near collapse of the global financial system!
It is but there are people that through no fault of their own will be screwed over. Put off buying a house and risk that prices continue to rise and it makes it less affordable and results in a bigger mortgage later. Buy now at high prices and you risk prices fall and interest rates rise. Just because you make the wrong decision doesn’t mean you were irresponsible.
There are numerous empirical studies that conclude that 'an important feature of inflation dynamics after the mid-1990s appears to be the lack of a strong wage–price spiral (or of any significant year-to-year feedback between wage growth and inflation) [link].'
What is clear is that when prices go up, people need more money to live, and this puts pressure on wages. However, there is little evidence that increased wages then drive further increases in the general price level. Whilst it sounds like an intuitively attractive theory, prices do not work like that. As is so often the case in reckonomics, the theory sounds good, but the real world simply refuses to fit it.
I'm trying to wrap my head around this. I get that we've moved from high double digit inflation to low single digits. How does low inflation equal deflation?
Nevermind that our wealth creation model needs larger amounts of debt creation to sustain it. And everything gets siphoned into the FIRE economy, which then governs everything else.
The situation that New Zealand is in has me very worried. I keep having the feeling that we are facing a worse economic crisis than Ireland, Greece, Italy, etc. faced in 2008. Already, we are seeing mortgagee sales. An accountant told me yesterday that business lending has also become much more difficult.
My hope is that the RBNZ will not only focus on consumer price inflation, which they themselves helped create via 'money printing'. Instead, they need to focus on the wider wellbeing of the economy and the people here - they need to prevent economic collapse by easing the official cash rate.
I think if RBNZ needs to focus on the wider wellbeing of the economy and the people here. They should focus on bringing down the housing price. There have been so many issues involved around unaffordable housing for the last 7 years, now they are spread almost everywhere in our economy. Now hiking OCR is just their job, not only bringing down inflation but also bringing down housing price. Two birds one stone.
Can they? substantial costs are incurred, directly and indirectly, to prepare a piece of land for construction. These costs (e.g. services and utilities. roads and transport, schools and police, healthy etc) keep going up at a fast pace.
In reality, it is absolutely possible for prices to go below the replacement cost of something. But for such a situation to sustain, there must be clear indications that the asset future value is diminishing significantly. For example, if you expect population of a territory to half within the next 20 years (e.g. by emigration, reduced birth rates, high death rates etc), it will be totally logical to see today prices to be less than the actual cost to build a new house. But if you expect more people, the costs will continue to be relevant
Professional forecasters are in general a disgraceful bunch who make living by confirming exactly what their clients want to hear. They have no skin in the game other than retaining their recurring business which they ensure by sounding plausible and by staying close to consensus. It is a field that requires intellectual dishonesty. A disgrace – even worse than those greedy bankers.
Those who do have skin in the game and are capable and intellectually honest will not tell you a thing, because their predictions will be highly conditional. If their predictions have validity and the prediction is bad, they should keep mum otherwise they will only increase the odds of the bad outcome they are predicting.
That is always the case, no one knows what will happen in the future. The job of an economist is to be more likely to be right than an average person. While I have read many comments here claiming they could do better, I have also read many terrible predictions here.
I agree somewhat with the NZD comment ...so many feel that if we predict low inflation it will appear like the sun shining through after a gloomy day...lol What many here ignore is the obvious and that is the NZD . Now local inflation is touted as around 7% but if we consider the currency picture, its shifted around +9% and I am being kind in pegging 9% (a year ago 70-72 cents today 62 cents) in the past 12 months... If we get the imaginary 'utopian' inflation figure (7%) to disappear by prediction we will still be left with a dollar that is not worth a dollar....lol
The delusion is that we will have defeated inflation when in fact inflation is kicking our butts . What we need are real number crunchers not utopians at the helm.... If our dollar cant foot it with the main player(s) we are treading water and such has been the situation for a very long time historically. Time everyone stopped ignoring the obvious , I suspect theres too much FIRE influencing the big picture.
Inflation goals are the key target for the RBNZ.
Whilst its interesting to discuss the ins and outs and complexities of how they achieve their target, and how external factors affect it - it doesnt change the fact that they are way off their target. And are failing to achieve their target.
CEOs of companies and sales leaders dont get to whinge and moan for long about all the external factors that would have led to missing profit and revenue targets by 250%, their shareholders would demand their sacking way sooner.
Ditto the All Blacks at the moment.
And surely that is where RBNZ is now - we running inflation at 7% vs a target of 3%.
We and our government should stop protecting the RBNZ and listening to all the excuses. Our government needs to demand to know when inflation will be back within target bands and some kpis on the way - and if it's not on track shortly - then the RBNZ leadership team probably need replacing asap by people who will get it done.
I have no issue for big salaries and bonuses if senior people achieve their goals, but there must also be consequences for failure. And at the moment they are failing.
RBNZ are being asked to achieve something that they are not equipped or able to do. They should just admit it. My guess is that they are waiting for oil prices to bring down CPI - at which point they will take the credit of course!
It is far, far better and much safer to have a firm anchor in nonsense than to put out on the troubled seas of thought. John Kenneth Galbraith (1958)
This survey is not surveying the people that actually set prices, it is surveying the people who know how monetary policy works. So if the RBNZ is raising rates, of course their opinion is that inflation will go down.
Its like surveying a group of pool cleaners and asking them if the pool will be cleaner after adding Chlorine, but not telling them how many people are pissing in the pool.
But can we go on for another year raising rates, killing the economy, and creating unemployment?
I personally think that is where we are now: either the RBNZ can stop increasing the OCR and inflation will gradually go back down to 3%, or continue increasing the OCR and kill the economy and get inflation under control much quicker. But of course I could be wrong, maybe they do need to keep going to prevent inflation getting out of control.
Out of interest, when you say "watching inflation run away from consumers", are you really worried about consumers or are you worried about your savings? Surely unemployment is worse for consumers than inflation, especially as wages are keeping up with inflation at present.
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