New Zealand’s headline inflation rate fell to 2.2% in the September quarter, landing comfortably within the Reserve Bank's target range for the first time since March 2021.
Statistics NZ said the consumer price index rose 0.6% during the quarter, bringing annual inflation from 3.3% to 2.2% after more than a dozen quarters above the Reserve Bank's 1%-to-3% target range.
“Prices are still rising, but not as much as previously recorded,” Stats NZ consumer prices manager Nicola Growden said.
Weaker headline inflation has been driven largely by declining prices among imported products. These ‘tradable’ prices dropped 1.6% in the past year, and 0.2% in September.
Prices for goods and services that do not face international competition continued to climb at a relatively fast pace. These ‘non-tradable’ prices were up 4.9% annually, and 1.3% during the past three months.
More than half of the quarterly inflation number was made up of an increase in local authority rates, which rose more than 12% — the largest increase since 1990.
Rate hikes are captured once a year in the consumer price index, when ratepayers see the increase, and results in an elevated data print in the September quarter.
Other large contributors to the quarterly result were food prices which rose 1.3%, tobacco and alcohol up 0.6% due to tax indexation, and actual rents which rose 0.9%.
Meanwhile, petrol prices almost offset the increase in rates with a 6.5% drop—helped by the Auckland fuel tax being scrapped—and early childhood education costs falling 22.8%.
Stats NZ has measured the price of early childhood assuming parents received the full tax rebate offered by the Coalition Government in Budget 2024. However, not all families have actually applied for the rebate.
If the FamilyBoost scheme was not included in the data, the quarterly price of early childhood education would have increased 6.9% and non-tradable inflation would have been up 1.5%.
Another policy change impacting the quarterly data was the re-introduction of a $5 charge for prescription medicines, which pushed pharmaceutical prices up 17% and added to inflation.
From last year
Annual inflation had a slightly different mix of key drivers. Almost 60% of the increase was due to housing costs, with rents up 4.5%, energy costs up 6%, and property rates 12% higher.
Alcohol and tobacco prices were up 6.3%, making up almost 20% of all headline inflation, due to indexed tax increases. Health costs were up 8.7% but not just due to the co-payment.
Insurance was the other large driver of annual inflation. Premiums rose 12.9% and contributed 17% of the overall inflation number.
In a note written prior to the data release, ASB economist Mark Smith said many of these price increases were “cost shocks in specific sectors” and underlying inflation was likely already running below 2%.
This should support the case for the central bank continuing rate cuts, although it would not provide any obvious reason to pick up the pace.
ANZ economists said getting inflation into the target band was good news for monetary policymakers, but warned it would still be too early to crack open the champagne.
“We hate to be party-poopers, but non-tradables inflation is still way too high, meaning if the sound of corks popping does resonate through the RBNZ building next week, they’ll be celebrating global disinflation progress just as much as their own,” they said.
117 Comments
Yeap that at times quite murky with one off costs and exceptions.
But I read that summary as 'core' inflation is already well under two. You only have to strip out that inflated rates hit and it is, let alone others.
I think we could really be looking at minimum 150 bps cut across next two OCR announcements.
These are tiny sums compared to what even fixing the water pipes is. To say nothing of all the other infrastructure that Wellingtonian's have swept under the carpet for many years to keep their rates low.
A Rookie distraction. And a silly one.
Question for you all: Does government pay rates in Wellington?
Good question. I looked into this a while ago and found that the Crown is exempt under the Local Government (Rating) Act 2002.
Most of the office spaces occupied by public sector agencies/ministries are privately owned and leased to those occupants, so I suppose rates will apply. Buildings on Parliament ground, MBIE office, courts, etc. are exempt from paying council rates. These are prime properties occupying several hundred hectares of land.
I would think that provision alone puts WCC and GWRC out of pocket by millions of dollars each year.
Yup. It's millions and millions each year.
And it's been going on at least 2002 (and before if memory serves).
If our government thinks this is a good thing, Wellingtonians (and everyone else!) should be asking why this government was handing out tax cuts to private landlords ... Just saying.
@ Chrisofnofame - Well you certainly don't get cheaper rents by continuing to add constant costs to a landlords pockets that's for sure. That's how a charity works. Rents increased over 60% under the last government, at a rate of 2.5x faster than the government prior to them....Just saying.
Hmmm ... If central government had to pay rates (and I think they should as they consume the services provided by Wellington Council, which are in turn paid for by Wellingtonian rate payers) then the cost - to say nothing of the massive continuity risks - of having central government in Wellington would need to be re-examined. They could, as most other countries have done, move central government to a lower cost city or province.
Chances of that happening under this government? Zero!
Or maybe not - let's not forget Luxon sold his Wellington digs. Maybe he knows something we don't?
"some valuations don't seem to reflect market value" - this deserves an award for how much of an understatement it is, in 2021 when they did the revaluations it appeared/appears that they forecast property value growth at the rate at the time and plucked a figure based on that projection, the resulting GVs are massively over where the market peaked. The new valuations have been done but looks like they've delayed release of those GVs going to be down 15-25%. (I think there's another thread on that topic)
Not much, certainly not 'hundreds of hectares'. The three biggest properties (in area) that might be non rateable would be Parliament, Government House and Premier House. I'd venture to go so far as to question whether religious institutions and marae occupy more non rateable land than the Crown. As another contributor said, most Government offices lease space in privately owned properties, so are rateable. For a long time Parliamentary agencies and Ministerial Services leased Bowen House, which has been privately owned since they moved in when Parliament House was being renovated and while it's been closed they've leased commercial premises further up the road.
I can't answer your second Q, but it fails the logic test. Rates are paid by the owner, not the tenant and the Council doesn't make adjustments to valuations in the way you suggest. Valuations are done every three years by Valuation NZ and a property owner can challenge them. Wellington CC used to do valuations every year until they woke up to the fact that they pay a very real cost for the service so reverted to the triennial valuation, which is the cycle followed by every other territorial local authority. The next WCC valuations are due out next month. FWIW every property in the CBD will be paying high rates because WCC has structured its rating policy that way.
@GV - I don't know the answer here and I don't really like to wish ill on anyone especially not anyone in Wellington - part of me think intervention.... part of me think make your bed and lie in it after all it was democratically voted for - this might be example of ideology that has gone wrong and a case study of how we can improve the capital and NZ.
Someone posted on here a week or so back that any central government intervention is motivated by being anti a “Green Council”being put in power in Wellington. Does that mean in turn that it is acceptable for any council or similar body, to be inept, spendthrift and incompetent so long as it is “Green?”
On NewStalk ZB this morning Chris Hipkins bet Nick Mills $ 1000 that he'd still be Labour leader in 2026 when he wins the General Election ...
... I nearly spat my weetbix all over the radio ... before I fell on the floor and rolled around larfing my Gummy butt off ...
Hey Foxy : A glorious day here in the Waimak ... the finest remedy for an incompetent mayor is to do absolutely nothing ... let the people who voted them in / or the ratepayers who couldn't be bothered to vote ... let them suffer the consequences of their actions ... it's called " tough love " , but its 100 % necessary to kick ratepayers up the butt to make smarter choices next time ...
@ Gummy Bear Hero - "Tory Whanau is all over it , Gareth ... sitting at home , clacking away on her PC ... possibly battling her 6'th reported Covid19 infection ..."
Impossible. The experts all told us if we got our two shots for summer that you couldn't get Covid19. The CEO of Pfizer Anthony Fauci & our very own government at the time all told us so. We've not heard anything different since? No public apology saying they got it all wrong? So it can't be Covid that she's got, especially not 6 times. Statistically impossible the experts say lol.
Ah, two shots for summer. The good old days when thats all it was going to take to make all our problems go away ...
Yes the experts were spouting baseless dictates based on nothing.... Quelle surprise
Anway, Knighthoods asap!! For all of them ! And lets get them on a leadership speaking circuit!
We would love to listen to how they oversaw all the division, fearmongering and in helping bring the country to its knees firsthand!
@ 26@Main - Nope. Short term memory loss or blind compliance? I'll give you the benefit of the doubt. None the less our "experts" have all said at time of vaccination:
Dr Anthony Fauci (NIAID Director) - "When people are vaccinated they aren't going to get infected".
President Joe Biden - "Your not going to get Covid if you have these vaccinations".
Rochelle Walensky, MD (CDC Director) - "Vaccinated people do not carry the virus and do not get sick".
Rachel Maddow (MSNBC News) - "Now we know the vaccines work well enough that the virus stops".
Bill Gates ("Expert") - Everyone who takes the vaccine is reducing their transmission".
Albert Bourla (Pfizer CEO) - "There is no variant that escapes the protection of our vaccines".
Even our very own government Ardern & co had stated on National TV that: 88,000 people would die of C in NZ, The vaccine is 95% effective, The vaccine will stop transmission, The vaccine will keep you out of hospital, A man shot in the head died of Covid, Vaccination will not mandatory, Cloth masks stop transmission, This will be the pandemic of the unvaxxinated.
And the government was accusing skeptical people of misinformation lol
It's hard to believe that after all this we still have some diehard decieved government supporters who literally believe the propoganda hook line and sinker, even if government are caught out right lieing to the public. At this stage the government could literally advocate that dog excrement is beneficial, and these decieved people would literally pick up dog excrement and eat it with no complaints. Stockholm syndrome is another name for it. People who are decieved do not believe that they are decieved, that's part of the deception.
Even Hipkins was caught out lieing to the public on National TV telling everyone there were no forced mandates everyone made their own choices. Exactly why he lost the last election.
It's not hard to figure out. When governments are more interested in tracking healthy people by vaccine passports then treating sick people with vaccine injuries then it's clearly about control not health.
But if it helps you to sleep at night, you keep believing that the government has your best interests at heart. Luckily for you they have all the answers eh.
Who will pay for all the bursting pipes and more. At some point, and it is hardly an unusual situation in Wellington, ratepayers are going to have to react to the fact that if they elect councillors that are lacking in both acumen and commonsense their municipalities are going to be stricken with policy that is implemented to the same tune. Exacerbating that there are inevitably likeminded factions within the bureaucracy that bond in a typical birds of the feather flock together manner. The people are responsible for their own democracy but if they are apathetic, the majority don’t even vote at all, then one way or another they will have to pay for what they get.
“Houses became financial instruments.” A lot of history and distortion curled up in arriving at that point too. Way back Norman Kirk’s 3rd Labour government was wise and forward thinking enough to introduce a clear distinction between a house, a home, owner occupied and everything else. That was the Property Speculation Tax. Simple and effective. So much so that Muldoon left it in place until into his second term. Since then though property has become an oversized and disproportionate industry. Local government is now eying the enormous wealth their citizens have attracted simply by living in their own home. Perhaps they should take a lien over every property and use that as collateral for even more debt. Just kidding, I hope.
Good points.
My statement was based upon the deregulation that occurred when central banks, as we now know them, were established in the early 1990s. Since that time, residential housing has become a huge part of just about every western country's financial system.
Aye and along the way the powers that be have bastardised and corrupted what was once a basic premise for any civilisation to have shelter, the sanctuary of a roof over their head. Earlier NZ governments weren’t too bad at that especially following the innovations and introductions of the accomplished Savage/Fraser First Labour Government. Such abilities as State Advances, capitalisation of Family Benefit and the building societies that once flourished offered first home buyers a heck of a lot more sporting chance than what’s on offer today.
Cycle ways ARE infrastructure - sure it doesn't seem as vital as pipes, but there's a reason (aside from idealogy) as to why WCC has gone so big on cycleways.
Brown has let everyone down by not turning off the tap as soon as he became minister. Despite the Govt cancelling the ironically named 'Lets get Wellington Moving', WCC was able to carry on by tapping into the 2023-24 appropriation for cycle lanes and bus lanes, etc. Afterall, they're safety improvements.
What most people fail to realise is that LTNZ is funding much (almost half) the cost and WCC dove into that pot of $ to do as much as they could before the door was firmly shut by the new National-led Government. There isn't any such subsidy for pipes.
Similar game play in Christchurch. $20 mill spent on 800 metres on a cycle walkway ($25,000 per metre) while on the other side of the estuary the vital Avon bridge to New Brighton near to collapse is ignored. Oh it was mostly shovel money from the government the council enthused.So what it’s still the public purse and a flagrant disregard to priorities and actual necessities.
So 'real' inflation still just under 5%...most of the reduction in 'getting lucky' items..imported fuel costs & favourable growing conditions for food etc.Are road user charges part of the basket?Removing the fuel tax decreases fuel costs,but the RUC's transfer the cost elsewhere.
"If the FamilyBoost scheme was not included in the data, the quarterly price of early childhood education would have increased 6.9% and non-tradable inflation would have been up 1.5%."
Its designed to promote a lack of claims. No reminders or publicity that it was live and available.
It Needs you to have time to sit a at a PC and you have to download and then upload weekly invoices from last three months. All for about 250 bucks.
You watch - the middle classes will claim the cash to give themselves a wee treat while those poor tired people that can barely afford nappies will miss out.
To top it off, miserable keyboard warriors with heaps of time on their hands will then blame them for being lazy.
https://www.nzherald.co.nz/nz/early-childhood-council-ceo-simon-laube-o… Hosking running intereference on any criticism here. Man basically leads the scheme's boss into three questions of 'Aren't you and the scheme great'. No depth, no balance, no nuance. Staggers me how he gets away with it.
It's a bit perplexing how they reached those figures for childcare costs. Family Boost only allows for people who meet a certain criteria for early childcare. If anything, Family Boost by offering a percentage rebate will be *driving* ECE costs higher as providers are able to now charge more and will likely increase their prices at a higher rate than they would have if the government rebate was not being offered.
All I'm saying is I can't avoid paying rates,insurance etc.The OCR should be reduced heavily,but my point is,this allows the pollies,local government & other monopoly suppliers in NZ to hide behind the "inflation war is over' rubbish when they are still gouging us.Inflation is a measure of increase in prices,the increses of the last few years are now baked in,the baseline costs for Joe & Mary Bloggs now have a new floor.
Like I said,all for lower OCR,just need to keep a lid on house prices,so we don't start the cycle all over again.
@ Vman - Well people now have less to spend, have burnt through most savings buffers, and will take much longer to recover.
So a dropping in OCR will take a while to filter through to people's pockets. The interest rates then have to drop, & people have to come off their fixed rates first. Even then, the additional money will likely be spent on recovering from harsh economic times first, before people start lining up to buy large ticket items like houses. A small dropping of the OCR is highly unlikely to suddenly see bucket loads of high end spenders all out in force buying up houses like there's no tomorrow. That's typical scare tactics. People are generally poorer now than they were over half a decade ago.
There's been articles plastered all over showing cases like more people having to take on an additional job just to pay bills, people have had to take out personal loans just to cover the power & internet, a majority of people have no burnt through their post Covid savings ect. Each time we come out of a recession we get poorer, not richer, & it takes longer each time to recover. Its not a sudden spring back. Hence the investment saying "The bull comes up the stairs while the bear goes out the window". Our markets fall faster than they rise, but they rise further than they fall.
If we were getting richer with everyone buying up houses like some lolly scramble, then our home ownership rates in this country would be rising, because it would be so easy to access a mortgage. But our home ownership rates are at the lowest in over 70 years.
I am not sure what comment of mine you're debating. I agree with what you say.I just don't want the ponzi fired up again.Sure home ownership rates are the lowest in 70 years...but here's the point there are more houses, not many have 'disappeared',it's just ownership is being concentrated amongst fewer,many of whom won the lottery by being born at the right time.I just want my kids and future generations to think it's worth giving this place a go.
@ Vman - "ownership is being concentrated amongst fewer,many of whom won the lottery by being born at the right time".
If by fewer you mean property investors, you do realize that according to MBIE, 49% of the population own their own property. Of that, there are 120,330 residential LLs in NZ. Based on 5mill population, means only about 2.4% of NZrs are actually property investors. Also showed 78% only own 1 rental property, about 16% own between 2 & 3 rentals, a property investor with 4 or more make up less than 6%. That means that less than 0.5% of NZs population actually own more than 1 rental property. If you own 2 rental properties, you are in the top 1% of property owners in NZ.
See if one listens to lamestream media they will have one believe that almost anyone with a house is easily using equity to buy up hoardes of property at a rate of knots, that every property investor has 20+ property portfolios that the banks just easily signed off on granting. This is not the case at all, so if your looking to blame "the greedy property investor for hoarding all the homes that my kids could elsewise buy", the blame is mis guided. It is much more likely that financing a property (ie how a bank values & assesses an individuals financial position) is to blame.
Has one also been listening to lamestream media again regarding how to finance a property? They will have one believe you cant buy a house under a mill without needing significant work done to it, that one requiires either 2 triple digit wages & a minimum 200k 20% deposit to finance the purchase or rich parents who are willing to gift their kids just a casual quater of a mill to get started, and if one gets a property for less than a mill that doesn't require work that it must be in the back of the wap waps with almost no neihgbours or shops. This is also not the case.
Less complaining it's everyone else's fault why kids can't buy, and a little more research into how it may be possible, one can easily find with a good mortgage broker a potential pre approval with significantly less than 20% deposit, plenty of decent approved first homes for 500k in plenty of areas around the country, that couples can be approved for with a combined income of under 100k.
At under 35yo my wife & I understand this is entirely possible as we both own our own homes, & we are part of the future generation (my wife is under 30). Plenty of our friends also have accomplished home ownership as well. Though skeptics will try fault this as they don't believe the second scenario is possible, for them they listen to too much lamestream media so only the first option becomes their reality. Get a good mortgage broker for your kids to see, they may find they're potentially closer to home ownership than they realize. There was a huge difference in pre approval that my wife found between what her bank could offer her & what the broker was able to get her offered. If ones financial situation isn't optimal, as we found our situation, then it takes a humbling of ones self to talk to someone that can help bridge that gap. It's not as impossible as the media make it out to be. Everyone turns into a property expert but be weary of the advice of disgruntled tenants who say it can't be done. We were both once tenants & we made the situation work for us.
Nothing ever easy was worth doing. The largest purchase one is likely to make will almost certainly take one of the largest sacrafices one is likely to have to make as well. At least in the financial sense.
Best of luck for both you & your children towards their home ownership journey.
Wow...you need to chill lol...key take out of that was "...then it takes a humbling of ones self to talk to someone that can help bridge that gap."
In other words you got financial assistance from some one "to bridge that gap" ?
When I bought my first house with a 50% deposit @ 23,I did it all on my own,not by begging someone else to bridge that gap...my point is,it is alsmost impossible for most folk to do that these days. You seem very triggered ...are you concerned that your equity is now negative and you are desperate for property prices to increase to enable you to sleep better at night.Can you afford to have your wife leave work for 5-6 years to start a family as we were able to?
My original point,which you seem to have taken exception to was just that the country as a whole doen't need house prices to increase rapidly again..it adds no value to the nation for that to happen.I can't see why that is so triggering for you,but then,with a name like "gowokegobroke" & comments like "lamestream media",I'm guessing you are triggered most of the time.I'll bet you are triggered today to hear of Dame Jacinda being honoured in Britain by Prince William lol...
@ Vman - No Vman you mis the point entirely.
We didn't get financial assistance to buy our homes, we simply just didn't except a blanket "no you cant achieve home ownership in your position" from the bank, & simply took our ideas & our position to a mortgage broker who was able to get us over the line. There was no hand outs our way, the humbling experience comes from realizing that sometimes you don't always have all the right answers, or any answers at all, so you seek out someone more experienced I the relevant field to help advise you to get from from you are to where you want to be.
I was simply referring this advice to your position with your children finding it hard to get into home ownership. You have brought your home on your own just as we have as well, well done, it's a massive achievement and we should be proud of that fact, not hiding from the neigh sayers who say it can't be done & those who do achieve it do so from the backs of rich parents.
You mentioned "my point is,it is alsmost impossible for most folk to do that these days". I challenged that as myself, my wife & plenty of our friends own properties in today's market, with less than ideal financial picking for the bank, & we are part of the next generation you speak of. So we know your statement to be false.
I'm sure it was hard when you brought property too - so why should it be any different for your children? Why should your children expect an easier time to gain home ownership? Why should other people's property values decline just so that your children could have an opportunity to buy a cheaper house? What you are advocating for is entitlement from a biased point of view. Everyone else should have to let go a portion of their financial position, just so that your children could have an easier time to buy their own home, according to you.
The entitlement is what triggers me. That you think it's everyone else's job to discount their own financial position, just so that people like your children could have an easier time of it. That's a mentality of a tenant for life. Wake up. It's not our job to take a massive financial hit for your children, that's your job as a parent, and that's the individuals job to do it for themselves. It's called personal sacrafice. If one leaves the sacrificing to others, they will likely stay a tenant for life. You can blame "those greedy landlords and home owners" all you want, but blaming won't get your children closer to ownership.
Ardern has decieved you. It's not the expectation that home owners relinquish their captial for your children's free ride. Socialism at its best. I don't support the attempted bankruptcy of half the country who own their own properties, just so that the other half get a free ride or a heavily discounted ride to ownership. You either make success with what you have & where you find yourself, or you help someone else to build theirs.
Good attempt though. I bet your pretty triggered that ol Luxon replaced your fleeing totalitarian leader. That over 75% of the country chose not to vote Ardern & Hipkins back in lol Ardern conveniantly fled before the embarrassing election results & left ol Chippie to clean up the mess - which as expected he only made it worse when he couldn't define what a woman was & lied on National TV about forced mandates being a choice that everyone made. It cost them the election. Face it, your angry as the hand outs now stop.
Never had a hand out in my life mate and you keep twisting what I am saying,I just don't want rampant increases in house prices as it does no one any good in the long run.I am not asking anyone to discount housing for my kids.It is also not the next generations job to cover your financial decisions to get a massive mortgage and hope house price inflation makes you feel better...are you under water equity wise..if so,it's not my kids job to help you out of it.You pays your money,ya take ya chances.Just like any investment,they go up,sometime go down.And sometimes you decide,that your money goes further elsewhere.I am flattered that you spend so much time writing novels in response.
@Vman - "ya take ya chances.Just like any investment,they go up,sometime go down.And sometimes you decide,that your money goes further elsewhere".
Total agreement with you.
Properties do go up, at a much slower rate than they come down. Prices have come down accross the country on average by 20%, some places even more so. That's the largest decrease in property prices in over 40 years. What an amazing opportunity your children currently have. If your children are of age to buy, this would be a prime time to find a way to do so, as the pants drop of property prices the chicken little sky is falling property skeptics have been banging on about for decades has already happened. If they are still a fair way away, then not to worry, the property cycle will eventually swing back around to another downturn in which we will again see falling prices. House price fluctuations, including rises, are inevitable.
Rampant increases in house prices has a number of contributing factors, including poor government implementation we saw over the last 6 years, which directly contributed to the largest increase in both property prices, rents & government emergancy social housing wait lists in our countries history. Thanks Dame Ardern, you deserve a knighthood from your elite buddies. Least of which factors are the completly ficticious stories of all those 10s of thousands of soleless money hungary sole eating landlords with bucket loads of money and tenants tears just waiting on the green light to add to their 20+ property portfolios as if they were buying up properties on clearance sales.
You can rest assured the stories Ardern & Hipkins have told you are false & fabricated distractions from their failures. Shift your blame of rampant property prices where it belongs. Taxing your neighours further out of envy also won't bring your children any closer to home ownership.
Though as you said, sometimes you decide that your money goes further elsewhere. Perhaps home ownership just isn't for everyone.
When hammering Council for increasing rates above people need a reminder that much of the increase is due to the extra work Councils need to do.
Doesn't matter what the inflation rate is, if you have failing infrastructure you need more rates to pay for it.
How everyone thinks Councils can stay within the inflation rate beats me.
Jeez…way to ruin the good vibes 😕
I’m not saying you’re wrong…but I’ve read on here that the latest OCR cuts are inflationary so that means there is overwhelming demand out there (somewhere) so surely no risk of a depression…shit, with this demand being grunty enough to get inflation roaring back to life how could we even have a recession 😉
In terms of what I "feel" is more expensive for my household, it's really just council rates (and Chch isn't as bad as some) and insurance.
Insurance I'm responding by changing policies to 3rd party for lower value vehicles (my wife's car was approaching 40% of the vehicle's realistic private sale value for comprehensive) and shopping around for other policies.
Memory a bit rusty but the difference between $1000 to $5000 excess was marginal. Don't think any of the majors have higher than $5000 excess.
I'd prefer to leave out items, eg shed but you can't pick and choose like that. This is how they make their money. You have to over insure as there are items which you may not want to reconstruct in the case of a write off.
This is a better place to repost the comment below from almost exactly two years ago:
by Yvil | 13th Oct 22, 12:38pm
DELAY, it's all-out delay and few seem to understand this point.
Delay between the RB raising the OCR and mortgages coming to their term, people re-fixing and then, after a few months realising how much less money is left on lattes. Yes people know the squeeze is coming, but many only adjust their spending when they are really forced to. The squeeze on spending from the increasing OCR is only going to start being felt in 2023
Delay between the rising OCR and the CPI stopping rising. Remember, the CPI is being measured year-on-year, meaning that any inflation from the last 9 months and there's plenty, is also included in the latest CPI figure. In conclusion it will take even longer for the CPI to stop rising and it will only do so meaningful when the 2023 first quarter CPI rise drops out, in other words when the 2024 first quarter CPI will be released, which will be in... May 2024 !!! So it's pointless expecting a meaningful drop in CPI before May 2024.
In conclusion, because of the delay explained above, the OCR is going to get raised far too high (most likely 5%), NZ will be in recession in Q1 2023 but this will only be reported in the GDP in June 2023 (we're so slow in NZ) by then CPI will be lower but not yet in the target range of 1-3%, the next set of data will be Q2 GDP deeply negative reported in September 2023, inflation confirming its continued drop towards 1-3% reported in August 2024 and then, the RB will panic and drop the OCR back down aggressively.
So expect a much lower OCR by end of 2024 after a likely peak of 5% earlier in the year.
Interestingly - the new government was right they have taken measures to reduce inflation.
Notably the reduction in childcare costs (with the childcare rebate) and fuel costs with the removal of the fuel tax.
Now we just need to wait for local government and insurers to join the party.
The dysfunctional relationship between our central government & local councils is a big part of the nation's malaise ... if they can get on the same wavelength we'll see vast progress ...
... but , how on God's green earth can any government work with the series of incompetent twats Wellington votes in as it's mayor ...
Non tradeables at 4.9% and 5.2% annualised is concerning to say the least. Tradeables mainly driven by falling prices of oil and may be on the precipice due to the conflicts in the middle east.
Dropping OCR too much is likely to fuel the fire. The FED is not likely to drop much either on the back of their results so.... rock and a hard place RBNZ.
Non-tradables less central & local government charges is running at 4% YoY and the last two quarters at 2.4% annualized.
Trimmed means are about 2.5% YoY. Median is 2.8%. We'll see what the RBNZ core measurements look like at 3pm.
I think this is a good print that is consistent with the view that 'market based' prices have normalized and there are a few idiosyncratic hotspots that are not tightly coupled to monetary policy.
Good points.
Did you factor in that Non-tradables is a lagging indicator due to the warehousing effect?
I.e. Price inflated Tradeable stuff comes into a warehouse at a price that is immediately measured. But the duration it sits in the warehouse before it is on-sold is unknown. But the on-sold price has previous inflation built into it's price when it is sold at a later date. Note that broken supply chains could mean it lags a lot if warehousers seriously stocked up at inflated prices if they expected supply disruptions to last longer than they did.
Thanks mate. That makes sense, I think, but I don't have a strong opinion. I'm not a huge proponent of the tradeable/non-tradeable split, but think it's worth considering within the overall basket of core measures. I wouldn't weight it any more heavily than something like trimmed mean or the RBNZ core inflation metrics, though. My main view at this stage is that there's no longer much evidence of high generalized inflation. So those rates increases are going to be offset by less spending by households on other things.
Israel has announced it will not strike Irans crude oil facilities, which is why we are seeing oil prices tank in the last few days. Israel has also announced a USA warning for resolving the Gaza conflict within 30 days or face the repercussions of an arms embargo. De-escalation efforts are in force which would result in overall lower fuel prices. We’re currently entering deflationary settings , and Canada’s new CPI print is a good predictor of what could come for other countries in the next few months. I wouldn’t bet on inflation taking off again anytime soon.
I agree. Our economy is going down the sh*thole and I do believe the OCR is contractionary.
That being said, I don't think recovery is on the cards without major structural reforms requiring tens of billions. If we continue taking on cheaper debt from foreign lenders to buy houses from one another at higher prices, expect NZ living standards to slide down even further.
The bulk of what we buy and/or consume in NZ has a significant 'tradeable' component. (No doubt those with the numbers handy will help out here.) It is really damn hard to split a CPI measured product into either tradeable or non-tradeable. And yet they do it.
What does this mean? By way of demonstration, lets assume that 50% of what we buy and/or consume is tradeable. If 50% is going up by 1% per quarter, and non-tradeable - the other half - is going up by 4% what's the inflation rate?
Why do people, especially the RBNZ, fixate so much on this tradeable vs. non-tradeable split? Other countries don't. Maybe because they know such measures are largely so full of crap it's simply laughable to do it?
Oh ... And I should also mention that the non-tradeable measure is a lagging indicator. How many know that?
"We are yet to see the full impacts of tightening" ... True dat.
If the RBNZ slashed the OCR to 2.5% it may immediately help reduce the working capital costs for many businesses, which may in turn help some to survive. But they couldn't leave it at 2.5% without the herd rushing into inflationary purchases.
Slow and steady around the neutral rate is how the OCR should move - not the big lurches this RBNZ likes.
And now that the CPI has been tamed, it's time to control the main driver of financial stress in our economy, euphemistically called Capital Gains and not Inflation.
Drop the DTI Ratios down to 4 and LVR's to 50% for starters, and let's see how that goes. Hopefully we can all cheer as enthusiastically on that day as we are doing today. It's not the Price of Debt that matters so much, but what we do with it.
100% Agree.
The RBNZ must cut hard. To avoid re-igniting the Ponzi, they must also tighten LVRs and DTIs while ignoring the whining, squealing and howls of outrage from the Australian banks.
Will that be enough? Maybe in the very short term. But until our hopeless government rebalances the tax system we're basically screwed.
Should they also ignore the whining, squealing and howls of outrage from first home buyers who will have no chance of meeting strict LVRs and DTIs?
Those tools are terrible IMO. If there was a lack of bread, should we reduce bread demand and prices by saying only rich people may buy it? Or should we leave the high prices in place to encourage the market to make more bread?
There's little to no evidence of these sorts of measures making housing more affordable or attainable for the lower rungs.
Let's pump them anyway.
The only thing wrong with your bread example is there's less expensive caveats lifting the price of a load than for housing.
JimboJones , your bread example is not even remotely similar, does not reflect the market for bread, nor does it reflect the effects on rich and poor in any sensible way. Think through what I've just said. Find a better one. (Funny, 5 people lapped it up, though.)
With regards your concern for FHBs. Have you thought through the effects? Consider a few ....
What if house prices stabilise? What then for FHBs? Some will need to save for longer to get a deposit big enough but they won't give up because prices are running away at even faster pace. Ditto for the banks of mum & dad should they wish to help.
Remember too the banks need FHBs to maintain churn, and it is the bank's total lending that is subject to LVRs and DTIs, not each lender. Thus, banks will lend to FHBs outside these two ratios. (And if the RBNZ tightens the LVRs and DTIs further for investors than they do for OOs, FHBs will get even a bigger chunk of the bank's descretionary lending outside the LVR and DTI rules.)
Its clear that the OCR should be dropped down to 3% or so. I wouldn't have a problem with the reserve bank doing that at the next review, with one massive caveat:
- Owner occupied mortgage stress testing must be set at 8% and no lower.
- Investment property stress testing should be set at a minimum of 3% higher than owner occupied.
All in the interests of sustainable housing prices.
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