Householders' views of future inflation have risen sharply in a development that goes very much against what the Reserve Bank is looking for as it seeks to dampen down inflation

The RBNZ Household Expectations Survey was re-developed in Q1 2022 and renamed to Tara-ā-Whare - Household Expectations Survey . The word “Tara” is derived from Pakitara, or the walls, and “Whare” means a house. Tara-ā-Whare is also used to describe going to door to door, to ask questions.

LOL

This is not "Tara-ā-Whare." The data is collected online. It's an online survey.

Maybe out here in the world we keep seeing huge price increases, with no real reason other than 'they can do it'.

With no sign in recent decades that governments of any hue have an interest in combating our duopolies and cartels, why would we think that inflation won't continue.

Proof you cant just go on squeezing mortgage holders or renters until they break!  We dont all have a cushy job and $800k salary.

Time for better, and less damaging, economic theory to manage inflation.

 

That's because if people expect prices to be higher in the future, then they will want higher prices for things they sell now and they will want higher wages.

Hmmm. I don't like these blanket assumptions about inflation expectations, but I guess this holds.

What I'm more convinced about is that if people expect prices to be lower in the future, they will be more likely to delay their purchase or consumption. And that arguably fuels deflation. 

Ohhhhhh maybe this does get really messy before it gets better.

Another 25bp now would be the proverbial iki to the head of the economy. Get it on ice asap....

Oh Boy.. JH...

GPWS is flashing red in for the leveraged. "TERRAIN" "TERRAIN" "PULL UP"

Of course peoples inflation expectations go up when you're seeing recent substantial increases in water bills (upwards of 25%) and insurance premiums of 10%-20%, rent and mortgage increases and food inflation that is far over and above the normal. If anything increasing the OCR only increases these more.

Average people making predictions about their own ability to pay their rent or mortgage in the coming months I would believe. Average people making predictions about inflation rates two years out is about as useful as asking them to predict the weather on Feb 22nd 2026. 

I don't think the RBNZ understand the magnitude of some of the increases or the actual proportion of spending they represent for most households.

Looking at my household, the below four things make up about 40% of our overall annual spend.

• Rates: 18%
• Power: 28%
• Insurance: ~30% average across all policies
• Groceries: ~11% on what we buy regularly.

All up works out to be about $5k a year increase at an average inflation of 16%, and I expect all four will be double digits again next year, and the year after, and the year after....

More wage inflation coming, rents up, cost of living climbing.. well wage inflation will support the housing market..

I don't know about you but all this talk about the OCR needing to go higher/stay high is influencing my inflation expectations? Would one not think by hearing this over and over again that you may conclude inflation may rise...

Its almost like the average person doesnt believe RBNZ has a handle on things, and take forecast rates etc increases in to account for predicting their expenses....

Come on Adrian

do it, do it 

This country needs a bigger ocr, reward savings and investment and drop the price of houses. My son Nicky living with his gf and baby in her parents basement, cos they can’t afford a house. 

All that money sloshing around houses can then go into getting the grain pier dredged and redeveloping the waterfront. Jobs and living for generations.

I am not sure he goes here but I think the fed will forcing his hand next decision

My guess is the Govt and RB will be reading from 2 different playbooks...will be interesting to see if the correct play is made.

Welcome my friends to the fabulous interest rates <> inflation spiral. One more hike should make it clear to everyone!

The mean of households' expectations... in terms of five years... actually shot up to 3.6% from just 2.1% in the previous survey.

That's a ridiculous metric, no one knows what inflation is going to be in 1 year let alone 5 years time. 

Some things are coming down but some big increases still coming through… rates water insurance.. money flows through the economy so yea. The problem is people are ridiculously leveraged so they feel so much pain at 7% interest rates. Asset bubbles just need to deflate. It’s just a cycle boom to bust. Alls good in booms but everyone try’s their darnest to avoid the bust by stretching things out. Problem is once inflation is entrenched it’s doubly hard to eradicate so it looks like we’re in that space. Inflation also hits the poorest hardest so it’s always in govt best interest to keep this well in control. No surprise we are seeing even more poverty despite the free money distribution min wage increase policies of labour. Give few bucks away but hey prices are increasing faster!

I would be surprised if interest rates didn’t increase next week.

Domestic inflation (non-tradable) hasn't really been quelled yet, people may be able to temporarily defer some of those items but they may also realise that ultimately have to pull their pants down and bend over.

Could survey sentiment have changed because of the near endless articles saying interest rates will continue to rise?

That last sentence was very useful to my understanding.

Lol. Statistical soup.

For example, which measure of inflation. The CPI used by the RBNZ that excludes numerous costs associated with RBNZ created high interest rates? Or the far more realistic Household Survey done by Stats NZ that includes all relevant costs?

Were the survey sample members even aware of the difference? Most likely they hear all about the RBNZ's CPI ad nauseum from MSM but experience the Household Survey done by Stats NZ every day and on every mortgage repayment.

And how many of the people sampled are actually price-setters? I suspect the majority will be price-takers. And how many actually had mortgages? And of those mortgages, how many were OO and how many were 'investors'?

re ... "The significant thing about this household survey is that it has a good recent track record of picking the actual inflation outcome one-year out, according to analysis the RBNZ did on surveys last year."

The report makes interesting reading. It concludes: The household inflation expectations survey of the RBNZ and 1year consensus forecasts are particularly noteworthy in their forecasting accuracy, offering significant forecasting value to the simple models. 

But go back to the graph "b. Headline inflation and 1-year survey inflation expectations" on page 6. Sorry, I don't see the Household predictions (HH median and mean) as showing any predictive capability at all. Can you?

What do you expect when you get "road cone" politicians and bureaucraps engineer a recession?  someone has to pay: normally business and households, in particular, the small business and low and middle income families. Meanwhile, the politicians and RBNZ morons continue to get bigger payrises for screwing the country. 

Hmmm ... Lots of talk about 'sticky inflation'. But is there any evidence of this in NZ in recent times?

Look at this graph. Stretch the graph sliders out so you can see the graph all the way back to 1995.

https://www.interest.co.nz/charts/prices/consumer-prices-index2

Now look at each inflation spike. If NZ has a 'sticky inflation' problem then you'd expect to see a fast spike up followed by a slower spike down.

Are there any? No. They're all pretty much inverted 'V's. Same rate up, same rate down and back into range.

If you believe "this time is different" then I'd love to hear why you think that.

Stagflation like the 70's then.