The Reserve Bank's making it clear it wants more and faster inflation data from Statistics New Zealand.
In Wednesday's Monetary Policy Statement (MPS) the Reserve Bank said Statistics NZ's recent move to start reporting Selected Price Indexes (SPI), representing about 45% of the total Consumers Price Index (CPI) basket monthly, was welcome. This is in the context of NZ being one of only a few developed countries that doesn't produce a monthly CPI, and nor do we review CPI weights as often as most developed countries.
"While the SPI is not intended to be a perfect measure of the CPI, it is a step in the right direction and gets New Zealand closer to the global standard. Overall, the SPI has increased the frequency of available information on consumer prices and gives forecasters an additional set of data to indicate the size and direction of changes in inflation components in a timelier manner. The Reserve Bank encourages Stats NZ to continue improving the frequency at which prices are reported in the New Zealand economy," the RBNZ says.
"Timely reweighting is important because consumers substitute various goods and services when relative prices, preferences or availability changes. It is likely that many such substitutions have occurred since the most recent reweight in 2020 based on the Household Economic Survey 2018-19. More frequent publication and reweighting of the CPI would support the [Reserve Bank's] Monetary Policy Committee in assessing the current state of the economy and reduce the risk of policy errors from slow data releases, particularly in periods of heightened uncertainty."
Speaking in a press conference after the MPS was issued, Reserve Bank Governor described NZ's inflation data as "very lagged and quarterly," when beginning an answer to a question about NZ's stubbornly high inflation compared to the now lower inflation in some overseas countries.
"The more they [Statistics NZ] can get to monthly whole consumer price indices, the more regularly they can be reweighted, rebased, then at least we know we've got apples with apples [comparisons] across countries. So that is an important caveat," Orr said.
The Reserve Bank's and Orr's comments come after interest.co.nz reported earlier in February Statistics NZ is overdue on updating the goods and services included in its CPI.
"We currently do not have the funding available to update the CPI basket to ensure it is fully representative of the goods and services that New Zealand households are purchasing," Statistics NZ said.
"The CPI is typically reweighted every three years, using the [Statistics NZ] Household Economic Survey (HES). The HES was suspended in 2021/22 as a result of COVID-19 restrictions on household interviewing. The data has now been collected for 2022/23, but the development work to update the CPI weights is currently unfunded."
Statistics Minister Andrew Bayly said reweighting the CPI basket is a priority for him.
"Currently the development work to update the CPI weights remains unfunded. The CPI basket reweight is a priority for me, and I am engaging with officials on this work," Bayly told interest.co.nz.
The Reserve Bank's monetary policy remit tasks it with achieving and maintaining annual inflation between 1% and 3% over the medium term, with a focus on keeping future inflation near the 2% mid-point. It uses Statistics NZ's CPI to measure inflation. The CPI measures the changes in prices households pay for goods and services. Price change is measured by tracking the prices of individual items that make up a representative basket of goods and services.
*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.
14 Comments
Whoop dee do.
Sure more timely inflation data is always nice ... But will it help 'tame' inflation?
Um. No it won't.
Most of NZ Inc's serious bouts of inflation are driven by external supply shocks, e.g. energy price rises due to actions by overseas players like Pootin. Once these base inputs rise, every business in NZ increases prices, and many do so by far more than the real cost due to the rise in input prices (yeah, greedflation is a real thang).
If we set up schemes to smooth input prices we'll be able to eliminate the big inflationary drivers. Jfoe and I have suggested a scheme to manage oil shocks using existing fuel taxes and duties. This one alone would have a massive effect.
So wake me up when the economists at the RBNZ are serious about controlling inflation in NZ.
Until then - they're just collecting their salaries and pontificating about past events while doing NOTHING proactive to really control inflation. Playing around with an untargeted tool like the OCR is simply pretending to do something useful and the pretense must stop. Fiddling with the OCR while NZ Inc burns isn't achieving anything except repetitive boom-bust cycles that only serves to enrich the already rich.
In a nutshell, yes.
But the focus is oil price shocks, not NZD movements. NZD movements are the result of many more factors. (And sorry, PDK, it shouldn't be used as a green tax either. KISS and a single focus prevails.)
But not just removing levies when the oil shock hit - they'd actually subsidize the prices to keep the price slightly higher than it was before the shock. Having some price rise is good as it focusses consumers on economizing their consumption. (And post shock, the levy may remain a tad higher than pre-shock as the fund is rebuilt.)
It would need to performed by an independent organization much like the RBNZ and/or NZ Superfund so governments don't try to get their grubby mitts on the funds. As the fund grows, the funds get invested and the levies can be adjusted down. An estimate would need to be made on the maximum fund size that related to an oil shock so it didn't become yet another form of taxation.
To stop the oil companies gaming the system; the goal is smoothing wild price fluctuations due to oil shocks; no price range is ever implied, and if oil companies try to price gouge during a shock, the organization can recommend to government that windfall taxes are applied. The price smoothing elements are quite simple. What is not, is anticipating how various market players will game the system and ensuring it's not worth their while. (This is where some of the best mathematicians end up - getting paid mega-bucks to game systems.)
Airline fares and Hotel costs are accessible for third partys to mine and present for easier customer access and comparison.
Why don't we legislate for Supermarkets to publish their prices daily (they're already all electronic, and standardised data formats)
This would allow apps like Grocer and others to work much more effectively while also allowing stats new zealand to track actual versus point in time inflation. It would allow customers to find bargains or plan their shopping trip.
Even more fun could be had if wholesale prices were also published.
This might have a downside of overfilling supermarket carparks.
But it would allow for better competition.
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