Annual inflation falls to 5.6% from 6.0% previously - even as fuel prices surge

Economy / news

Housing and petrol prices were the largest contributors to inflation during September

17th Oct 23, 11:00am by Dan Brunskill

Source: 123rf.com. Copyright: nakhin

New Zealand's annual inflation rate dropped to 5.6% in September, from 6.0% in June, despite upwards pressures from high fuel prices and an annual increase to local council rates.

The so-called 'headline' inflation figure has come in significantly lower than economists and the Reserve Bank had forecast. Most economists forecast a figure in the 5.8% to 6.1% range, while the RBNZ had forecast an unchanged 6.0% figure.

Annual non-tradable inflation was at 6.3% in the September quarter, with construction costs, rental prices, and ready-to-eat food all contributing to the result. This was down from 6.6% last quarter.

This is a measure of domestic inflation in products that don't face overseas competition, however offshore input costs, such as buying fuel, can impact prices.

The Reserve Bank had forecast that the domestic inflation would fall to 6.2% - but most economists had expected it to be higher than this.

Quarterly non-tradable inflation was 1.7%, the hottest three months since March (1.7%) but lower than the previous September (2%).

The biggest drivers to the overall 'headline' inflation figure were an 8.8% increase in food prices, 5.3% lift in housing costs, and a 4.6% jump in transport costs, largely due to higher petrol prices.

Higher fuel costs and the purchase of new vehicles were the two largest contributors to the transport group, up 16.5% and 4.6% respectively.

The housing costs were driven higher by local council rates, which increased 9.8%, and rents which were up 1.2%.

New rates are captured once a year in the September quarter when households first see the changes set by councils, which boosts the inflation number in that quarter.

While annual headline inflation remains well above the 1% to 3% target, the fall from last quarter is meaningful.

Quarterly headline inflation was 1.8%, which was the hottest three months since last September when it was 2.2%, although a 0.3 point chunk was because of the one-off rate increases.

Of the 1.8% price increase during the quarter, transport made up one percentage point and housing another 0.5 points. Only the food and miscellaneous groups added more than 0.1 points.

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105 Comments

by blobbles | 17th Oct 23, 11:05am 1697493901

Slowly dropping. After years of being under the target rate (which was originally just a guess anyway), maybe they are OK to let it run for a while.

Its not like the RBNZ has much control over fuel prices anyway, so raising rates isn't going to do much more in the current environment.

by tothepoint | 17th Oct 23, 11:12am 1697494362

A move in the right direction...... Will make things a little easier for Luxon.

But the housing market might well strengthen further??

TTP

by Te Kooti | 17th Oct 23, 11:50am 1697496604

Right on cue, TTP...

by DTRH | 17th Oct 23, 6:16pm 1697519814

Yes at this rate 0.40% per quarter only 8 more quarters and will be back at around the 2% narrative for inflation. Don’t believe the RBNZ will start the the process of lowering rates again as this would just push inflation up once more, surely they have more savvy than that.

by Mr Frank | 17th Oct 23, 11:05am 1697493938

Let's be clear, still well above 1-3% band.

The question is how patient RBNZ wants to be. Wait and see it slowly come down, but higher interest rates for longer.

Or,

Increase OCR and kill off inflation - short term pain, long term gain.

I don't think there is a right answer.

by Pa1nter | 17th Oct 23, 11:46am 1697496375

The lag time for OCR hikes to be felt is about 12-18 months. So not that short term, and the RB will have some grim indicators to weigh against price inflation in a narrowing set of benchmarks.

by Retired-Poppy | 17th Oct 23, 11:51am 1697496671

Many on here have indicated 2024 is going to be tough. It's pretty much a foregone conclusion.

by Pa1nter | 17th Oct 23, 11:55am 1697496917

Many on here claim the sky is going to fall tomorrow, on a daily basis.

Fear and paranoia aren't overly conducive to financial success. Feel the fear, do it anyway.

by Rob Reid | 17th Oct 23, 12:11pm 1697497866

All my subconscious heard is "sky is going to fall tomorrow". I feel even worse.

by Retired-Poppy | 17th Oct 23, 12:11pm 1697497918

Yes and some here, in order to advance their own ends over dramatize the views of others.

"Sky is falling" - really? When fear dominates, opportunities are often abound.

by Pa1nter | 17th Oct 23, 12:26pm 1697498789

"sky is falling" is a reference to Chicken Little.

As for advancing their own ends, yours is a view which is badly tainted by your own desires, opinions and views. This is what has you making prophesies so far from reality as to not be taken seriously.

by Retired-Poppy | 17th Oct 23, 12:39pm 1697499568

It's obvious and somewhat understandable my presence here bothers you greatly You'll get over it sooner or later :)

by Pa1nter | 17th Oct 23, 1:30pm 1697502647

Given how often you drop my name it does seem like you're more obsessed with me than the other way round.

I thought we'd already established you are definitely not my type.

by Retired-Poppy | 17th Oct 23, 1:57pm 1697504245

....you wish. Pa1nter, are you seriously being honest with yourself? It's not your name that's been dropped....

I'm struggling to keep a straight face as I type - thanks for the laughs :)

by Pa1nter | 17th Oct 23, 2:13pm 1697505233

I'm a scallywag and won't pretend not to be.

You however are a much more dangerous breed, an utter rascal, who will try and present himself as anything but.

by Slapheid | 17th Oct 23, 2:14pm 1697505246

Get a room guys.....

by Hans Brink | 17th Oct 23, 3:34pm 1697510049

I must admit Pa1nter that I only read the comments out of curiosity. If I used the gloomy predictions to base my business decisions on simply nothing would get done.

So read for a laugh and do what your gut instinct tells you. No risk no reward.

by Retired-Poppy | 17th Oct 23, 4:04pm 1697511846

Fair enough and well said. Posts on here are no more than pixels with varied and often opposing opinions.

It's eye opening about where people are vested - it's certainly telling.

by HouseMouse | 17th Oct 23, 11:07am 1697494061

Interesting and surprising.

Probably no more OCR hikes

by JimboJones | 17th Oct 23, 11:40am 1697496034

I'm surprised you were surprised. Food inflation is well down in the last 3 months. Fuel is a much smaller component of people's spending than food.

Inflation has been dead for a few months. If it wasn't for the fuel subsidy removal (a one off event that the RBNZ should look through), I reckon we are back in the target band already. Of course it will take a year for that to show in the annual CPI

by HouseMouse | 17th Oct 23, 11:53am 1697496821

Well done, you were on the money. Although I think it’s an exaggeration to say inflation has been dead the past few months ie. look at rental and fuel data, council rates

by imhenry | 17th Oct 23, 1:08pm 1697501322

As well as huge increase in House, Contents Insurance Premiums

by K.W. | 17th Oct 23, 12:00pm 1697497215

Domestic inflation is still 6.3%. Hardly dead.

by JimboJones | 17th Oct 23, 12:11pm 1697497913

If someone died three months ago, would you claim they are still alive because they lived for the nine months beforehand?

by tothepoint | 17th Oct 23, 12:20pm 1697498419

House insurance premiums are a killer for many people - and they’re sure to take a further quantum leap next year……

Very interesting to observe what happens to insurance markets over the short/medium term. I imagine insurance must now be priced off the market for a sizeable proportion of homeowners.

TTP

by imhenry | 17th Oct 23, 1:10pm 1697501436

Your last sentence sums it up. Huge premiums increases are already here

by GJCA | 17th Oct 23, 1:41pm 1697503307

My insurance premium increased 27% a few months ago....definitely already here!

by Retired-Poppy | 17th Oct 23, 2:04pm 1697504660

Yes, 8% net interest borrowing costs, skyrocketing insurance and Council rates, it's no wonder many view capital gain as a right.

Right now, from an investment perspective, figures just don't stack. Unless of course the investor is proud of the fact they top up the shortfall from wages.

Hardly winners......

by Pa1nter | 17th Oct 23, 2:15pm 1697505325

All assumes someone's working from the sorts of imaginary scenarios a DGM mathemagician uses.

by Retired-Poppy | 17th Oct 23, 3:23pm 1697509414

....sorry, I forgot to mention they're often whiners and question logical and simple math handed on a platter 😂

by Thinker | 17th Oct 23, 11:09am 1697494149

Two words for this THANK GOD.

by John from Bunnings | 17th Oct 23, 11:13am 1697494435

As predicted. Today's reading will anger alot of those predicting and hoping for a blown up CPI reading, crushing their hopes of a hard-landing and economic collapse. As per my last comment on the previous CPI reading, a soft-landing becomes increasing likely as time goes on. All the "Oh but petrol will surely increase the figures" comments leading up to this reading were just noise as usual. Great news today.

by GraemeRansom4234 | 17th Oct 23, 11:40am 1697496054

John. I am a bit of an old dog and I rarely comment here. However, the people hope post here would have to be the most negative collective I have ever come across.

by John from Bunnings | 17th Oct 23, 12:17pm 1697498225

Unfortunately this place is an echo-chamber for negativity. I would suggest to not read too much into the comments on here as most of them suggest we are constantly a short distance away from economic armageddon, or about to slip into some sort of new dystopia where existence will be nothing but pain. There will be a small handful of informative comments however, that aren't written by Ray Dalio enthusiasts with chronic alarmist syndrome, that can actually be quite helpful.

by Independent_Observer | 17th Oct 23, 12:37pm 1697499445

We are already in the dystopia John and people are in a lot of pain - see the depression/mental health and suicide stats.

It isn’t something that is coming in the future - we are already there.

by John from Bunnings | 17th Oct 23, 1:09pm 1697501386

So we should just mope around and complain to strangers on the internet all day? Sure the world may not be what it used to be but that’s the point, things change. You have two options, go out and enjoy your life to the fullest extent as conditions allow, or become apart of those statistics you mentioned.

by Independent_Observer | 17th Oct 23, 1:24pm 1697502253

I’m afraid that you confuse discussion around these matters with complaining on the internet all day. If reading the comments is depressing for you then perhaps it is you that is the unhappy individual and you should find something else to do with your time .

ie take your own advice and get on with it (whatever it means to be happy for you) - otherwise you fall into the trap of being a hypocrite on these matters. Eg you complaining about other people above.

by John from Bunnings | 17th Oct 23, 2:53pm 1697507603

Unfortunately, your bias sentiment is feeding into your delusion trying to mask this gloom-ridden echo chamber as some place that facilitates healthy discussions. If you’re really stating the comment section of this site has anything much more to offer other than negative sentiment or complaints when things don’t turn out their way then you’re utterly delusional or being disingenuous. But you are right about one thing, as someone who doesn’t usually engage a whole lot in replies I will crack on with it as I have already used up much more time than I’d like. Have a good one 😊

by Independent_Observer | 17th Oct 23, 4:14pm 1697512460

Good for you John - the problem is that you aren't going to find a more intelligent online forum (in NZ) to have such discussions.

This is it (god help us).

by Nzdan | 17th Oct 23, 1:03pm 1697501002

The mood should hopefully shift over the next few month now that National have elected. At the moment we'll have this period of "residual dissatisfaction". A confusing mix of emotions where people are unsure if they should be happy National have been elected or still upset over the hyperbolic chaos that was Labour for 9 years.

by Iceman | 17th Oct 23, 1:09pm 1697501356

Nzdan, to be fair - I've seen your mood shift positively LOL

by Nzdan | 17th Oct 23, 3:27pm 1697509674

Thanks for noticing, my online persona is not really the bellwether for my mood in real life. Life's good though, happy days!

by Retired-Poppy | 17th Oct 23, 1:12pm 1697501542

Voter remorse, or even worse Electorate remorse! If history serves as a guide - it's inevitable at some point!

by Iceman | 17th Oct 23, 11:18am 1697494691

DGMs still going to spin this and maintain higher for longer because they know better than everyone 😂

by Retired-Poppy | 17th Oct 23, 11:38am 1697495905

It obviously bothers you....

by Iceman | 17th Oct 23, 11:47am 1697496435

No. But can’t help laughing at their/your desperate attempts to make things seem worse than they actually are from the comfort of your armchairs. Have a good day mate!

by Retired-Poppy | 17th Oct 23, 11:58am 1697497088

Enjoy. Whatever give's you the kick you crave. It's encouraging news that's for sure.

It's all eyes on the FED and the global cost of money more than ever. America is borrowing like its wartime...

by Iceman | 17th Oct 23, 11:56am 1697496996

To be fair mate, you are probably one of the nicer ones on here. The others vehemently preach the gloom and ridicule anyone else who doesn’t agree, when really they likely have no real world experience. So yes, got to stick it to them when they’re wrong.

by Pa1nter | 17th Oct 23, 12:00pm 1697497235

Now we'll get to hear "it's all rigged".

Yes, yes it is. Learn how the economy you exist in works, and approach your commercial life accordingly.

by Retired-Poppy | 17th Oct 23, 12:15pm 1697498116

Iceman, I do respect/expect others opinions/views will differ and that's what makes life and conversation interesting!

It does at times get personal when the post is not received well.

by Pa1nter | 17th Oct 23, 12:28pm 1697498880

Haha, like claiming a poster is another poster. Again, and again, and again.

If only trying to upseat people was a mark of high thought.

by HouseMouse | 17th Oct 23, 11:40am 1697496008

The OCR may not rise but it’s quite likely to stay at its current fairly high and impactful level for quite a while. It is high enough to continue to create significant economic headwinds.

by Iceman | 17th Oct 23, 11:47am 1697496469

I have a feeling the cuts will come a bit earlier than anyone anticipated.

by Baywatch | 17th Oct 23, 11:50am 1697496600

Well you are never wrong ICEMAN

by JimboJones | 17th Oct 23, 11:56am 1697497019

I agree. Its possible the RBNZ agree too, but they can't signal cuts just yet.

Covid caused this inflation, through loose monetary policy, supply constraints and and demand spurt. That has all gone now, in no time we will be back to deflation. There is no point causing job losses to bring the deflation problem on quicker!

by Independent_Observer | 17th Oct 23, 12:54pm 1697500446

So you are praying for financial pain then? Because that is what falling interest rates mean - that the economy is weak and in trouble.

So want financial pain for many in society (job losses etc), for your own financial gain? (lower interest rates/higher house prices)

by ChrisOfNoFame | 17th Oct 23, 1:04pm 1697501064

Except the RBNZ wants to get DTIs implemented. And DTI's can restrict foolish house price inflation ... f.o.r.e.v.e.r!

.... Which won't happen because the banks don't want any such restrictions on them. And as Sir John Key has a direct line to the PM ... Anyone want to bet with me that DTIs will quietly disappear?

by Independent_Observer | 17th Oct 23, 1:06pm 1697501206

But I thought it was the ‘DGMs’ who keep suggesting economic carnage is ahead of us - and yet your are suggesting this is what is ahead of us (eg the only reason. Central Banks will be cutting rates is because the economy is in real trouble)

So who really are the DGM? Are you sure it isn’t you by predicting falling rates just around the corner?

Stable/rasing rates indicate a strong economy - and yet you are predicting the opposite (falling rates) you doom gloom merchant. The hypocrisy always amazes me.

by the Joneses | 17th Oct 23, 1:58pm 1697504318

If you want to understand them, try watching this. It explained a lot for me.

To summarise, being rich tends to have the following effect on people:

Increased desire to accumulate more wealth
Increased fear of losing their wealth
Less empathy for others
Narcissism and an over-inflated sense of being 'self made'
Overconfidence in their own abilities

Nobody is immune, but some are definitely worse affected by these natural tendencies than others.

by Independent_Observer | 17th Oct 23, 2:15pm 1697505341

Yip as Jesus said, 'what is it to gain the world but lose your own soul'. Our crazed mindset towards property investment is destroying peoples souls and as a consequence also the quality of our society.

Who cares if you are rich if your suburb/home town/city has turned into a hell hole? You have gained nothing.

by huttman | 17th Oct 23, 11:19am 1697494776

so it's in the right direction, even though a bit slow.

by Iceman | 17th Oct 23, 11:35am 1697495738

Slow but steady, and in the right direction.

by Albert2020 | 17th Oct 23, 11:20am 1697494803

That domestic inflation is still insanely hot given we have been in this high inflation environment for almost 30 months. Likely no immediate hikes but OCR is firmly stuck for a long while to come.

by AshwinRai1488 | 17th Oct 23, 11:22am 1697494937

Expect NZD to fall

by donny11 | 17th Oct 23, 11:44am 1697496272

Yup this is bad for the NZD & good for house prices.

by dr_Mike | 17th Oct 23, 11:38am 1697495902

The annual components add up to 5.7 and not 5.6? Seems someone cannot add.

by Chairman Moa | 17th Oct 23, 11:42am 1697496157

After topping up the family with fuel. Chances are there will be bugger all left for anything else.. Good times ahead for NZ and the rest of the world, but some will see Luxon as our almighty saviour!

by Iceman | 17th Oct 23, 11:49am 1697496596

EVs. Adapt or pay for it.

by Average Kiwi | 17th Oct 23, 11:43am 1697496237

From the Stats Website

Inflation rate for the September 2023 quarter:

quarterly inflation rate was 1.8 percent
annual inflation rate was 5.6 percent
quarterly non-tradeable inflation rate was 1.7 percent
annual non-tradeable inflation rate was 6.3 percent
quarterly tradeable inflation rate was 1.8 percent
annual tradeable inflation rate was 4.7 percent.

Still looks that Non tradable inflation is a big issue. Has been for years, even when Total inflation was in the band.

by KH | 17th Oct 23, 11:55am 1697496905

Hardly exciting. 6.0 to 5.6. Really just much the same.

Beware the derivative. Remember. "Inflation Dropping" still actually means " Prices going up".

by huttman | 17th Oct 23, 11:56am 1697496971

oh well, even cpi drops to the RBNZ target of 2%, it still means prices going up. and what's your point?

by K.W. | 17th Oct 23, 12:02pm 1697497363

Most people's incomes go up by 2% a year so its manageable. Incomes are not going up 6% year. Yet.

by JimboJones | 17th Oct 23, 12:07pm 1697497657

Median weekly earnings from wages and salaries increased by $84 (7.1 percent) to $1,273 in the year to the June 2023 quarter. For men, median weekly earnings increased by $80 (6.1 percent), to reach $1,400. For women, median weekly earnings increased by $85 (8.1 percent), to reach $1,140.15 https://www.stats.govt.nz/information-releases/labour-market-statistics…

by Pragmatist | 17th Oct 23, 12:12pm 1697497933

All income data refers to gross (before tax)

After tax not so much, thanks to lack of indexation of tax brackets. For most that $84 increase was taxed at 33%, so a sub inflation take home pay increase.

by mfd | 17th Oct 23, 12:32pm 1697499133

The effect is more subtle than that, you can't just take off 33% from the % pay rise. You have to compare the marginal tax rate (likely 33%) to the average % paid on the previous income, which might be in the 20%s. When I modelled it for myself I think it reduced my pay rise by something like 10% - not 33%. Will vary quite significantly for different pay rates.

by Pragmatist | 17th Oct 23, 3:05pm 1697508342

I didn't say it reduces your pay rise by 33%, just that it is taxed at 33%. Yes it will vary depending on where you were in the tax brackets, with the worst case being if you were right on the cutout point between brackets, then all your increase gets taxed at the higher bracket.

Also factor that Kiwisaver deductions and Student loan repayments are calculated on your gross, not net income. End result is that 7% payrise thats above CPI inflation actually isn't an inflation beating in the hand payrise.

by huttman | 17th Oct 23, 12:16pm 1697498166

thanks for the figures.

many people didn't talk too much about the National's 'Removal RBNZ's duel mandate', this means RBNZ will no longer has a 'unemployment' mandate. So RBNZ will sacrifice employment if they have to, to get CPI down.

by timbob | 17th Oct 23, 12:11pm 1697497900

Actually wage inflation is running at over 4%.. if you only got a 2% rise, you got swindled.. https://www.stats.govt.nz/news/annual-wage-cost-inflation-remains-at-4-….

by Neddludd | 17th Oct 23, 1:32pm 1697502745

I got swindled, applying for new roles without luck yet. Im getting around it by eating lentils.

by JimboJones | 17th Oct 23, 12:05pm 1697497512

The last thing we want is prices going down. That will cause the opposite problem and will force interest rates back to 0 or below.

Its all a balancing act, the momentum for inflation is down, but we don't want it to go too far down.

by ChrisOfNoFame | 17th Oct 23, 12:48pm 1697500120

I assume that you're having a laugh ...

Adjusting to climate change will ensure inflationary pressures remain high.

We might get imported deflation from Chinese goods for a year or so but that'll be about it (good time to buy whiteware coming soon).

Interest rates at zero is like the speed of light or absolute zero - all are theoretical. (Even an OCR at zero is extremely unlikely. Retail rates? Never.)

by Joe Smith | 17th Oct 23, 12:11pm 1697497870

I wouldn't read too much into the headline figure. Domestic inflation is still well above 6% and higher than RBNZ expected; I think it was David Hargreaves who recently rightly said that this component would be more important than the headline.

With $NZ about 59 cents and falling, I don't see RBNZ failing to match Fed rate rises, which I think are likely before year end. Higher for longer OCR is still the best bet.

by Thats All Folks | 17th Oct 23, 5:14pm 1697516059

100%

However, people will refuse to accept this.

by timbob | 17th Oct 23, 12:21pm 1697498482

Wages running at 6% PA, non tradable inflation at 6.3% (which the RBNZ is targeting). Bit early for celebrating a win over inflation I think. If Jerome Powell thinks 3.7% inflation in the USA is too high and another hike is on the cards, I fail to see how we are done with rate hikes.

by JamesM | 17th Oct 23, 12:24pm 1697498693

Could someone explain in simple terms for a simple man how quarterly inflation of 1.8% is seen as positive.

Surely if we continue at this rate inflation we will still be well in excess of the target range. ie 1.8% x 4 quarters is 7.2%?

Is the 1.8% based on the previous quarter or the corresponding quarter in the previous year?

by John from Bunnings | 17th Oct 23, 12:30pm 1697499003

It's positive because it is down from the previous year's September. Seasonally adjusted its only up 0.2% from the last quarter, accounting for the fuel subsidy ending, home owners rolling onto higher council rates, etc

by BigOldWeapon | 17th Oct 23, 1:09pm 1697501379

So no matter what way you spin it, we are up on the previous quarter? Sounds bad.

by Sharetrader78 | 17th Oct 23, 12:30pm 1697499004

still a long way from the target and will be sticky to come down ..weaker NZD if we are to stop increasing rates and the US looks likely as do AUS to hike... we run major trade deficits so more imported inflation costs to come .. how many more immigrants coming in?

by ChrisOfNoFame | 17th Oct 23, 12:52pm 1697500326

Now people will understand why the RBNZ sold off all those NZD to buy USD some months back.

I wonder when the RBNZ will start buying NZD ... Anyone know? Have they started already?

by Jonny.Foe | 17th Oct 23, 12:42pm 1697499758

Quarterly non-tradable inflation was 1.7%, the hottest three months since March

Quarter 3 is the quarter that local govt rates show up in the CPI - they were up 10% and made up about a third of the qtrly non-tradable increase. The removal of public transport subsidies also kicked in, and the recent spike in rents and insurance costs account for most of the rest of the increase.

The more interesting fact is that imported inflation (as badly measured by tradable CPI) disappeared this quarter apart from fuel. Note also that 60% of fuel increase was the return of excise duty.

by ChrisOfNoFame | 17th Oct 23, 12:59pm 1697500778

Concur.

Housing costs (and costs associated with where you can afford to live, e.g. how much you need to commute) remain staggeringly high and even small movements have big impacts on the CPI. (But don't worry. The NACTs have a solution. No. Wait. They don't! ... It'll just get worse.)

by Independent_Observer | 17th Oct 23, 1:10pm 1697501439

This creates a feedback loop - just as falling rates have done so the last 40 years (eg falling rates decreased living costs, creating measured deflation,resulting in falling rates, resulting in more measured deflation).

The decades ahead could be the opposite of recent history - and this isn’t doom and gloom - it is just a change in paradigm which people appear to be very afraid of for whatever reason - usually it threatens their ego/financial position. Falling rates and rising house prices has an ego attachment for many NZers which is actual quite insane.

by ChrisOfNoFame | 17th Oct 23, 1:29pm 1697502551

Welcome to economics .... it is the study of feedback loops! There are hundreds, if not thousands.

And at any point in time some are influential, most are not. But in a year's time? Who knows. But you can be fairly certain the feedback loops affecting the current economic climate will be deprecated and others will be in ascendancy.

For example, you tie interest rates to house prices. But enter a RBNZ DTI set at a sensibly restrictive level. What then? Will the loop change and it becomes house prices are affected by income rises? Maybe. Could be a good thing too? Maybe. Maybe not.

(As an aside, factor in dealing with climate change, as we must, and persistent deflation is extremely unlikely.)

by Independent_Observer | 17th Oct 23, 2:12pm 1697505170

I'm trying to look at it from a macro perspective - hence why I keep providing links to the US 10 year. Which to me has broken out of a 40 year cycle and now appears to have started a new cycle.

Yip well I've been arguing that we should have introduced DTI after witnessing other global property bubbles burst and while rates were dropping! (ie we should have had DTI from 2010 period onwards). Introducing them now, sure it would be wise, but its years after when they were really needed as the damage is done - too much debt realtive to economic productivity = pain.

Demand for higher wages to pay for high mortgage debt is going to keep inflationary pressures high in my opinion - until prices fall back to lower multiples of income. But that means interest rates can't fall without the NZD getting hit and find ourselves importing even more inflation.

by meh | 17th Oct 23, 2:47pm 1697507240

Yet economics doesn't study anything. It has a set premise that's never changed and much has been corrupted since.

One could suggest house prices, wealth etc are tied to emotional, conditioned fears outside of economics' realm. Data, numbers, statistics can never understand why people behave the way they do. Yet it sets a direction that everyone must adhere to.

Economics like many other constructs has been influenced by the perspective of a few, who have cast that view on to the whole. Over time it has continually narrowed it's focus down to the lowest denominator, embedded itself in the psyche, and no-one is able to question the truth... IMO

by Independent_Observer | 17th Oct 23, 2:51pm 1697507515

Yip I think inflation for example is both a monetary policy and a psychological condition combined together.

by AdamJay1990 | 17th Oct 23, 12:49pm 1697500143

Not sure why this release is being perceived so positively. Domestic inflation (the arguably most important figure) is still insanely high and doesn't seem to be budging.

by Independent_Observer | 17th Oct 23, 12:57pm 1697500625

Vested interests/cheerleaders with too much housing debt want lower interest rates for the benefit of their housing portfolio.

by K.W. | 17th Oct 23, 3:09pm 1697508560

People have gotten very good at deluding themselves over the last 3 years. Aided and abetted by Government propaganda. If everyone tells you 6.3% inflation is fabulous and means interest rate cuts are on the way, you are supposed to just nod your head and believe.

by ChrisOfNoFame | 17th Oct 23, 1:17pm 1697501850

About what I expected.

And looking quite like an accelerating fall is imminent.

Remember what I've said about putting too much faith in bank economists' predictions? They are far from impartial. They were predicting 5.8% to 6.1% publicly whereas I'd stake good money that their analysis of their customers' accounts would be telling a completely different story.

Looking forward ... A shitty Christmas for those in retail that rely on the Christmas period to keep their heads above water. Come February / March the results will be in. March / April and the RBNZ will be making lovin' noises and banks will have given up on the higher-for-longer nonsense and some mortgagors will get heavy discounts. First OCR cut? May? June?

We'll see just how independent the RBNZ is soon. If they drop implementing DTIs then we can call 'political interference' with considerable certainty.

by Independent_Observer | 17th Oct 23, 1:28pm 1697502533

Interesting point on DTIs - still find it bizarre that key was publicly cheerleading for Nats given his banking role.

The corporate/state relationship looks far to cosy for for my liking.

by nktokyo | 17th Oct 23, 1:38pm 1697503107

How does DTI differ from the already implemented serviceability tests?

Do they solve different problems?

by mfd | 17th Oct 23, 2:32pm 1697506349

DTI acts as a ceiling on borrowing when interest rates fall very low as in the Covid bubble. Serviceability tests fell, people borrowed up large and got caught out when rates rose. With a decent DTI, house prices don't kick up so insanely.

As a happy side effect, the leveraged property snowball effect is cut off at the knees - buying that second or third investment property becomes dramatically harder.

by nktokyo | 17th Oct 23, 1:37pm 1697503036

Retail has fallen off a cliff. 6 months later than I thought but here we go. Get your redundancy insurance in.

by DTRH | 17th Oct 23, 11:25pm 1697538303

With inflation once things go up they hardly ever come down.The big exception is house price’s down 20% from highs.