'Sticky non-tradeables inflation looks set to seriously test the RBNZ's patience'

Economy / news

Overall inflation direction encouraging but bank economists cautious about stubborn non-tradeable inflation

14th Dec 23, 7:40am by Gareth Vaughan

Source: 123rf.com

The latest iteration of Statistics NZ's Selected Price Indexes, which incorporate about 45% of the Consumers Price Index (CPI), paint a softening overall inflation picture but not for the Reserve Bank's current bête noire of non-tradable inflation, BNZ Senior Economist Doug Steel cautions.

Statistics NZ's second monthly Selected Price Indexes (SPI) release on Wednesday, for November, showed seasonally-adjusted food prices down 0.2% in November 2023 compared to the previous month. The annual rate of food price inflation dropped to 6.0% from 6.3% in October, and from a peak of 12.5% in April, which was a 35-year high.

Elsewhere, there was a 0.2% monthly fall in the 'flow' measure of rents, which measures costs of new rental agreements, plus lower fuel and international air travel costs, but higher domestic air travel and accommodation costs.

Steel notes on balance the SPI data makes BNZ's December quarter CPI estimates "closer to rounding down than rounding up." BNZ's economists are picking December quarter CPI of 0.6% month-on-month and 4.7% year-on-year. That compares to the Reserve Bank's expectations for 0.8% and 5%.

In the September quarter Statistics NZ had the CPI up 1.8% quarter-on-quarter and 5.6% year-on-year. The quarterly non-tradeable inflation rate was 1.7% and the annual rate 6.3%. The quarterly tradeable inflation rate was 1.8%, with the annual tradeable inflation 4.7%.

Tradeables are goods and services that can be substituted with imported or internationally available alternatives. Non-tradeables are goods and services that can't be. (See more on tradeable versus non-tradeable inflation here).

Steel notes; "At this point, non-tradeables inflation continues to be shaping up to print above the Reserve Bank's 5.7% year-on-year view for Q4 [the December quarter]."

"This is important as the Reserve Bank emphasised non-tradeables inflation in its recent [monetary policy] statement as it turned overly hawkish."

"Annual headline CPI inflation still looks like falling further from Q3's 5.6% and under 5% in Q4. And the direction of travel could well assist with inflation expectations moving the same way over time. But sticky non-tradeables inflation looks set to seriously test the Reserve Bank's patience, which is already clearly wearing thin," Steel says.

Meanwhile Westpac NZ Senior Economist Satish Ranchhod says the SPI were softer than expected, leading Westpac NZ's economists to revise down their December quarter CPI forecast to 0.3% from 0.6%, leaving prices up 4.5% for the year.

Ranchhod also says this SPI reinforces the downside risks to the Reserve Bank’s forecast for a 0.8% December quarter CPI rise.

"The Reserve Bank will take some comfort from the easing in headline inflation. However, while we’ve seen volatility in some specific prices, some of this is just reversing the large price rises that we saw during the pandemic as a result of supply chain disruptions. That won’t be an enduring source of deflationary pressures for the Reserve Bank," says Ranchhod.

"Core inflation, especially for domestic prices, remains elevated. That means inflation is still set to remain far above the Reserve Bank’s [1% to 3%] target well into the new year."

ASB Senor Economist Mark Smith notes recent inflation signs are encouraging, but there's still a long way to go.

"The monthly CPI data are underweight for stickier services prices that have more of an impact on core inflation and more persistent inflation trends. The Reserve Bank will want to see further concerted progress to prevent hiking the Official Cash Rate [currently 5.50%] further. We expect this to be the case, but for the Reserve Bank to keep OCR settings tight to ensure circa 2% inflation is delivered. No OCR cuts are expected until 2025," says Smith.

Statistics NZ will release December quarter CPI data on January 24.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

57 Comments

by Jonny.Foe | 14th Dec 23, 8:57am 1702497444

Right, let's have a look at that non-tradable inflation shall we?

In Sep 2023, CPI inflation went up by about 1.6% for the quarter (and 5.6% for the year). Non-tradable inflation contributed a shade over 1 percentage point to that increase (1.065 to be precise). What pushed non-tradable inflation up? There are 35 'level 2' components of non-tradable inflation, but almost all the heavy lifting on non-tradable inflation came from just 8 of these components (percentage points contribution shown).

Property rates and related services: 0.304 (nearly a third of quarterly increase)
Actual rentals for housing: 0.127
Passenger transport services (domestic flights): 0.120
Insurance: 0.104
Restaurant meals and ready-to-eat food: 0.085
Private transport supplies and services: 0.065
Price of getting a house built: 0.051
Booze: 0.045

Together these 8 components of non-tradable inflation contributed nearly 90% of non-tradable inflation in the quarter.

So, faced with these basic facts, how would you set about 'taming' non-tradable inflation? By reducing the disposable income of people with debts, increasing the interest paid on savings, and boosting bank profits? Removing the RBNZ employment mandate maybe?

Go down that list one-by-one and see how much of the non-tradable inflation in the quarter was actually demand sensitive? Will Local Govt be better funded if people are spending less money? How poor would we have to make kiwis to prevent rents going up as tens of thousands of people arrive in the country? Are domestic flight prices high because kiwis are rolling in money and bidding up the price of seats? Will insurance costs go down if people can't afford to pay for it?!?

The data released yesterday suggests that rents will continue to push non-tradable inflation up in Q4, along with tobacco (tax increase in Oct) and domestic airfares and accommodation (tourists are back). The Govt will blame excessive public spending (lol) and the economic commentators (author of this article excepted) will roll out their lazy 'consumers need to cool their jets' nonsense. Don't even get me started on what a crock the non-tradable vs tradable methodology is.

by Roheir | 14th Dec 23, 9:07am 1702498074

100% agree Jfoe

by ChrisOfNoFame | 14th Dec 23, 9:22am 1702498939

Concur. The OCR is a 30+ year old tool based on "pub economics".

Due to the unfairness of how it works - I can't understand why nobody has challenged its use under the NZ Bill of Rights. That would a good argument to have. (The problem, as always with the Law, is that the people being disadvantaged have no money and the ones being advantaged have plenty. Same old, same old, and the rich get richer.)

by Biologist | 14th Dec 23, 9:30am 1702499450

Amen.

by Te Kooti | 14th Dec 23, 9:47am 1702500431

Sorry Jfoe, your argument is flawed. We held interest rates well below already stimulatory levels for an extended period of time when tail winds were delivering low CPI prints and we now need them to stay high - regardless of the underlying components

We either target inflation or we don't, we cannot start to pick and choose now.

by Jonny.Foe | 14th Dec 23, 10:24am 1702502658

You see, there you go. You're assuming that low rates push consumer prices up and high rates push them down. Stand back and look at this coldly: We respond to the price of stuff going up by actively reducing disposable incomes and making people unemployed. It's just daft..

by Roelof | 14th Dec 23, 11:00am 1702504808

Jfoe... No...He is not saying that at all. TK said ..

" We held interest rates well below already stimulatory levels for an extended period of time when tail winds were delivering low CPI prints".

Ask TK to qualify what he means... before putting "words in his mouth ".

by Jonny.Foe | 14th Dec 23, 12:17pm 1702509445

Is that different? I may have misunderstood, but I was assuming that this meant that TK considered that rates were stimulatory - i.e. that there were early indications in the near-term data that these 'stimulatory rates' were setting fire to prices (causing early stage inflation-, BUT that this was not showing up because of the lagging data in the annual CPI.

by ChrisOfNoFame | 14th Dec 23, 11:10am 1702505459

re ... "We held interest rates well below already stimulatory levels for an extended period of time when tail winds were delivering low CPI prints ..."

For over 8 years we had low inflation and low interest rates. You may conclude they were "stimulatory" (I don't) but they didn't drive up inflation.

Ergo, when you conclude, "and we now need them to stay high - regardless of the underlying components", your conclusion doesn't follow the observable facts. i.e. low interest rates, stimulatory or not, do not always drive up inflation.

You'll need to show more reasoning to justify your conclusion as the premise you use does not.

by J.C. | 14th Dec 23, 11:45am 1702507520

For over 8 years we had low inflation and low interest rates. You may conclude they were "stimulatory" (I don't) but they didn't drive up inflation.

Nonsense. Because the CPI was relatively stable, it doesn't mean we had "low inflation". This is part of the problem. Our limited measures of inflation are typically understated and not framed quickly. While inflation was "low", the money supply mechanism has been chugging away to support the engine of the economy - credit for the ponzi and consumer spending.

The crypto bros understand this far better than most people at the neighborhood BBQ.

by ChrisOfNoFame | 14th Dec 23, 3:21pm 1702520507

If you are going to redefine the meanings of words with defined economic meanings and introduce your "own research" as to why measures of inflation are lying and/or part of some grand conspiracy theory, then its pointless trying to reply. So I'm only to return with what you said: Nonsense.

BTW, the "crypto bros" know only that scarcity creates value when something scarce can also be used as a medium of exchange. Much like gold in that regard.

by J.C. | 14th Dec 23, 4:24pm 1702524270

Some of the crypto bros (not all) will be aware of Truflation and why it exists. Then again, Truflation measures price levels. It does not measure the impact of money supply on price levels and the degradation of the money supply.

If the CPI tells you that inflation is 5%, why do you accept that is some kind of truth? It's a construct that is constantly manipulated.

Truflation offers a new inflation truth-set to provide reliable financial data for better decision-making. It uses 10 million data points and updates indices daily, offering more comprehensive and up-to-date information compared to traditional indexes updating monthly. Truflation's secure blockchain infrastructure provides unbiased, verifiable data for the growth and sustainability of business decisions.

https://truflation.com/

by Roelof | 14th Dec 23, 11:46am 1702507578

Chris... Are you implying that there some direct cause/effect relationship between inflation and interest rates..?

That seems to be your logic in rebutting what TK said..

My take on what TK said is this.... That that forces of Globalization have provided deflationary "tailwinds" in western countries for many yrs. Some of the effects were cheaper goods, softening of domestic wage rate inflation ( work visas etc ), Access to easy Capital that enables chronic Current acct. deficits...etc...etc...etc

In that "environment" I think one can argue that the RBNZ kept interest rates too low...and were too stimulatory. (One way of looking at it might be to look at NZs' productivity growth over the last 30 or so yrs and compare it to the level of credit growth over that time. )

Of course... This is not the RBNZs' fault. They were simply implementing the Inflation targeting policy framework, ..which most of us agree, is flawed.

Its not interest rates , per se, but the demand for credit that drives the supply /demand dynamic.

An example is that increased demand ,as a result of credit growth, might well manifest as greater quantities of goods imported, rather than increased prices and the implications of that are seen in our Current Acct , rather than CPI. ( It depends on the bigger Macro environment we are in )

Relying on Simple "correlations" dont lead to this kind of "seeing".... For me its been living thru and pondering 40 yrs of economic evolution.

just my view

by ChrisOfNoFame | 14th Dec 23, 2:52pm 1702518747

re ... "Are you implying that there some direct cause/effect relationship between inflation and interest rates..?"

Um. You know how the OCR works, right?

by Roelof | 14th Dec 23, 3:03pm 1702519419

Chris... Your answer, as a question, is so inane... I'm assuming its an attempt at insult ?

by ChrisOfNoFame | 14th Dec 23, 3:26pm 1702520783

No, no insult was implied. What you said makes no sense. I was being as polite as I could.

By all means have a go at explaining why you think there isn't a " direct cause/effect relationship between inflation and interest rates".

Once you've have a go at that, here my reply: https://www.rbnz.govt.nz/education/explainers/the-official-cash-rate-ex…

by Roelof | 14th Dec 23, 3:51pm 1702522289

Chris,

My understanding of the RBNZs' use of interest rates, is to influence the demand for credit.

In this regard, the OCR is a derivative approach .

The demand for credit is influenced by many things..... hence the expression that the OCR is "a blunt tool".

So... In this context , any cause/effect relationship of Interest rates to inflation is not so much direct,

In a monetary sense, credit growth has more of a cause/effect relationship with inflation than does. interest rates....., which is not to say that interest rate are not important .( They are the tool of choice... by the rbnz )

That's my view.

by ChrisOfNoFame | 14th Dec 23, 5:37pm 1702528622

Ah. I think I see what you're trying to say.

But perhaps you are conflating 'credit growth' with the 'growth in the money supply'?

The money supply has to grow. It is quite natural. Consider this:

A guy buys tools to build a hut. They cost $100. He builds a hut from the surrounding trees which cost nothing. Along comes another guy. "Cool hut!", he says. "I need a hut. Will you sell it?". The first guy thinks for a bit. Only his tools cost money. But he feels his labor (sweat and time) is worth something. "$300", he says. "Done", says the second guy. "I just happen to have $300 for doing farm work for that farmer back there." And suddenly labor has been turned into money. Not once - but twice.

Thus the money supply continues to grow. If it doesn't grow - as most bitcoins don't - the value of a money unit becomes so enormous it becomes a very ineffective means of exchange. Can you imagine how difficult buying a beer would be with a single $30,000 bitcoin?

But 'credit growth' is subtly different. It is money created for future stuff. When you take out a mortgage, the bank securitizes your house and gives you money to buy it. In return, you agree to pay them the principal back over 30 future years together with interest payments based on what the interest rates are at that time. So far so good.

But what if interest rate is suddenly raised?

Suddenly, you can no longer afford the cost of borrowing the money. I.e. the interest you pay. So you don't buy.

In this case the effect of raising interest rate is direct and immediate. The link between interest rates (the cost of borrowing) and credit demand is clear.

by Chaosinflesh | 14th Dec 23, 12:01pm 1702508508

We've had significant long-term inflation.. it was just conveniently hidden in house prices and only measured by second- and third-order derivatives (a.k.a. the 'wealth effect' -> such as increased demand for boats, cars, campervans, holidays etc on the back of cheap credit backed by house price ... oh wait, there's a tie-in with interest rates there...). And conveniently, the largest derivative of this cheap credit-based inflation - leveraging to purchase more houses and pushing house prices up - is still ignored!

by J.C. | 14th Dec 23, 12:04pm 1702508688

We've had significant long-term inflation.. it was just conveniently hidden in house prices and only measured by second- and third-order derivatives (a.k.a. the 'wealth effect' -> such as increased demand for boats, cars, campervans, holidays etc on the back of cheap credit backed by house price ... oh wait, there's a tie-in with interest rates there...). And conveniently, the largest derivative of this cheap credit-based inflation - leveraging to purchase more houses and pushing house prices up - is still ignored!

Bingo

by ChrisOfNoFame | 14th Dec 23, 3:30pm 1702521017

So you too are re-defining what 'inflation' is?

It is hard to have a sensible discussion if people can't agree on the meanings of words. Sorry, I'm going to stick with accepted meaning.

by the Joneses | 14th Dec 23, 3:58pm 1702522693

They were not arguing what inflation is, simply how it is measured.

Everyone agrees what inflation is, money becoming less valuable compared to what you buy with it. But only the government gets to say what the official inflation rate is, and how exactly inflation is measured.

by malamah | 14th Dec 23, 9:42am 1702500125

I fear rates have a long way to go yet, especially derelict parts of the country, such as the capital. High interest is not helping, neither is allowing cashing out on massive capital gains. Something has to give.

by rastus1 | 14th Dec 23, 9:46am 1702500418

What comes first - cart or horse. Council costs go up, so rates go up. And so on.

by Te Kooti | 14th Dec 23, 9:49am 1702500559

Rates are going up because of inflation, we should have gone harder earlier.

Pre 2015 RBNZ would have squashed it like a bug.

by Roelof | 14th Dec 23, 10:03am 1702501411

Pre 2015 RBNZ would, most likely, not have gone down the road of Ultra low % rates and QE ....as a covid response....

by Jonny.Foe | 14th Dec 23, 10:25am 1702502704

Sorry, but this statement tells me that you have your head on the wrong way round.

by Te Kooti | 14th Dec 23, 10:32am 1702503135

Using "whataboutery" with CPI is the playbook of the ill-informed, you can engineer any number you want by ex-ing inputs.

by ChrisOfNoFame | 14th Dec 23, 11:36am 1702507006

Like the RBNZ does?

The CPI everyone loves to quote as gospel for inflation is actually a measure that only the RBNZ should be using as it excludes some real world costs to consumers. Like what? ... Like interest rates!

So when the RBNZ raises the OCR the effect of higher interest rates is initially not reported in the CPI. But over time it does start to show up. Not as interest rates hikes directly, but as the increase in other goods and services affected by the now higher costs. Like where? Like the cost of living and the wages needed to maintain that cost of living.

by Jonny.Foe | 14th Dec 23, 12:21pm 1702509695

it was the 'squashed it like a bug' comment that had me guffawing. The only central bank on the whole bloody planet that could reasonably claim to have crushed this episode of inflation 'like a bug' is the Bank of Japan. How much did they hike rates? The other countries that have got on top of inflation quickest (Denmark, Spain, Switzerland etc) have done so using Govt policy and targeted investment. The central banks have been bystanders.

by M0ralHazard | 14th Dec 23, 11:13am 1702505580

Don't you mean "rates are going up because of decades of under investment in infrastructure, which is now coming back and biting us in the rear end"?

by Advisor | 14th Dec 23, 10:12am 1702501960

The worrisome part is that the rates are going up at much faster clicks to simply maintain the core services.

Our water infrastructure has to be fixed by nothing short of uprooting thousands of kms of 3-water pipes around the country and replacing them entirely plus replacing the treatment plants that are well-past their design lives. Plus, there is the need to rapidly expand infrastructure and service delivery to cater to the rapidly growing population.

There is just no way local councils could front up the millions or billions in capital and recover these in the form of rates trickling in each year over decades. Either we pay more for the foreseeable future through other avenues (service more Crown debt to pay for capital costs, higher water charges, congestion charging, etc.) or accept lower quality of basic amenities.

by Te Kooti | 14th Dec 23, 10:07am 1702501674

Why not, that's what ratepayers want?

by Advisor | 14th Dec 23, 10:55am 1702504555

If the councils are somehow able to borrow such huge sums over a small period to fund those capital projects with only rates revenue to show for (underground pipes don't exactly make good collaterals), it would seriously dent their creditworthiness. So, ratepayers will have to bear high debt-servicing costs due to the higher risk premium.

by morepork | 14th Dec 23, 11:01am 1702504897

In the USA property taxes are often 1-2% or property value, far higher than the typical rates burden here. There's no reason rates can't increase significantly.

by K.W. | 14th Dec 23, 3:20pm 1702520413

Thats because house prices are about half what they are in NZ. The average house price in Texas is $303k and their property tax is one of the highest in the USA at 1.6% (the average is 1%) so that would be $4848 a year in property taxes. I wish my rates were a mere $4k a year.

by morepork | 14th Dec 23, 3:51pm 1702522317

That's nearly 8000 NZD/year. The vast majority of NZ households have rates bills less than that.

Where I used to live in California the basic 3 bedroom house next to our sold and had property tax increase to a touch over $20k USD/year

by rumpole294 | 15th Dec 23, 1:08pm 1702598903

Calipornia and Gavin Newsome says it all - vote for shit don't complain about the stench - its present in every democrat state - Wellington NZ ditto.

by morepork | 14th Dec 23, 10:59am 1702504759

With the amount of debt local governments have, and the debt limits imposed on them, any increase to their funding costs will cause higher rates. That component looks like it has a positive feedback loop if rates go up.

by ChrisOfNoFame | 14th Dec 23, 11:19am 1702505973

The insurance component is an interesting one.

But first, definitions are critically important as many people I've discussed tradables and non-tradables with have the definitions wrong (and think they're about imports and exports which is part of the puzzle but not the definition.).

Tradables = can be substituted ... with alternatives.

Non-tradables = can NOT be substituted ... with alternatives.

So can you swap your insurance with an alternative? According to the measure, it is a non-tradable component and therefore can not be substituted.

A bit of a digression here ... How many people have actually read their insurance documents, especially the policy wording? Do they actually know a) what is covered, and b) under what events will a payout be made, and c) what the payout will be and how it is limited. Answer: Very, very few. It not like buying a liter of 91 octane gas. Insurance policies differ, sometimes quite substantially, and many parts of the cover are negotiable and money can be saved, or more cover bought. Take house insurance for example. Did you know you can buy house insurance that excludes earthquake cover? Or that you can set limits for the total payout? Or that you can adjust your excess (what you pay before the insurance company starts paying - also called a deductible in other countries) up or down, and by considerable amounts if you wish? In fact, an insurance policy is much more like a cake. When someone offers you a 'cake' - your first question is 'what sort'? And 'how big'. And the questions can go on and on.

Why the digression?

When faced with a cash-crunch the consumer can re-evaluate the price of their insurance cover. By shopping around and finding a better price for the same cover, the consumer can drive the price down. But insurance can not be substituted, apparently.

But the same consumer, when faced with a cash-crunch, can re-evaluate their insurance cover and make trade-offs so less cover is bought and their risk increases. But has the price gone down? No. They just bought less. Did non-tradable inflation go down? I'm not sure how Stats calculate the effect but my guess would be Stats probably class it as a price fall which it actually isn't.

But what happens if they decide to wear the risk and cancel their policy. I.e. leave the market all together?

Is there an effect on non-tradable inflation? No. None whatsoever.

So one consumer short of cash has left the market. So who is left buying?

The people who are left are those who can afford the higher prices. Read that again. The people who can afford to pay more. I.e. wealthier, or prepared to cut back on other spending to continue to pay the premiums. Thus the people doing the price setting are only those who can afford it. And they are the ones continuing to drive inflation by paying the higher prices.

But what of the effect of our cash strapped consumer of having totally left the market? And perhaps thousands like them. Have they had an effect on lowering inflation? No. None whatsoever. Is that how the OCR is supposed to work? Or perhaps a better question is, is that how you thought the OCR would work, i.e. drive people into riskier financial positions while having zero effect on inflation?

So where do these now 'at risk' consumers show up?

In falling GDP. (i.e. less product is bought.)

And eventually layoffs in the insurance industry as reducing headcount is the fastest way to maintain profits.

And should there be a disaster? ... NZ Inc goes backwards big time as less insurance money comes flooding in and our taxes must pay for government to address the needs of these now destitute people.

Is that how rises in the OCR are supposed to work?

by K.W. | 14th Dec 23, 3:06pm 1702519577

So what are you suggesting? That they cut the OCR based on overseas inflation rates, while Kiwi's just have to suck up 6% inflation on the things they cant avoid buying? How is that helpful to anyone in the long run?

by morepork | 14th Dec 23, 3:55pm 1702522500

Unpopular opinion, but even high single digit inflation doesn't do any real harm to the economy from what I've read. Annoying sure. Detrimental to the people if wages don't keep up, yes.

But we just elected a coalition that has removed fair pay agreements under urgency, so clearly wages keeping up with the cost of living isn't a goal we care too much about.

by the Joneses | 14th Dec 23, 4:21pm 1702524060

All part of Nationals great plan for the economy. Just look at their website:

In government, National's focus will be on creating and delivering opportunities for all shareholding Kiwis and their wealthy families to get ahead.

We will do this by rebuilding landlords dignity while screwing the economy to reduce the cost of living (increasing homeless)

We will:

Encourage unfit people back to work, reward passive investment effort by siphoning wealth to the top 1%
Grow skills and keep talent in New Zealand, without paying them any more.

National will rebuild the economy to get it working for allready wealthy New Zealanders.

https://www.national.org.nz/plan

by rumpole294 | 15th Dec 23, 1:04pm 1702598658

Jfoe - Thanks so much for those figures, they put a real insight on the source of inflation, I have suspected that some were the cause but now you have confirmed - thanks.

by M0ralHazard | 14th Dec 23, 9:08am 1702498104

"leading Westpac NZ's economists to revise down their December quarter CPI forecast to 0.3% from 0.6%"

0.3% for the quarter is only 1.2% annualised. Even if it comes in at 0.6% that is 2.4% annualised so well within the 0-3% band.

Anyone who thinks the OCR needs to go up again needs their head examined.

by Squishy | 14th Dec 23, 9:26am 1702499199

RBNZ has the tools, the question is if there are too many doves.

by ChrisOfNoFame | 14th Dec 23, 11:20am 1702506012

The RBNZ has a hammer.

by Jonny.Foe | 14th Dec 23, 12:24pm 1702509869

Yep, they have a hammer, and they are pretending to chop down a tree with it... while hoping nobody notices how absurd this is.

by sadr001 | 14th Dec 23, 10:13am 1702502021

Council rates rising by 30% whilst being weighted at 2 - 3% (depending on the inclusion of water and waste disposal, etc) kinda guarantees a high non tradable inflation figure!

when looking at just the non tradable items, council rates account for about half of the increase (ie. exclude council rates and we are back in the 2 % ish range)!

by MikeM | 14th Dec 23, 10:26am 1702502770

If food is omitted from the inflation equation like it is in other countries the inflation number would be considerably lower.

Use a consumption expenditures index like the Fed does. It strips out volatile food prices.

by ChrisOfNoFame | 14th Dec 23, 11:25am 1702506352

The Fed uses multiple inflation indexes and considers all of the major ones.

The RBNZ has just one ... (And while not in their remit, they hopefully consider Stats's Household surveys which better represents inflation from a household's perspective.)

by kiwi_overseas | 14th Dec 23, 12:33pm 1702510391

And yet to come the proposed property rate increases for 2024/25 at about 2x inflation.

Central government needs to force Local govt to limit rate rises to the target inflation band.

by M0ralHazard | 14th Dec 23, 1:44pm 1702514652

Why do they need to do that?

by kiwi_overseas | 14th Dec 23, 4:26pm 1702524392

Because local government is an arm of central government and should be required to aim for the inflation target band to be consistent with government policy.

Because ratepayers can’t continue to afford to pay rate Increases well above the inflation rate.

Because we are now a poor country and need to wind back the service levels.

by ChrisOfNoFame | 14th Dec 23, 3:37pm 1702521473

Or you can take the view that rate payers have been underpaying for council services they have been consuming for 30+ years and now it is time to pay the piper.

Having smaller property with a lower rates bill never looked so go, huh?

by rumpole294 | 15th Dec 23, 1:20pm 1702599634

Local binding referenda that requires councils to automatically resign if rate increases exceed CPI so a new council is elected on their rate rise policy - democracy in action.

by K.W. | 14th Dec 23, 3:08pm 1702519696

Immigration is pushing up rents. That's an easy lever for the Govt to pull. A quick "hiatus" on immigration approvals under the guise of redesigning the system and improving its integrity.

Domestic flight prices are going up because Air NZ has run out of covid credits, and is back to gouging its domestic customers in order to subsidise its international ones as the international routes are competitive and the domestic ones are not. Last I checked, AirNZ is majority owned by the Govt, and I do believe Luxon used to run it. A quick word in the ear of a few people, followed by a ComCom threat should do the trick in that department.

Building materials is also a quick win - quickly implement the NZ Standards bypass like they are doing in the pharma industry. If something has been certified in two countries already (eg. Australia, USA) then its automatically accepted as meeting code in NZ.

So really, there are lots of things the Govt can do to bring down inflation. They just need to get on and do them.