An online Reserve Bank (RBNZ) survey of about a thousand Kiwi householders has found they expect inflation will fall, but only slowly - while they now see house prices rising more strongly than in previous surveys.
And despite the slowing economy, households are not significantly more worried about making mortgage payments, or keeping their jobs, than they have been in the recent past. In fact they see the chances of missing a mortgage payment as being more unlikely now than respondents did in the last survey.
The latest quarterly Household Expectations Survey shows that the median expectation for inflation in a year's time is at 5%, which is the same as the expectation in the previous survey three months ago. The expectation for inflation in two years' time has dropped though, from 3.5% in the last survey to 3.0% this time.
The data for the report was collected by Research NZ on behalf of RBNZ. Fieldwork for this survey was conducted from October 17 to October 27.
The net percentage of survey respondents expecting house price rises rocketed from under 5% in the March survey this year to 56.5% in the latest survey, which is officially styled as a December survey.
The median expectation for house price inflation in a year is now 2%, up from 0% in the last survey, while the expectation for a cumulative increase in five years' time is unchanged at 7%.
The results, particularly relating to inflation, may quite possibly disappoint the RBNZ, which is looking for 'inflation expectations' to decline so that inflationary behaviour does not become ingrained - leading to ingrained inflation.
The sister survey for the RBNZ released last week, the Survey of Expectations, which canvasses the views of a small number of business leaders and professional forecasters, showed a reasonably meaningful fall in the expectation of inflation in the one-and-two year time brackets.
The RBNZ might have hoped to see the same with the latest household survey.
The significant thing about this 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 earlier this year. And the RBNZ has been putting much more emphasis on this survey recently - even bringing forward the timing of this release by a day so as not to clash with the August 16 Monetary Policy Statement release.
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.
Key among the RBNZ's aims with its tightening of monetary policy and interest rate hikes has been to kill 'inflationary expectations'. 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. This fuels actual inflation.
So, these latest results may not be that encouraging on inflation expectations, albeit that they are generally moving in the right direction.