Households have delivered the Reserve Bank (RBNZ) some news likely to encourage it as it ponders its first Official Cash Rate (OCR) decision for 2026, being released this Wednesday.
The country's households do expect future inflation will be lower than it is now. The only fairly major downside to that though is that they also think that the current rate of inflation is more than double what it actually is officially.
Results of the latest quarterly Tara-ā-Whare Household Expectations Survey, conducted for the RBNZ, show that households are now expecting future inflation to be lower than they did at the time of the last survey. This is the second in a series of three RBNZ surveys with results to be released ahead of the OCR decision.
The results of the household survey will be encouraging for the RBNZ because it comes at a time when actual inflation has been rising - to 3.1%, and outside the central bank's 1% to 3% target as at the December quarter.
And it contrasts ,with the first results in the trio of surveys that were released on Friday. That was for was the survey of the 'experts' the Survey of Expectations, canvassing the views of business leaders and professional forecasters. Those results weren't very encouraging for the RBNZ. They showed expectations of the future level of inflation rising across the board. Expectations for one-year-ahead annual Consumers Price Index (CPI inflation) increased by 20 basis points from 2.39% to 2.59%. Two-year-ahead inflation expectations increased by 9 basis points from 2.28% to 2.37%. Five year-ahead inflation expectations increased by 9 basis points from 2.22% to 2.31% and 10 year-ahead inflation expectations increased by 12 basis points from 2.18% to 2.30%.
While the RBNZ's universally expected to keep the OCR at 2.25% at this review, the fairly strong re-emergence of inflation expectations could have quite an impact on how the central bank positions itself for the future and what kind of rises in the OCR might be needed, and when.
The RBNZ likes to keep itself well up to date with what the public think inflation's doing and where it is heading.
To this end it now has three surveys that all cover off views of the level of expected future inflation. These surveys are generally released days before the RBNZ has an OCR decision, with the idea of informing the central bank's decision.
Inflation expectations are important. If people think inflation will rise, they change their behaviour. Those with businesses, for example and responsible for setting prices, might start to incorporate higher inflation into their prices, IE they will raise their prices. This in itself will then produce higher inflation.
Therefore, quelling inflation expectations is key to taking the heat out of actual inflation.
Generally the RBNZ wants to see expectations of the future level of inflation 'anchored' at around 2%, which is the midpoint and explicit target of the central bank's 1%-3% target range.
So, anyway, after the Friday results delivered a knock to the bank, the household survey is, as said above, somewhat encouraging, but with qualifications.
Households have a long history in these surveys of over-estimating official inflation, with for example, the average estimate among survey respondents of the current level of inflation being 7.7%! But that is actually down from 8.0% in the previous survey.
However, the good news is that they still see inflation falling in future and they see it at lower levels than they expected in the previous quarter.
This is a summary, by the RBNZ of the findings from the household survey:
So, while the numbers are not ones that would encourage the RBNZ, the direction in which they are travelling between surveys - IE down - is encouraging, at a time when inflation has been rising. And it might suggest that inflation expectations are not becoming ingrained in the behaviour of households - which is good news for the RBNZ.
The data for this report was collected by Research NZ on behalf of RBNZ. Fieldwork for this survey was conducted between January 23 and February 2, 2026 after the December quarter inflation figures had been released. About 1000 people (1003 to be exact) took part in the survey.
So, of the two survey results released so far ahead of Wednesday's OCR decision, its probably a case of one dose of bad news and one dose of good for the RBNZ.
The final survey in the trio is the one that the RBNZ is clearly looking to become its 'big' one in the future, the quarterly Tara-ā-Umanga Business Expectations Survey, which has a large and broad sample size. The latest results from this one will be out on Tuesday.
14 Comments
Interesting that the survey differentiates between two subjective constructs: inflation and house prices. Given that house prices are a direct result of monetary inflation, this is encouraging. The relationship between how people perceive house price inflation and CPI is an interesting phenomenon among different subsets and the general popn.
For nerds, the ‘net % expecting higher house prices’ series is calculated by finding the weighted percentage of respondents who expect that house prices will increase overall in 1 years’ time and subtracting the weighted percentage of respondents who expect that house prices will decrease overall in 1 years’ time [Non responses are excluded from the calculation].
That is: net % expecting higher house prices = 𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑛𝑜. 𝑒𝑥𝑝𝑒𝑐𝑡𝑖𝑛𝑔 ℎ𝑜𝑢𝑠𝑒 𝑝𝑟𝑖𝑐𝑒𝑠 𝑡𝑜 𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑜𝑣𝑒𝑟𝑎𝑙𝑙 − 𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑛𝑜. 𝑒𝑥𝑝𝑒𝑐𝑡𝑖𝑛𝑔 ℎ𝑜𝑢𝑠𝑒 𝑝𝑟𝑖𝑐𝑒𝑠 𝑡𝑜 𝑑𝑒𝑐𝑟𝑒𝑎𝑠𝑒 𝑜𝑣𝑒𝑟𝑎𝑙𝑙 𝑡𝑜𝑡𝑎𝑙 𝑛𝑜. 𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑜𝑓 𝑟𝑒𝑠𝑝𝑜𝑛𝑠𝑒𝑠
Slightly different to the inflation measure - those who gave a 1-year ahead inflation estimate that is greater than their current inflation estimate, and subtracting the weighted percentage of respondents who gave a 1-year ahead inflation estimate that is less than their current inflation estimate.
Wow, a survey comes to rescue. Same old same old. The people have worked it out that inflation is twice what it has been massaged down to. Food price rose 2.4% in just 1 month and its going to increase. OCR 2.25%, inflation running above 3%, unemployment at 5.5%.
Let's not utter the word " stagflation".
Inflation at 3.2% isn’t high enough for that word. If it gets closer to 4 then yes.
Consumer expectations - i expect that panel of 1003 are the non-economist great unwashed. Are the factors, at individual level, that shape expectations, well understood?
The price increases in the weekly grocery shop are insidious, slow creep. Few, i would expect, would be able to put a % figure on groceries price increases, unless they keep till receipts and analyse over time. Takes a bit of effort. And there are the seasonal factors for fresh produce that can confound trends at a given point in time.
But when the rates or insurance bill comes in and is x% higher than last year, that's attention grabbing. And i hear lots of grumbles about that. Even though within the basket of costs individuals meet on a total annual basis, they may not be as dominant a cost as compared with the perception.
Just looking for a reason expectations are mismatched to objective measures.
Just looking for a reason expectations are mismatched to objective measures
You've missed the state of how almost everything is currently being valued?
A large part of the economy is confidence based, often in defiance to what objectivity would dictate. Sometimes we get a self fulfilling prophecy, sometimes reality comes back to bite us.
I'm on a bit of a health kick. No booze, snacks (except fruits and almonds) or bread/rice/pasta/cereals for 5 weeks. No dining out unless I get a Tank salad for lunch. Also 10k steps a day. I have a toe injury so can't run, just walking.
Some observations:
3 weeks in I've dropped 8 kgs. Half of which was put on last year, half is bonus.
Knees don't ache.
Spending I think could be down 30-50% at the supermarket. Replaced carbs with legumes, which cost SFA. Spending is down 100% on takeaways and crap when I am tired.
Sleeping way better. I was waking up due to sugar after effects from alcohol. I'm a 2 bottles of wine per week person. I guess 2 glasses a night ish, more on weekend.
Very pleased. It is a bit boring, but I'll take that. I was quite a cost conscious shopper beforehand and I'm amazed and how much spend fell off by avoiding virtually everything that comes wrapped in plastic.
Solid work squire.
Good stuff dude. Usually the theory is that if you can consciously alter a behaviour for 6 weeks it's got a decent chance of becoming subsonscious.
There's a bunch of ways we all should be living for our own well-being. They usually run counter to how the market would like you to behave.
Well done sir. I will add that if/when you tire of legumes, your food bill will jump if you stick with whole foods such as fruit, veges and meat. That stuff's expensive if it forms the bulk of your weekly shopping.
No booze - yikes!
:D
Well done, I should give it a go.
Been reading the 4-hour body by Tim Ferriss?
It looks a lot like what he advocates and I used it to get rid of weight that's mostly stayed off.
https://www.penguin.co.nz/books/the-4-hour-body-9781446446881
Increasingly every one in society is going with less as a requirement of needing to spend less. With one exception...bank profit.
Why is that, can't just be everyone chasing tax avoided specu gains...?
So: we're functionally broke becasue we're essentially borrowing to keep the lights on, inflation looks like it's going to persist out of mandated band (and even higher than the published rate depending on what is is put into the basket) and improving per-capita productivity that might dig us out of the hole keeps slipping.
Did I miss anything, or are we on the verge of some kind of death spiral?
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