October 19, 2025 • 12 mins
Annual inflation has risen to a 15-month high of 3%.
Economists had been expecting inflation to reach or surpass the 3% upper limit of the Reserve Bank's target band.
The central bank's expected to look past this current spike when it reviews the OCR next month.
New Zealand Herald Business Editor-at-large Liam Dann told Kerre Woodham that, “this this drip feeding of the rate cuts means that everybody just waits.”
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Episode Transcript
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Speaker 1 (00:06):
You're listening to the Kerry Wood and Morning's podcast from
News Talks.
Speaker 2 (00:10):
He'd be as you heard in our news, annual inflation
has arisen to a fifteen month high of three percent.
Economists had been expecting inflation to reach that also pass
the three percent upper limit of the Reserve Banks target band.
The Central Banks expected to look past this current spike
when it reviews the OCR next month. It reckons the
(00:32):
economy has been weak enough to start pushing inflation down.
New Zealand Herald Business editor at large Liam Dan joins me, Now,
good morning, some late breaking news coming into your phone.
Speaker 3 (00:45):
Phone shouldn't be get near that. It shouldn't be on
should It's okay, but I'm reading the latest news off
it because it's all just coming out really yeah, so
look bang on. Expectations not great, but that the big
headline has got to be power prices. So in terms
of driving up inflation, the word power prices. We've had
(01:08):
in this country since March nineteen eighty nine, the biggest
annual increase sorry yeah, since March nineteen eighty nine, when
there was some I can't really remember, but there was
a bigger going through at that time, and that spiked it,
so that is pretty is this the gas again will
be that there's actually just shortt Well, it's not all
(01:30):
the wholesale price. It's to do with distribution. I'm not
an expert in this very complicated industry, but you know,
like for example, companies like Genesis, the retailers have said, look,
you know they every five years retailers pass on the
(01:52):
costs that they've been accumulating from increases from the lines company.
So that that was included in that quarter, I think.
But yeah, there was also you know, the lakes are
full now and wholesale power prices have come down, but
they were spiking earlier in the year and we all
felt it right through winter unfortunately, and so that that
(02:13):
was a big one food where we got food on
you know, food's been up around four or five percent
so and rates have been high as well. So you know,
if you look at they are things that you just
can't avoid, food rates, and so people feel it, and
they feel more acutely than the three percent because some
(02:36):
of those other things that are keeping keeping it sort
of pushing down the other way. You know, it can
be anything from international travel to you know the price
of getting an accountant or something like that. You know,
things that services and things that we don't necessarily have
to spend on. So if you're just you know and that,
so that affects people who are spending more of their
(02:58):
income to survive and makes it pretty tough. So you know,
that is all horrible, but it's also already happened. So
it's worth remembering that this is the third quarter. We've
already paid these prices, and there are some positive signs.
As economists mentioned, it's bang on the target. The power
(03:19):
prices won't be going up or anything like that. Again,
rents well not not in this current quarter because you
know you're not going to get the lines companies. The
distribution charges and wholesale prices are down a lot. So
you know, I can't can't promise further out or next winter,
but so that'll be promising. Food prices have already started
(03:41):
to come off. Butter's down. Yeah, yeah, so I mean
that genuinely. You know, I see it at the supermarket already,
butter not cheese. I got to say, I've watched these
things very closely, so.
Speaker 2 (03:54):
I know these things.
Speaker 3 (03:54):
Butter prices has definitely started to improve, and so I
think from a big macro economic point of view, this
isn't going to change anything for the Reserve Bank. So
we're still going to get another rate cut, possibly one
after that if things are still really bad.
Speaker 2 (04:13):
You don't think they'll go hard before Christ. I mean,
because this drip feeding of the rate cuts means that
everybody just waits. Yeah, and I've got a lot of
employers who are telling me that they are not going
to invest or grow while they've got the fear of
a left block coming in, which means it's going to
be a self fulfilling prophecy if they don't start growing.
Speaker 3 (04:34):
They have to be careful though, because they have, as
we know, a single mandate. It's this government is brought
in which says only inflation is their only only target.
So previously they could have gone, oh, unemployment's looking bad,
we'll factor that in and do a double. They do
have to look at inflation.
Speaker 2 (04:50):
And the two tier economy.
Speaker 3 (04:51):
Yeah, and I mean, you know, I've argued that I
can see the logic for that, but in terms of
timing it hasn't been fantastic for this government. It's almost
I suggested, it's almost an own goal because they could
have moved faster with a the dual mandate.
Speaker 2 (05:06):
Quite possibly, But I suppose they were so busy trying
to fix everything at once with the night, as you've said,
with the Night of the Future, and they're not going
to be thanked for that unless things start to improve
in the short term.
Speaker 3 (05:17):
Yeah, I mean, it wasn't it was It was an
odd one to prioritize it was that in their taxkit.
So I struggled, struggle.
Speaker 2 (05:24):
Struggled with they remember those.
Speaker 3 (05:27):
Well, no one's going to remember them at the voting
booth next year, and and it's unfortunately so yeah, look
it'll I guess this is good news in a way
that it's bang on target. The economists have got it right.
Nobody's going to be panicking. The markets are unmoved, so
we've still got the seeds of the recovery starting starting
(05:51):
to roll. I mean, as you say, it is, it
is a very slow process. If people think the rates
are going to be down lower in February, they hold
off even longer. But I wouldn't. I mean, you know,
there's plenty of economists who are warning that you're not
going to see that much more on the mortgage. You know,
the retail mortgage end.
Speaker 2 (06:11):
There's a bit of there's a bit of riggle room
within the different trading links, though, isn't there a little?
Speaker 3 (06:16):
They move pretty fast to keep there. One year, two
year and six months about the same. Yeah, I guess
you know, people have held off, and to me, what
is keeping people from spending is not it's not that
so much the locking and the rates. It's the still
the fear around jobs. And the next piece of ugly
economic data that we get is going to be the
(06:38):
unemployment numbers.
Speaker 2 (06:40):
I know I could have done with that your column
quite frankly, well that was really that was the sub
editors with the headline the economy is recovering, Brace yourself.
There's bad news coming Liam Dan, good on you.
Speaker 3 (06:52):
But there is the point of that, though, is that
I think we've got a recovery happening, and you're going
to get but we're going to have, you know, news
about horrible power prices and things. Today, we're going to
get an ugly unemployment number. They're all historic, and then
we're going to get right before Christmas, we're going to
get a GDP number that could say that we were
back in recession. And that's the way it works. The
(07:13):
headlines come later, and we just don't want to let
them disrail derail us in terms of confidence, because you
have to think about what we're in right now, and
hopefully there are some signs that there are some signs
around consumer spending. Some towns are doing better than others.
I was in christ Church in the weekend, better and
better and better. Although I talked to people in christ Church.
(07:37):
I've got friends who were made redundant, you know, from
tech industry and things. And I've got a family member
who runs a small business working with a large number
of other small businesses at B to B accounting type thing,
and they've they're saying that they've had the toughest year
they can remember in terms of, you know, their clients.
And so even the cities that are supposedly doing well
(07:59):
have had a tough year. So a stretch to say that,
you know, you don't want to assume that it's it's
all Auckland and Wellington's blues.
Speaker 2 (08:09):
No. Somebody says too that the White Cuttle regional rates
an increase of twenty three percent. Somebody else says the
food prices only go up, they never come down. Same
for power and rates. No signs of green shoots whatsoever.
Economist government and Hosking are dreaming.
Speaker 3 (08:25):
Yeah. I mean it's not true though, because the food
prices do come down. I mean so so much of
our food is based on commodity prices, and right now
beef prices are very high, so beef lam vegetables are
up a lot in the last quarter. I mean it's seasonal.
They will come down. Yeah, And I'm watching butter come
down and cheese will come down again, because we can
(08:47):
see it in the commodity prices that are coming through,
you know, six weeks two months ahead of where it
ends up in the retail. So probably never feels like it.
There's always something, you know, coffee prices or choplerate prices.
Someone else is having a problem with their growing season
and somewhere in the world, so that that is an issue.
(09:08):
But I think we will. I think we'll see some
positive stuff there over the coming.
Speaker 2 (09:13):
Now somebody else has conflated a text. I think this
headline inflation number is a nonsense. The inflation experience by
most of us, who spend most of what we earn
on essentials as well above three percent. New Zealand is
teetering on the edge of stagflation. I would argue, we're
already there, aren't we. Yeah, ask Leam if the New
Zealand economy is now the sausage that has dropped through
the grill.
Speaker 3 (09:34):
I don't know about the sausage analogy, but I agree
about the stagflation. I mean, a simple definition of stagflation
is when you're worrying about your job and price and
the supermarket bill. You know, inflation and rising unemployment and
rising inflation. And we've definitely had a bit of that.
And yeah, I take that point entirely. I think it's
what we were saying earlier that you know, your lived
(09:56):
experience of the cost of living, if you're spending most
of your income to just get by week to week,
and that's going on rent, food power and and or rates,
and you know, you know that that is going to
be clearly higher than the top line inflation rate. But
(10:19):
it's two different things. The Reserve Bank, in terms of
controlling the money supply, needs to know what the overall
amount of inflation in the economy is, and it has
some capacity to look through things that go up and
down a bit like so, you know, petrol prices up
and down a lot, and again they've come down again
in the last week or so, and so you know,
(10:42):
that's probably not going to be causing too much problems
in the in the fourth quarter, so we you know.
So so those things, you know, you live with it.
It goes up and down. The Reserve Bank has to
take a longer term view.
Speaker 2 (10:55):
They will be this will be doctor Anna Bremen's first one,
won't it After after this meeting, then before Christmas.
Speaker 3 (11:05):
Before Christmas any and December one, and.
Speaker 2 (11:08):
She'll certainly be cut Surely she'll be looking at what
happens next next month.
Speaker 3 (11:14):
Yeah, yeah, well that they are meeting. I think it's
November twenty, so I'm not sure, but it would only
be She wouldn't take a formal role because they're frigorous
about that sort of stuff. But yeah, maybe certainly be
looking at it closely and hopefully, you know, my hope
is that she comes in and we've got a fairly
stable economy and recovery and she doesn't have to do
(11:35):
too much, Like maybe if the rates are in the
right place, it might be not moving them at all
next year.
Speaker 2 (11:41):
That'd be nice, wouldn't it be nice to have a
nice period of boredom around money and money rates. All right,
Liam lovely to talk as always, the New Zealand Herald's
business editor at large, Liam Dan talking the annual inflation
rates was into a fifteen month I have three percent.
But you know, he keeps saying, Liam, does that the
worst is behind us. Really, it's all in the rearview mirror.
(12:03):
Good times are ahead. See Little e or bouncing in
like a tigger next year.
Speaker 1 (12:09):
For more from Kerry Wood and Mornings, listen live to
News Talks at B from nine am weekdays, or follow
the podcast on iHeartRadio
You're listening to the Kerry Wood and Morning's podcast from
News Talks.
Speaker 2 (00:10):
He'd be as you heard in our news, annual inflation
has arisen to a fifteen month high of three percent.
Economists had been expecting inflation to reach that also pass
the three percent upper limit of the Reserve Banks target band.
The Central Banks expected to look past this current spike
when it reviews the OCR next month. It reckons the
(00:32):
economy has been weak enough to start pushing inflation down.
New Zealand Herald Business editor at large Liam Dan joins me, Now,
good morning, some late breaking news coming into your phone.
Speaker 3 (00:45):
Phone shouldn't be get near that. It shouldn't be on
should It's okay, but I'm reading the latest news off
it because it's all just coming out really yeah, so
look bang on. Expectations not great, but that the big
headline has got to be power prices. So in terms
of driving up inflation, the word power prices. We've had
(01:08):
in this country since March nineteen eighty nine, the biggest
annual increase sorry yeah, since March nineteen eighty nine, when
there was some I can't really remember, but there was
a bigger going through at that time, and that spiked it,
so that is pretty is this the gas again will
be that there's actually just shortt Well, it's not all
(01:30):
the wholesale price. It's to do with distribution. I'm not
an expert in this very complicated industry, but you know,
like for example, companies like Genesis, the retailers have said, look,
you know they every five years retailers pass on the
(01:52):
costs that they've been accumulating from increases from the lines company.
So that that was included in that quarter, I think.
But yeah, there was also you know, the lakes are
full now and wholesale power prices have come down, but
they were spiking earlier in the year and we all
felt it right through winter unfortunately, and so that that
(02:13):
was a big one food where we got food on
you know, food's been up around four or five percent
so and rates have been high as well. So you know,
if you look at they are things that you just
can't avoid, food rates, and so people feel it, and
they feel more acutely than the three percent because some
(02:36):
of those other things that are keeping keeping it sort
of pushing down the other way. You know, it can
be anything from international travel to you know the price
of getting an accountant or something like that. You know,
things that services and things that we don't necessarily have
to spend on. So if you're just you know and that,
so that affects people who are spending more of their
(02:58):
income to survive and makes it pretty tough. So you know,
that is all horrible, but it's also already happened. So
it's worth remembering that this is the third quarter. We've
already paid these prices, and there are some positive signs.
As economists mentioned, it's bang on the target. The power
(03:19):
prices won't be going up or anything like that. Again,
rents well not not in this current quarter because you
know you're not going to get the lines companies. The
distribution charges and wholesale prices are down a lot. So
you know, I can't can't promise further out or next winter,
but so that'll be promising. Food prices have already started
(03:41):
to come off. Butter's down. Yeah, yeah, so I mean
that genuinely. You know, I see it at the supermarket already,
butter not cheese. I got to say, I've watched these
things very closely, so.
Speaker 2 (03:54):
I know these things.
Speaker 3 (03:54):
Butter prices has definitely started to improve, and so I
think from a big macro economic point of view, this
isn't going to change anything for the Reserve Bank. So
we're still going to get another rate cut, possibly one
after that if things are still really bad.
Speaker 2 (04:13):
You don't think they'll go hard before Christ. I mean,
because this drip feeding of the rate cuts means that
everybody just waits. Yeah, and I've got a lot of
employers who are telling me that they are not going
to invest or grow while they've got the fear of
a left block coming in, which means it's going to
be a self fulfilling prophecy if they don't start growing.
Speaker 3 (04:34):
They have to be careful though, because they have, as
we know, a single mandate. It's this government is brought
in which says only inflation is their only only target.
So previously they could have gone, oh, unemployment's looking bad,
we'll factor that in and do a double. They do
have to look at inflation.
Speaker 2 (04:50):
And the two tier economy.
Speaker 3 (04:51):
Yeah, and I mean, you know, I've argued that I
can see the logic for that, but in terms of
timing it hasn't been fantastic for this government. It's almost
I suggested, it's almost an own goal because they could
have moved faster with a the dual mandate.
Speaker 2 (05:06):
Quite possibly, But I suppose they were so busy trying
to fix everything at once with the night, as you've said,
with the Night of the Future, and they're not going
to be thanked for that unless things start to improve
in the short term.
Speaker 3 (05:17):
Yeah, I mean, it wasn't it was It was an
odd one to prioritize it was that in their taxkit.
So I struggled, struggle.
Speaker 2 (05:24):
Struggled with they remember those.
Speaker 3 (05:27):
Well, no one's going to remember them at the voting
booth next year, and and it's unfortunately so yeah, look
it'll I guess this is good news in a way
that it's bang on target. The economists have got it right.
Nobody's going to be panicking. The markets are unmoved, so
we've still got the seeds of the recovery starting starting
(05:51):
to roll. I mean, as you say, it is, it
is a very slow process. If people think the rates
are going to be down lower in February, they hold
off even longer. But I wouldn't. I mean, you know,
there's plenty of economists who are warning that you're not
going to see that much more on the mortgage. You know,
the retail mortgage end.
Speaker 2 (06:11):
There's a bit of there's a bit of riggle room
within the different trading links, though, isn't there a little?
Speaker 3 (06:16):
They move pretty fast to keep there. One year, two
year and six months about the same. Yeah, I guess
you know, people have held off, and to me, what
is keeping people from spending is not it's not that
so much the locking and the rates. It's the still
the fear around jobs. And the next piece of ugly
economic data that we get is going to be the
(06:38):
unemployment numbers.
Speaker 2 (06:40):
I know I could have done with that your column
quite frankly, well that was really that was the sub
editors with the headline the economy is recovering, Brace yourself.
There's bad news coming Liam Dan, good on you.
Speaker 3 (06:52):
But there is the point of that, though, is that
I think we've got a recovery happening, and you're going
to get but we're going to have, you know, news
about horrible power prices and things. Today, we're going to
get an ugly unemployment number. They're all historic, and then
we're going to get right before Christmas, we're going to
get a GDP number that could say that we were
back in recession. And that's the way it works. The
(07:13):
headlines come later, and we just don't want to let
them disrail derail us in terms of confidence, because you
have to think about what we're in right now, and
hopefully there are some signs that there are some signs
around consumer spending. Some towns are doing better than others.
I was in christ Church in the weekend, better and
better and better. Although I talked to people in christ Church.
(07:37):
I've got friends who were made redundant, you know, from
tech industry and things. And I've got a family member
who runs a small business working with a large number
of other small businesses at B to B accounting type thing,
and they've they're saying that they've had the toughest year
they can remember in terms of, you know, their clients.
And so even the cities that are supposedly doing well
(07:59):
have had a tough year. So a stretch to say that,
you know, you don't want to assume that it's it's
all Auckland and Wellington's blues.
Speaker 2 (08:09):
No. Somebody says too that the White Cuttle regional rates
an increase of twenty three percent. Somebody else says the
food prices only go up, they never come down. Same
for power and rates. No signs of green shoots whatsoever.
Economist government and Hosking are dreaming.
Speaker 3 (08:25):
Yeah. I mean it's not true though, because the food
prices do come down. I mean so so much of
our food is based on commodity prices, and right now
beef prices are very high, so beef lam vegetables are
up a lot in the last quarter. I mean it's seasonal.
They will come down. Yeah, And I'm watching butter come
down and cheese will come down again, because we can
(08:47):
see it in the commodity prices that are coming through,
you know, six weeks two months ahead of where it
ends up in the retail. So probably never feels like it.
There's always something, you know, coffee prices or choplerate prices.
Someone else is having a problem with their growing season
and somewhere in the world, so that that is an issue.
(09:08):
But I think we will. I think we'll see some
positive stuff there over the coming.
Speaker 2 (09:13):
Now somebody else has conflated a text. I think this
headline inflation number is a nonsense. The inflation experience by
most of us, who spend most of what we earn
on essentials as well above three percent. New Zealand is
teetering on the edge of stagflation. I would argue, we're
already there, aren't we. Yeah, ask Leam if the New
Zealand economy is now the sausage that has dropped through
the grill.
Speaker 3 (09:34):
I don't know about the sausage analogy, but I agree
about the stagflation. I mean, a simple definition of stagflation
is when you're worrying about your job and price and
the supermarket bill. You know, inflation and rising unemployment and
rising inflation. And we've definitely had a bit of that.
And yeah, I take that point entirely. I think it's
what we were saying earlier that you know, your lived
(09:56):
experience of the cost of living, if you're spending most
of your income to just get by week to week,
and that's going on rent, food power and and or rates,
and you know, you know that that is going to
be clearly higher than the top line inflation rate. But
(10:19):
it's two different things. The Reserve Bank, in terms of
controlling the money supply, needs to know what the overall
amount of inflation in the economy is, and it has
some capacity to look through things that go up and
down a bit like so, you know, petrol prices up
and down a lot, and again they've come down again
in the last week or so, and so you know,
(10:42):
that's probably not going to be causing too much problems
in the in the fourth quarter, so we you know.
So so those things, you know, you live with it.
It goes up and down. The Reserve Bank has to
take a longer term view.
Speaker 2 (10:55):
They will be this will be doctor Anna Bremen's first one,
won't it After after this meeting, then before Christmas.
Speaker 3 (11:05):
Before Christmas any and December one, and.
Speaker 2 (11:08):
She'll certainly be cut Surely she'll be looking at what
happens next next month.
Speaker 3 (11:14):
Yeah, yeah, well that they are meeting. I think it's
November twenty, so I'm not sure, but it would only
be She wouldn't take a formal role because they're frigorous
about that sort of stuff. But yeah, maybe certainly be
looking at it closely and hopefully, you know, my hope
is that she comes in and we've got a fairly
stable economy and recovery and she doesn't have to do
(11:35):
too much, Like maybe if the rates are in the
right place, it might be not moving them at all
next year.
Speaker 2 (11:41):
That'd be nice, wouldn't it be nice to have a
nice period of boredom around money and money rates. All right,
Liam lovely to talk as always, the New Zealand Herald's
business editor at large, Liam Dan talking the annual inflation
rates was into a fifteen month I have three percent.
But you know, he keeps saying, Liam, does that the
worst is behind us. Really, it's all in the rearview mirror.
(12:03):
Good times are ahead. See Little e or bouncing in
like a tigger next year.
Speaker 1 (12:09):
For more from Kerry Wood and Mornings, listen live to
News Talks at B from nine am weekdays, or follow
the podcast on iHeartRadio
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