October 15, 2024 • 10 mins
Inflation is continuing to fall and interest rates are likely to follow suit.
The inflation rate has dropped to 2.2 percent.
It's the first time in more than three years it's returned to the Reserve Bank's 1-3% target range.
The Herald's Liam Dann told Kerre Woodham the markets are now pricing in a 100% chance the Reserve Bank will cut the OCR at least 50 basis points next month.
He says there's now serious talk about a 75 basis point cut, which normally only happens during major economic downturns like the Global Financial Crisis.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
You're listening to the Kerry Wood of Morning's podcast from
News Talk sed B.
Speaker 2 (00:12):
As you heard just before our news the war against
inflation has been one. Later stats and Zied figures show
the inflation rate has dropped a two point two percent,
back within the Reserve banks one to three percent target range.
Non tradable inflation remains at four point nine percent due
to rising insurance premiums and council rates. And as I
(00:32):
said earlier to Helen, I bet our Cassandra, our profit
of Dome, we'll have some bad news to take out
of this. New Zealand Herald Business editor at large Lim
Dan Joins's morning.
Speaker 3 (00:43):
Hi, carry, Yeah, no, I mean you know, good news.
We'll take take a win.
Speaker 2 (00:48):
Well, your headline, I'm going to refuse. Where are we?
Speaker 3 (00:51):
Yeah?
Speaker 2 (00:54):
Should we worry about deflation?
Speaker 1 (00:56):
Well, that's true.
Speaker 3 (00:57):
I'm very quick to go to the next problem that
might be coming down the line. That's economics for National Science.
Speaker 2 (01:04):
And it has been pretty grow Even the bus times
were pretty grim because everyone could see what was about
if you wanted to see what was going to happen. Yeah,
it was pretty clear that the good times were not
going to last forever.
Speaker 3 (01:16):
Yeah, I think it's been well signaled at least we
could say that, you know, and look, look, yeah it is.
It is a win in the war on inflation in
the sense that we are now back inside the reserve
banks target bound for top line. But you know, as
people have become experts and inflation over the last couple
of years, we're all looking at the non tradable and
(01:37):
the tradable. So the tradable, which is petrol prices and insurance. Yeah,
tradeable is petrol prices and imported food, that kind of thing,
stuff that that's actually come down, come down down, so
it's not even it's actually gone backwards. So that's deflation.
But I'm not so worried about deflation of those things
(01:58):
that the rest of the world can worry about that.
But we're cheaper petrol, good news. But that non tradable
is still higher, so that's at four point nine percent,
so people will still be feeling some of that. And yeah,
the big ones rates, insurance costs, and rents were still
very high. Particularly some of that is from the big
increases late last year and early earlier this year, which
(02:20):
which have leveled off a bit.
Speaker 2 (02:21):
But you know, food is cheaper too, seasonal, Yeah, vegetables
out seventeen.
Speaker 3 (02:28):
Yeah.
Speaker 2 (02:29):
It makes such a difference to go in and think, Okay,
I'm not going to have to sell a kidney to
get a capsicum. Yeah.
Speaker 3 (02:34):
Yeah, no. So so there's some really some heartening stuff there,
you know, relief. I guess you know, it had to
happen after the kind of ringer we've been through with
interest rates and all the rest of it. But yeah,
that's right. Does it? Does it? Does it? You know,
have we got control of it? Does it now?
Speaker 1 (02:51):
Have we?
Speaker 3 (02:52):
Have we done so much damage to the economy that
it's now going to fall through through the floor. There
is some risk of that, and that's why people are
talking about, like the market is pricing and virtually one
hundred percent chance of another fifty fifty basis point cut
in November, and there's now serious talk about a seventy
five basis point cut, which is the kind of cutting
and slashing that goes on when big bad things happen,
(03:14):
like global financial crisises and things.
Speaker 2 (03:16):
Isn't it so crude? Such a rude, crude tool, So
we go out of control, the fires are burning, hoots, wah,
let's throw more money on it. Let's get those flames
even higher. Okay, so let's get people out of work
and let's get businesses shut down, and let's get everything
slowed to a complete and understand still. And that affects
(03:36):
the psyche of a nation and then we're like, hey,
let's go off again.
Speaker 3 (03:41):
Yeah it is. It's very blunt, and even the central
bank bankers will say, yeah, it's a blunt instruments, it's crude.
It does damage. But the one thing that's got going
for it is that it actually works. And we've seen
it work, you know. So we've seen inflation go up
and now it's come down as predicted because they did
the things, and there's not much in economics that are
(04:02):
the tools that actually work. So that's why the world
has remained very focused on it. I get emails from
people all the time with alternative systems, things we could do,
could we And some of them aren't crazy, Like you know,
it's like you could actually affect the money supply by
moving the rate of key we saver payments up and down,
things like that, but they're politically quite unpalatable and it
(04:26):
would be also, I think difficult for New Zealand to
go out on its own with that kind of thing,
while the rest of the world is stuck on this
monetary system. So yeah, I mean, I think those are
the big questions because at some point, and I think
we're going to feel it in the next year or so.
So if unemployment settles at five whatever and that's historically
(04:46):
not that high, and interest rates are low, and we're
going to be in the situation which they're in the
United States a little bit where you've got the experts saying, no,
everything's good, it's a great economy because the numbers are
all in the right place. But if people aren't feeling that,
then maybe there's something wrong with the wider system.
Speaker 2 (05:06):
His confidence, isn't it. Yeah, you know, you've got to
have confidence to take on the apprentices, to open another store,
to do their addition to the house.
Speaker 3 (05:16):
There's a bit of and there's some political leadership to
be done there. I mean, I keep coming back to
it because Christopher Luxen set himself that challenge with the
mojo thing. He wants to get mojo back in the economy.
Well that that is probably his challenge now is to
try and get that momentum and confidence going the way
that people like john Key. John Key was able to
(05:38):
and and it's a bit of swagger in the economy.
I think, I think there's optimistic actually that what there
is that I could get that going next year. There's
been some you know, good regulatory change which you know
they're looking at in the new year, talking about maybe
getting more changes to foreign direct investment, getting a bit
(05:59):
of international capital and talking up free trade deals and
that sort of thing. It's all positive, and we interest
rates will be in the right place, but it's a
lot to expect them to do it on their own
after what we've been through. The economy is so flat
out that you know, people at the moment are probably
looking at a bit of extra money coming back from
the mortgage and just you know, they're cautious because if
(06:25):
you're in that middle age bracket like thirty to fifty,
where you've still got a pretty big mortgage, you might
be worried about your job at this point, you know,
or thinking wage rises are not going to be there,
so you're probably more likely to be saving that money
at the moment than spending it. So it's not translating
to an immediate turnaround in retail. We're just you know,
(06:45):
hopeful that people will be confident and get out there.
But I at the moment, house prices and retail remain
fairly you know, they haven't really seen much of a
bump from the first rate cut or the tax increase.
I think it's going to take time. You know, people
are sort of in catch up mode.
Speaker 2 (07:02):
Well it is that survived to twenty five, isn't it,
And I think with summer and hopefully better weather, and
people have been exhausted by the ups and downs and
the swings and roundabouts and the roller coaster ride.
Speaker 3 (07:15):
So I'm also very I'm hopeful that we get this,
that it comes with some stability next year, and so
the world doesn't go crazy and there isn't another giant
financial crisis or New Zealand doesn't have some sort of
huge natural disaster. That we we could just have six
months of the numbers sort of being in the right
place and then some momentum to build around confidence. So
(07:38):
that would be nice, and then you know, by by
this time night next year, we could be feeling in
a lot a lot better place and looking in a
lot better place. So you know, I can see why
the government, for example, hasn't been soaring away in the
polls because it's.
Speaker 2 (07:53):
Sort of grim, relentless.
Speaker 3 (07:56):
But politically they're doing they're aware that they've got to
be doing the tough stuff early on. I mean, they're
they're they're taking them. They need that and and it
it's their job to sell it. But they're taking the
winses and release from Nicola Willis this morning saying you
know that that it's not quite happy days are here again,
but that the you know, to the effect that the
crushing price increases are over. And you know how much
(08:19):
credit governments can take for that, I don't know, but
they certainly, you know, are in charge and they can
they can get they they're the ones who get to
put the press release out as things turn in the
right direction. So fair play to that.
Speaker 2 (08:31):
Yeah, very quiet from labor. Yeah, not a murmur from LA.
I did ask I see dollan as Labour sent through anything,
But no, not yet. And they're not saying, oh my god,
where there be all an end all? She said, you know,
there's more work to be done to get the economy growing,
but New Zealanders can be confident we're headed in the
right direction.
Speaker 3 (08:52):
Yeah, Well, I think I think that's some realism. I mean,
you've got to be careful. And it's the same when
I'm writing a column or something like that. You don't
want to be like it's hard to be you know.
If she comes out really cheering and saying everything's great,
you know, you're up against the reality for many people,
which it just isn't and they know that. So there
(09:14):
is a lot of work to be done. But the
foundations are there. I guess that's why I'm feeling more
optimistic than usual, that the foundations in terms of the
economic data are sort of there and for them to
do the work and for us to get out and
you know, you can see a pathway for businesses to
start making some decisions about the future which could add
(09:35):
to real growth and create some wealth.
Speaker 2 (09:37):
And that's what we need, is real, real productivity, real growth.
Speaker 3 (09:41):
Well, I mean, I've been working with the retail end
z and talking to them lately, and it's still very
grim in retail. And you know, a lot of this,
you know, relief around interest rates will just be going
to go. It's sort of just helping them survive. They're
getting from the point where they thought many businesses thought
they just weren't going to survive to just surviving and
(10:02):
then hopefully, you know, move a bit further and they
can start looking at, you know, what they can do
to grow the business and that's where our economic growth
will come from. I mean, the Finance Minister can't be
too cheery really while we're still sitting in what is
probably a recession. We won't get that number until December
or November or something like that.
Speaker 2 (10:23):
Yeah, finishing.
Speaker 3 (10:26):
Oh there we go. No, no, no, good news.
Speaker 2 (10:28):
There we go. Thank you so much, Business Editor at
Large Liam Den.
Speaker 1 (10:32):
For more from Kerry Wood and Mornings, listen live to
news Talks. It'd be from nine am weekdays, or follow
the podcast on iHeartRadio.
You're listening to the Kerry Wood of Morning's podcast from
News Talk sed B.
Speaker 2 (00:12):
As you heard just before our news the war against
inflation has been one. Later stats and Zied figures show
the inflation rate has dropped a two point two percent,
back within the Reserve banks one to three percent target range.
Non tradable inflation remains at four point nine percent due
to rising insurance premiums and council rates. And as I
(00:32):
said earlier to Helen, I bet our Cassandra, our profit
of Dome, we'll have some bad news to take out
of this. New Zealand Herald Business editor at large Lim
Dan Joins's morning.
Speaker 3 (00:43):
Hi, carry, Yeah, no, I mean you know, good news.
We'll take take a win.
Speaker 2 (00:48):
Well, your headline, I'm going to refuse. Where are we?
Speaker 3 (00:51):
Yeah?
Speaker 2 (00:54):
Should we worry about deflation?
Speaker 1 (00:56):
Well, that's true.
Speaker 3 (00:57):
I'm very quick to go to the next problem that
might be coming down the line. That's economics for National Science.
Speaker 2 (01:04):
And it has been pretty grow Even the bus times
were pretty grim because everyone could see what was about
if you wanted to see what was going to happen. Yeah,
it was pretty clear that the good times were not
going to last forever.
Speaker 3 (01:16):
Yeah, I think it's been well signaled at least we
could say that, you know, and look, look, yeah it is.
It is a win in the war on inflation in
the sense that we are now back inside the reserve
banks target bound for top line. But you know, as
people have become experts and inflation over the last couple
of years, we're all looking at the non tradable and
(01:37):
the tradable. So the tradable, which is petrol prices and insurance. Yeah,
tradeable is petrol prices and imported food, that kind of thing,
stuff that that's actually come down, come down down, so
it's not even it's actually gone backwards. So that's deflation.
But I'm not so worried about deflation of those things
(01:58):
that the rest of the world can worry about that.
But we're cheaper petrol, good news. But that non tradable
is still higher, so that's at four point nine percent,
so people will still be feeling some of that. And yeah,
the big ones rates, insurance costs, and rents were still
very high. Particularly some of that is from the big
increases late last year and early earlier this year, which
(02:20):
which have leveled off a bit.
Speaker 2 (02:21):
But you know, food is cheaper too, seasonal, Yeah, vegetables
out seventeen.
Speaker 3 (02:28):
Yeah.
Speaker 2 (02:29):
It makes such a difference to go in and think, Okay,
I'm not going to have to sell a kidney to
get a capsicum. Yeah.
Speaker 3 (02:34):
Yeah, no. So so there's some really some heartening stuff there,
you know, relief. I guess you know, it had to
happen after the kind of ringer we've been through with
interest rates and all the rest of it. But yeah,
that's right. Does it? Does it? Does it? You know,
have we got control of it? Does it now?
Speaker 1 (02:51):
Have we?
Speaker 3 (02:52):
Have we done so much damage to the economy that
it's now going to fall through through the floor. There
is some risk of that, and that's why people are
talking about, like the market is pricing and virtually one
hundred percent chance of another fifty fifty basis point cut
in November, and there's now serious talk about a seventy
five basis point cut, which is the kind of cutting
and slashing that goes on when big bad things happen,
(03:14):
like global financial crisises and things.
Speaker 2 (03:16):
Isn't it so crude? Such a rude, crude tool, So
we go out of control, the fires are burning, hoots, wah,
let's throw more money on it. Let's get those flames
even higher. Okay, so let's get people out of work
and let's get businesses shut down, and let's get everything
slowed to a complete and understand still. And that affects
(03:36):
the psyche of a nation and then we're like, hey,
let's go off again.
Speaker 3 (03:41):
Yeah it is. It's very blunt, and even the central
bank bankers will say, yeah, it's a blunt instruments, it's crude.
It does damage. But the one thing that's got going
for it is that it actually works. And we've seen
it work, you know. So we've seen inflation go up
and now it's come down as predicted because they did
the things, and there's not much in economics that are
(04:02):
the tools that actually work. So that's why the world
has remained very focused on it. I get emails from
people all the time with alternative systems, things we could do,
could we And some of them aren't crazy, Like you know,
it's like you could actually affect the money supply by
moving the rate of key we saver payments up and down,
things like that, but they're politically quite unpalatable and it
(04:26):
would be also, I think difficult for New Zealand to
go out on its own with that kind of thing,
while the rest of the world is stuck on this
monetary system. So yeah, I mean, I think those are
the big questions because at some point, and I think
we're going to feel it in the next year or so.
So if unemployment settles at five whatever and that's historically
(04:46):
not that high, and interest rates are low, and we're
going to be in the situation which they're in the
United States a little bit where you've got the experts saying, no,
everything's good, it's a great economy because the numbers are
all in the right place. But if people aren't feeling that,
then maybe there's something wrong with the wider system.
Speaker 2 (05:06):
His confidence, isn't it. Yeah, you know, you've got to
have confidence to take on the apprentices, to open another store,
to do their addition to the house.
Speaker 3 (05:16):
There's a bit of and there's some political leadership to
be done there. I mean, I keep coming back to
it because Christopher Luxen set himself that challenge with the
mojo thing. He wants to get mojo back in the economy.
Well that that is probably his challenge now is to
try and get that momentum and confidence going the way
that people like john Key. John Key was able to
(05:38):
and and it's a bit of swagger in the economy.
I think, I think there's optimistic actually that what there
is that I could get that going next year. There's
been some you know, good regulatory change which you know
they're looking at in the new year, talking about maybe
getting more changes to foreign direct investment, getting a bit
(05:59):
of international capital and talking up free trade deals and
that sort of thing. It's all positive, and we interest
rates will be in the right place, but it's a
lot to expect them to do it on their own
after what we've been through. The economy is so flat
out that you know, people at the moment are probably
looking at a bit of extra money coming back from
the mortgage and just you know, they're cautious because if
(06:25):
you're in that middle age bracket like thirty to fifty,
where you've still got a pretty big mortgage, you might
be worried about your job at this point, you know,
or thinking wage rises are not going to be there,
so you're probably more likely to be saving that money
at the moment than spending it. So it's not translating
to an immediate turnaround in retail. We're just you know,
(06:45):
hopeful that people will be confident and get out there.
But I at the moment, house prices and retail remain
fairly you know, they haven't really seen much of a
bump from the first rate cut or the tax increase.
I think it's going to take time. You know, people
are sort of in catch up mode.
Speaker 2 (07:02):
Well it is that survived to twenty five, isn't it,
And I think with summer and hopefully better weather, and
people have been exhausted by the ups and downs and
the swings and roundabouts and the roller coaster ride.
Speaker 3 (07:15):
So I'm also very I'm hopeful that we get this,
that it comes with some stability next year, and so
the world doesn't go crazy and there isn't another giant
financial crisis or New Zealand doesn't have some sort of
huge natural disaster. That we we could just have six
months of the numbers sort of being in the right
place and then some momentum to build around confidence. So
(07:38):
that would be nice, and then you know, by by
this time night next year, we could be feeling in
a lot a lot better place and looking in a
lot better place. So you know, I can see why
the government, for example, hasn't been soaring away in the
polls because it's.
Speaker 2 (07:53):
Sort of grim, relentless.
Speaker 3 (07:56):
But politically they're doing they're aware that they've got to
be doing the tough stuff early on. I mean, they're
they're they're taking them. They need that and and it
it's their job to sell it. But they're taking the
winses and release from Nicola Willis this morning saying you
know that that it's not quite happy days are here again,
but that the you know, to the effect that the
crushing price increases are over. And you know how much
(08:19):
credit governments can take for that, I don't know, but
they certainly, you know, are in charge and they can
they can get they they're the ones who get to
put the press release out as things turn in the
right direction. So fair play to that.
Speaker 2 (08:31):
Yeah, very quiet from labor. Yeah, not a murmur from LA.
I did ask I see dollan as Labour sent through anything,
But no, not yet. And they're not saying, oh my god,
where there be all an end all? She said, you know,
there's more work to be done to get the economy growing,
but New Zealanders can be confident we're headed in the
right direction.
Speaker 3 (08:52):
Yeah, Well, I think I think that's some realism. I mean,
you've got to be careful. And it's the same when
I'm writing a column or something like that. You don't
want to be like it's hard to be you know.
If she comes out really cheering and saying everything's great,
you know, you're up against the reality for many people,
which it just isn't and they know that. So there
(09:14):
is a lot of work to be done. But the
foundations are there. I guess that's why I'm feeling more
optimistic than usual, that the foundations in terms of the
economic data are sort of there and for them to
do the work and for us to get out and
you know, you can see a pathway for businesses to
start making some decisions about the future which could add
(09:35):
to real growth and create some wealth.
Speaker 2 (09:37):
And that's what we need, is real, real productivity, real growth.
Speaker 3 (09:41):
Well, I mean, I've been working with the retail end
z and talking to them lately, and it's still very
grim in retail. And you know, a lot of this,
you know, relief around interest rates will just be going
to go. It's sort of just helping them survive. They're
getting from the point where they thought many businesses thought
they just weren't going to survive to just surviving and
(10:02):
then hopefully, you know, move a bit further and they
can start looking at, you know, what they can do
to grow the business and that's where our economic growth
will come from. I mean, the Finance Minister can't be
too cheery really while we're still sitting in what is
probably a recession. We won't get that number until December
or November or something like that.
Speaker 2 (10:23):
Yeah, finishing.
Speaker 3 (10:26):
Oh there we go. No, no, no, good news.
Speaker 2 (10:28):
There we go. Thank you so much, Business Editor at
Large Liam Den.
Speaker 1 (10:32):
For more from Kerry Wood and Mornings, listen live to
news Talks. It'd be from nine am weekdays, or follow
the podcast on iHeartRadio.
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