Brad Olsen: Infometrics principal economist on food prices continuing to soar in June

Households are still finding it tough to pay for the basics, with high prices not easing yet. 

Stats NZ has revealed the cost of food rose 4.6 percent in the 12 months to June.

It's largely driven by double-digit increases for products like red meat, cheese and milk

Infometrics principal economist Brad Olsen says the general economy is still experiencing intense price pressure and weakness - which isn't comforting.

"Mince prices are now hitting nearly $22 a kilo. You can't even have a cheap mince meal at a cheap price."

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Episode Transcript

Speaker 1 (00:03):
Questions, answers, facts, analysis, the drive show you trust for
the full picture. Brian Bridge on Heather dup c allan
drive with one New Zealand let's get connected news talkstb.

Speaker 2 (00:15):
Good negative seven after five newstalks ATB So you've heard
the story. Food prices there, you've done the shops, you
know at four point six percent in the year to June,
dairy meat leading the way. This is statsne dead data
out today. Butter up almost fifty percent, forty six percent,
a lamb leg roast up thirty seven percent. The question
is what does this do to the overall level of inflation?

(00:37):
Will it soon how much you're spending at the supermarket
potentially affect how much we're spending on our mortgages. Brad
Olson Infametrics, principal economists with US tonight, Hey, Brad Good evening.
So does this risk pushing up overall CPI?

Speaker 3 (00:52):
It does, is a short answer. We are worried that
when we see the numbers on Monday for headline inflation
for the quarter nd June, that there will be more
pressure in there. Most market picks are somewhere between sort
of two point six and two point nine percent per annum.
Of course, that would be a further reacceleration off the
two point five percent figure that we had at the

(01:13):
start of the year. For the Reserve Bank, that won't
be useful and helpful news for them. But at the
same time, I think we've signaled themselves looking through some
of the numbers that they anticipate they expect that there
will be some of that near term volatility. They're hopeful
that it's not persistent, that it is more temporary, and
therefore they should still be able to marginally reduce interest

(01:35):
rates through the rest of this year a little bit.
But I think importantly, if you're sitting out there and
you're looking at some of these numbers, it does make
you uncomfortable, right whether or not you're a household or
a decision maker, that we're in this position where you're
seeing a bit more of that intense pricing pressure, but
you're still seeing the weaker general economic tone. Normally, those
two things are the opposite of what you'd see exactly.

Speaker 2 (01:55):
It's felt a little bit freaky seeing the number today
and knowing that we are hoping and praying for another
oc well of those with mortgages, for another OCAA cup
next month. What about wage growth, because the government obviously
talks a lot about wage growth keeping ahead of inflation.
If we are going to see inflation go up, is
it still going to be ahead of well, wages till
be ahead of.

Speaker 3 (02:16):
It, you'd still be expecting that wages would be growing
ahead of inflation. The challenge, of course, for the moment
is that wages are only growing if you've got a
wage to grow, if you're one of the five point
one percent of people that are currently unemployed. We saw
more benefit numbers today showing further increases in those who
are out of work and needing government support. You know

(02:38):
that that's a pretty tough environment at a time when
it's across the board these increases that I think that
that are a real challenge. It's not just you know,
some of your are more expensive items. I mean butter, Yes,
it's expensive, but let's be quite clear, it's not the
thing that you know, households are eating a whole block
of every day. The worry for me actually looking through
some of these numbers is it's the other basis. It's
the fact that mince prices are now head nearly twenty

(03:00):
two dollars a kilo. You know, you can't even have
a cheap mince meal anymore at a cheap price. It's
the fact that energy costs are increasing. Electricity costs now
are increasing ten percent over the last year. That's the
fastest pace for our energy and electricity gains that we've
seen in over a decade. So it's the worry that, Look,
if you're already in that tough position, things are not

(03:22):
getting any easier, and of course for the Reserve Bank,
they are a bit more nervous about those pricing pressures.
So we're still in a tough position and I don't
think we'll get out of it massively quickly. Better signs
on the horizon, but it's still tough out there for
the minute.

Speaker 2 (03:34):
All Right, interesting, Brad, Thank you. Brad Olsen infor Metrics
Principal Economists.

Speaker 1 (03:38):
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