Jarrod Kerr: Kiwibank Chief Economist previews inflation data from December quarter

This week's inflation data will set the economic tone for the new year, but experts are hoping the final months of 2024 brought positive results.

The latest inflation results from the December quarter will be out this Wednesday, and there's hope enough steam has been let out of the economy.

Kiwibank Chief Economist Jarrod Kerr explains what we can expect.

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Episode Transcript

Speaker 1 (00:00):
We have Jared Kerr on the lane and he is
Kiwibanks chief Economist. Welcome to the program, Jared, and happy
new year.

Speaker 2 (00:07):
Happy new year, and it's.

Speaker 1 (00:09):
Time to look at this year and to look at
the economy and look at the back. I've been dreading
this slightly for a little while now because I've had
such a happy time over Somemon with my holiday, but
there we go. So the latest one is the inflation data,
which for the December quarter is out on Wednesday. We
have a dollar that's tanking, in petrol that's going up,
and all sorts of things. So what do you think

(00:30):
is going to look like, Well, we.

Speaker 2 (00:32):
Think it's going to be quite good. Actually, the annual
rate's going to fall to about two point one percent,
which from the Reserve banks perspective, you know, that's job done.
There's a few things happening beneath the surface there. We're
seeing like petrol. Petrol prices are actually down, a lot
of imported goods are down in price, which is nice.

(00:53):
And it's just the homegrown inflation that's still a little sticky,
but it looks to be heading in the right direction.

Speaker 1 (01:00):
You talk about that homegrown that's that's the that's a
non tradable, right, that's the stuff like, well, we've got
their rates and rents and electricity charges and supermarket charges
and all sorts of things, and that's a never ending,
you know, saga of increasing costs and increasing prices. Don't
we have more control over that than than the tradable inflation,

(01:22):
which is overseas based.

Speaker 2 (01:25):
Yeah, exactly right. So the Reserve Bank does target, you know,
with a with an eye on domestic inflation because that's
what they can control. It has fallen quite sharply over
the last couple of years. It's got a little bit
further to go. Like you say, there's some frustrating stuff
in there, like rates, council rates, insurance costs. There's a

(01:49):
few things in there that are quite that are running
at quite a high rate. That will start to ease
off this year.

Speaker 1 (01:55):
But last time we measured that was a five percent.
That's that's the inflation rate from.

Speaker 2 (01:59):
Hell, well's in the falls now, and we expect it
to come to come down to about three percent this year,
which is in line with its longer run average. So
we have had a really strong bout of inflation. But
the good news is that we're on top of it
and it's getting back to longer term averages.

Speaker 1 (02:20):
Very good. Meanwhile, as I mentioned before, the New Zealand
dial is looking terrible. What do you make of that.

Speaker 2 (02:26):
It's a double edged sword. So on the one hand,
it's really useful in making New Zealand attractive. New Zealand
goes on sale when the currency falls, makes our goods
and services and travel cheaper to foreigners, So you know,
that's nice. We need more tourists here and our farmers

(02:47):
could always do with a few extra dollars in pay.
The other side is one of chevi frustration, where it
costs US more to buy foreign goods, it costs us
more to travel overseas. So the falling dollar, you know,
good on one hand, bad on the other. I'm an economist,
you know, I stay down the middle. It is. It

(03:09):
is a bit better for us as an accomy. It
does come off.

Speaker 1 (03:13):
But the thing is it also affects things like oil
prices and petrol prices, and rather than worrying about going overseas,
I think most people are more worried about the fact
that it's going to cost an awful lot more to
deliver their goods to market.

Speaker 2 (03:24):
Yeah, that's true. So as petrol prices lift, petrol prices
are actually down at the moment. But if they if
they lift on the back of this floor in the currency,
then that that acts like attacks on households, and it
affects us all, anyone with a car or transport.

Speaker 1 (03:44):
It hurts, right, Jared, Well, look, I thank you very
much and we'll talk again soon and have a great year.
It's a year of grace.

Speaker 2 (03:51):
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