Sharon Zollner: ANZ Chief Economist ahead of the latest Consumer Price Index number release

Most economists are forecasting the latest inflation rate to be well within the target band. 

There’s a widespread expectation that it will fall within the 2.2-2.3% range. 

The latest Stats NZ Consumer Price Index number will be released just before 11 this morning.  

As it cut the Official Cash Rate last week, the Reserve Bank said it was confident inflation was now below three percent.  

ANZ chief economist Sharon Zollner told Mike Hosking they're picking another OCR cut in November.  

She says they're picking 50 basis points, but this is a really important check point and there's also labour market data three weeks before that decision. 

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Episode Transcript

Speaker 1 (00:00):
So CPI day today, good old inflation. The whole plan
was to get it back in the band of one
to three percent. That would mean, in theory, the Reserve
Bank could continue on its merry way, cutting the cash
rate and freeing up the economy a bit. So what
to expect and its chief economist Sharon's on the back
with the Sharon, good morning, Good morning, mat What you
got for as numbers wise.

Speaker 2 (00:17):
Well, actually, most of the domestic analysts are in a
pretty tight band actually, all agreeing that inflation will be
around the two point two to two point three percent
year on your mark. That's the same as the Reserve
Bank actually, so there's pretty widespread the expectation that inflation
is going to be not just within the band, but
well within it.

Speaker 1 (00:35):
Job done in the job done or not well.

Speaker 2 (00:39):
So details aren't quite as friendly as the headline. Basically
if you look at the non tradeable domestic part of inflation,
but that reflects wage growth and whether the economy has
been overheated or not. That sort of inflation still expected
to be north of five percent and actually barely lower
than last quarter, So still a way to go in
terms of the sustainability of it all. Rather the fall

(01:01):
in inflation sort of ninety percent of it over the
last YEARNIT that has been driven by tradables inflation, and
that's actually expected to become a negative minus one point
six percent here on the Earth. That's mostly import prices,
so there was a bank can take a bit of
credit for that, and so far as terms than keeping
their prices sharp because consumption is weak because rates are high.

(01:21):
But some of it's a lot water those to do
with things like oil prices.

Speaker 1 (01:25):
Bank of it, Well, no, do we want that sort
of balance of what you say is correct because a
lot of the non tradable stuff there's councils, insurance, things
like that, and I don't know that that's necessarily getting
attended to it. And if that's going to be the case,
aren't we still in an element of trouble?

Speaker 2 (01:40):
Yeah, the council rates are expected to be up thirteen
percent in the quarter. That would actually be the highest
quarterly increase in rates since late nineteen eighty seven. So
some of that is related to past time inflation and
the economy, things like construction costs and waged costs that
you know, there's obviously a lag when it comes to
things like rate, but some of it stuff that Evan

(02:02):
really can't do much about at all. Infrastructure needs, that
sort of thing, but they can reasonably expect that that
sort of thing plus insurance costs would be another one
that those will reduce. Well, not prices weren't fall, but
the inflation rate will fall over time, So as long
as the core inflation's falling, then I think they think
they can be pretty relaxed about that, probably more relaxed

(02:25):
than rate payers about those high increases because they will
they're not going to stop inflation from being in targeted
over nineteen.

Speaker 1 (02:33):
Okay, so fifty or seventy five in November, we're picking.

Speaker 2 (02:37):
Fifty most everybody is, but obviously this is a really
important checkpoint on that front. We've also got labor market
data just three weeks before that decision, so the market's
weighing up whether it'll be fifty or seventy five. They're
pricing in a little bit more than fifty, but a
seventy five point cut that does have more than a

(02:57):
whiff of emergency a data state that I think it'll
come down to whether they think, why do we need
to cut seventy five or why not cut seventy five,
and the outlook for inflation will have a lot to
do with that because the ocr the official cash rates
still clearly at contractionary levels. But yeah, I think sidneyfied

(03:19):
would be a pretty big deal. It's not something you
see very often. So of course we did see sidneyfied
those point hips on the way up, and we do
also have a twelve week gap between them and in
the meeting and for everyone, so you could actually argue
in that regard that a fifty point cut would they
are slowing down and the.

Speaker 1 (03:35):
Pace of easy exactly. It's interesting, all right, Shairon. Appreciate
your expertise as almost Sharon's on and it's the chief economists.
When I say interesting, I mean it's broadly interesting. I'd
rather not be in the middle of it, run by idiots,
But you know, here we are. For more from the
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