Sharon Zollner: ANZ Chief Economist on what rising inflation means for OCR

Rising inflation is hitting low-income households hard, but is expected to spark hikes to the OCR. 

New data -- due out from Stats NZ this morning -- is expected to show inflation has risen to between 2.6 and 2.9 percent in the year to June. 

ANZ Chief Economist Sharon Zollner says households are facing rising energy and food prices. 

She says inflation could surpass three percent in the year to September, but the Reserve Bank isn't likely to change course. 

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Episode Transcript

Speaker 1 (00:00):
So we've got the new inflation Danta out today. The
experts are picking something like two point eight or two
point nine for the year, which would be up from
two point five. AM's It's chief economist sharings on the back,
what are the sharing good morning to you?

Speaker 2 (00:10):
Good morning?

Speaker 1 (00:10):
So you're at zero point eight is my understanding for
a number of two point nine? If it's two point nine,
do we have a thing? Do we have a problem here?

Speaker 2 (00:19):
Well, we've got a lower house lower income households certainly
have a problem because it's concentrated in necessities like food.
For example. Altrist is also rising at the moment. But
does the Reserve bank have a problem. We don't think so,
because if you struck out the stuff they can't do
much about, even though they are important to households, the
things the reserve Bank can actually influence are looking very benign.

(00:42):
The economy is obviously some weeks so we think that
within six months in fact, they'll be worrying that inflation
being too low. But we do have this uncomfortable period.

Speaker 1 (00:50):
First, well, when you say period, I mean the stuff
you can't do things about insurance rates or that cost
plus accounting from councils. I mean that's forever, isn't because
they're getting away with it.

Speaker 2 (01:03):
Well, it's very lagging because part of that will reflects
things like construction costs, inflation from the last boom. Now
some of these administered prizes just do take quite a
long time to catch up. Wage inflation as well would
be in there to some extent too. Those things have
come back a lot, and so there'll be less pressure

(01:24):
on these things going forward. That said, there's some stuff
like weather effects and political stuff in there that obviously
there is also well beyond anything then dead candn thing.

Speaker 1 (01:33):
About does it make it acceptable when you say the
RB you hold their hands up and go, well, don't
look at us. I mean what I'm seeing here, Sharon
correct me if I'm wrong, is an economy that's really struggling,
and the Reserve Bank's still saying, don't you worry, there's
plenty of growth still to come, and we're saying, well,
it's July, come on, where is it.

Speaker 2 (01:52):
It does seem to be taking forever, doesn't it, But
it does actually take a really long time. I remember
on the other side when the Reserve Bank, when Adrian
ll said he was going to deliberately cause a recession.
Never heard that. For business confidence absolutely tanks and then
it sort of just bounced back over coming months because
the sky didn't fall, But it actually did eventually. Of course,
it just takes a lot longer on both sides, up

(02:13):
and down than people generally expect. So every month more
people are rolling over onto lower mortgage spaces. So you know,
it won't happen overnight, but it will happen, but it
is taking a long time, and our view is actually
that the economy just needs a bit more support. We're
expecting everyone's expecting another cut in August, that we're actually
seeing another one in November, and then potentially even more
after that, depending on what happens overseas.

Speaker 1 (02:33):
John Key said, one hundred basis points too high at
the moment, as you write, well, that's a big call.

Speaker 2 (02:39):
I've seen that people argue that right should be lower.
Hundreds of the most extreme I've seen. But there's one
member of the MONTROPOLOTOI Committee who's not sure what should
be any lower at all. You know, it is clear
as mud, as these things tend to be, but it
is the Reserve Bank's job to be a little bit
more paranoid about inflation than everyone else.

Speaker 1 (02:56):
Nically, it would be nice to talk to you as always.
Shying interrupted Sharon's on to the as chief economist with us
this morning infometrics. I notice got two percent growth. Forget
the inflation. Two percent growth GDP for next year. So
next year, if you're looking forward to twenty twenty six,
they're saying two percent because hardly Christmas is it. For

(03:16):
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