Nick Tuffley: ASB Chief Economist on the inflation rate coming into target range at 2.2%

Inflation is expected to keep easing in the months to come. 

Overall inflation is back within the target range at 2.2% due to falling prices for imports like petrol and diesel. 

Domestically-driven non-tradeable inflation remains much higher at 4.9%, due to a sharp rise in rents, council rates and insurance premiums. 

ASB Chief Economist Nick Tuffley told Ryan Bridge that inflation is expected to remain close to 2% over the next few years, with a chance of it edging below towards the end of 2025/26. 

He says it would take something quite drastic to push it back up.  

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Episode Transcript

Speaker 1 (00:00):
How big will Adrian or go on rate cuts next month?
That is the question on everybody's lips. He's away on
business at the IMF currently, apparently. But after yesterday's lowest
annual inflation figure in three and a half years, back
in the safe zone at two point two percent, could
we see a seventy five basis point cut by Christmas? Gosh,
we're all excited, aren't we. Nick Tuffley is the asbchief economist.

(00:22):
He's with us this morning. Hey, Nick, morning, Hey, So
I mean this, first of all, this is great news,
isn't it that we're back in the safe zone? But
how safe are we? How pre curious is.

Speaker 2 (00:32):
That we do think that inflation will be remaining very
close to two percent now over the next couple of years.
So if anything needs a chance that inflation could each
a bit below two percent at some point as we're
heading towards the end of twenty twenty five twenty twenty six,
we're really back in the zone now.

Speaker 1 (00:52):
And it would take something quite dramatic to get us out,
because I mean, you look at the insurance, the rents,
the rates that will spected to keep going up, right,
But the international story is a different one. What about
if oil spiked because of the Middle East or something
like that.

Speaker 2 (01:10):
Well, we still have that mixture where some of that
domestic inflation is still pretty high, and that will get
will eat a little bit going forward, and that will
help keep things down. We have had things like oil
prices falling back at times over the last quarter, which
helped keep inflation low at the moment. But yes, there's
always the watt if it will take a pretty significant
spike in the price of oil to push things up,

(01:32):
and the Reserve Bank won't necessarily rush to turn around
and start putting rates up or slow the pace down.
Because oil prices are something that can't control. They tend
to have a short term impact. But the Reserve Bank
would worry about so sizeable and lifting oil prices, whether
there are some lingering impacts created by just the impacts
that it has on transport and wider costs.

Speaker 1 (01:55):
All right, I'll stop worrying about the oil thing now
and then Nick, thank you. What's up with the domestic
air travel? The price is down by eleven percent? I
was reading that going really eleven percent.

Speaker 2 (02:07):
Well, we do find that air travels it's quite seasonal,
so it does go up and down from one quarter
to the next as we move in and out of
the sort of tourism season. We did see quite a
spike in sort of airfare prices in that sort of
immediate post COVID period, but we have now started to

(02:27):
see some settling down in that area, and you can
see that in accommodation costs as well, where the trend
has been that things have started to ease back after
that initial nudge that we saw.

Speaker 1 (02:38):
Nick. Thanks very much for you update this morning. Really
appreciate it, Nick Tuley, chief economist at ASB Bank. We're
in the zone and it sounds like we're going to
stay there for the foreseeable, which is great news. For
more from earlier edition with Ryan Bridge, listen live to
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