Brad Olsen: Infometrics Principal Economist on food prices rising 5% in the year to August

Food price inflation is starting to stabilise. 

Latest figures from Stats NZ show the food price inflation is 5% – unchanged on a month ago. 

Butter prices have risen 32% in a year, cheese is up 26%, while milk has increased by 16%. 

Infometrics Principal Economist Brad Olsen told Ryan Bridge that while households are still seeing high costs, the pressure is coming through in a more contained fashion. 

He says that when inflation was running rampant a few years ago, just about everything was impacted, but now it’s not.  

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Food prices up five percent in the year to August.
The dairy main driver mel cup sixteen percent, cheese up
twenty six percent, butter up thirty two percent, meat, poultry,
fish all up eight point one percent. Brad Olson in
for Metrics with us this morning. Brad, good morning to you.

Speaker 2 (00:14):
Good morning. Hey.

Speaker 1 (00:15):
Did you see the global dairy trade auction numbers overnight?

Speaker 2 (00:17):
Your thoughts I did a little bit down, I think,
probably highlighting that look, we're still seeing our across the
globe a bit of trying to find where things are
going to level out in terms of both supply and demand.
But I think also again on one hand, encouraging for
households in the sense that you haven't seen in the
food price data but is basically been flapped the last

(00:40):
three months. But at the same time, if you're starting
to see the GDT come down, it does just make
you a bit nervous about those very high commodity prices
that we're getting at the moment. If the GDT continues
to fall, then yes, you might have ever so slightly
cheaper butter prices, but the primary sector might not be
earning quite as much either.

Speaker 1 (00:58):
Yeah, but they are expected to I mean either hold,
they should actually get to new record highs. According to
some economists.

Speaker 2 (01:07):
The yeah, well, I mean we're certainly hopeful of those
better times to come. But again, I mean, you see
that coming through in the food price data released yesterday,
which does highlight that from a household perspective, you're still
seeing some pretty big costs. Interestingly, though, again we're still
seeing that those cost pressures are coming through in a
more contained fashion. So you know, go back a couple

(01:27):
of years when inflation was running rampant, and you really
still quite a broad based level of inflation. Just about
everything was increasing in price at a fairly rapid pace. Nowadays,
it's not everything. It's just that it's quite a few
of the high frequency items that you notice a whole
lot more. It's the fact that you know, minces increased significantly,
steak all of your dairy. But we've also seen in

(01:49):
the latest food price numbers just a few bits of easing.
The likes of olive oil prices, which we're very high
a couple of years back, are now starting to come down.
The likes of coffee prices also easing, ever so slightly,
still elevated, still expensive, but continuing to sort of shift
in the right direction, you'd.

Speaker 1 (02:06):
Say, outside bred, outside of food. We are seeing rents
come down though, right, So does that sort of I
mean I see ASP's come out and said they probably
are picking two point nine percent for September, which is
below forecast of the RBNZ. So is there actually a
silver lining to all this?

Speaker 2 (02:22):
Well, I think it's just so mixed depending on exactly
who you are and what you're buying. Yes, we've seen
that that rental pressure has really eased back. That's generally
a lot more concentrated in our urban centers, Auckland and
Wellington in particular, So if you're renting in the regions,
you're probably still not seeing all that much of a
better sort of position there. But the one that worries me,

(02:43):
I think the most. We spend a lot of time
talking about rent and about food, but it's the energy
prices that really get me. The fact that electricity and
gas are up something like eleven and fourteen percent year
on year respectively. Those are some pretty big gifty increases
coming through for what are fairly vital costs. You can't
choose not to have electricity or gas. You need to
be able to sort of heat your home and cook dinner,

(03:04):
So all of those sort of pressures show that look,
it's mixed out there. But even then getting towards the
top of the target band, yes, the reserve banks still
got more scope to cut things, but realistically that's still
an uncomfortable level of inflation for everyone to be having
to handle.

Speaker 1 (03:20):
Appreciate your time, Brad brad Olson, Informetric's chief economists.

Speaker 2 (03:24):
For more from early edition with Ryan Bridge. Listen live
to News Talk Sat BE from five am weekdays, or
follow the podcast on iHeartRadio