July 20, 2025 • 8 mins
Inflation's cooling in many corners of the economy, but not headline inflation.
Latest Stats NZ figures suggest core inflation and domestically-driven non-tradeable inflation are trending downwards.
But annual inflation has risen to 2.7 percent, up from 2.5 three months ago.
NZ Herald business editor at large Liam Dann says these figures will provide relief for the Reserve Bank, as they work on getting the OCR down.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
You're listening to the Kerry Wood of Morning's podcast from
News Talk sa'd be.
Speaker 2 (00:11):
The latest news, which came out twenty two minutes ago
was our inflation figures and the latest stats. New Zealand
figures showed the consumer's price in the NEX rows two
point seven percent in the year to June. The two
point seven percent increase follows a two point five percent
annual increase in the twelve months to the March twenty
twenty five quarter. Now, the largest contributor upwards to the
(00:34):
annual inflation rate was local authority rates and payments em
Brace Yourself twelve point two percent. So New Zealand Herald
Business Editor at Large Liam dan is joining me in
our commodity Iliam. Hey, Andrew, So I heard people predicting
two point nine. I know some said two point six.
If it comes in two point seven, good news or bad.
Speaker 3 (00:56):
Yeah, I think it's good news. I mean, it doesn't
change what you're paying at the supermarket for your butter
and your minced beef and all the rest of it,
so that pain still there, but it does provide a
little bit of comfort for the Reserve Bank, whose which
is you know, trying to get interest rates down so
we can get the economy going again and is up
(01:17):
against this risk that inflation is getting up towards their
three percent upper target. So it you know, one of
the things is that you know, the annual rate is
you know, looking backwards quite a lot. So some of
the food prices weren't as bad a year ago. The
quarterly figure though, was only zero point five and that
(01:37):
that's lower than the previous quarterly figure, but it was
flattered by petrol prices which were down quite substantially eight
percent or something like that. So fuel costs were down.
We might not get that in the in the current
quarter we're in, but yeah, the things that annoy people
were certainly there, you know, so rates and.
Speaker 2 (01:57):
Yeah, of course we're talking about that in just a second.
In the last six months we've had the government going well,
inflation has been has been beaten, the beast is beaten,
and it's all good. But we've also heard people warning
about a thing called lag. And it's the same with recessions.
That you think you've turned the corner, that the green
shoots are there, You think you've turned to the corner.
The inflation is down, but it often takes a lot
longer to actually cement itself down than you would hope.
Speaker 3 (02:21):
Yeah. Yeah, So that the inflation coming out of the economy,
which it still is, is in that core domestic end
of it, what we call non tradables. We all learned
a couple of years ago the difference between non tradables
and tradeables and that sort of stuff. But so that
you know, the cost of getting a plumber in or
something like that, all those services costs are sort of
(02:42):
coming out and that's partly more largely because the economy
is so little demand in the economy. The economy is
so stuffed to use a shorthand, that it's disinflationary and
that's continuing to happen. Meanwhile, in the short term, we've
had a big spike in global commodity prices for basically
for proteins, dairy butter. Yeah, all the dairy prices and
(03:05):
the meat price is now. I spend a lot of
time trying to explain to people that this is good
for New Zealand as a net equation, but it isn't
good for you if you're at the supermarket and struggling
with your food price bills. Because we saw last week
with the food price inflation numbers that they've been pretty
ugly in the past, were really in the past couple
of quarters, you know, and they're not going to come
(03:28):
down real fast because the dairy prices are staying elevated,
the meat prices are elevated, and we've seen fruit and
vege ten percent in the quarter, some of that seasonal,
but that's not going to be great in the next
few months because of the flooding we've had, you know. Unfortunately,
whenever we have flooding in places where they grow our
potatoes and stuff, it's no good.
Speaker 2 (03:47):
You talked about the tradables and the non tradables, and
in the non tradables is things like rates, you know.
In the non tradables is things like electricity powers, yeah,
power prices. In the non tradables is things like insurance,
which is being driven up by fears of climate change
and as you quite quite rightly say, whether it's earthquake
or floods, and so the insurance is going up. So
(04:09):
those non tradables cannot really be affected by a reserve bank.
And seeing that the annual inflation rate for local rates
and stuff is twelve point two percent, that shows there
is a level of inflation that is severely baked in.
Speaker 3 (04:25):
Yeah, you mentioned the lag effect. I mean the problem
is you know that those particularly those three areas, the rates,
the power prices, and the insurance we all got hit
with price rises. And add another one which is probably
non tradables, although it sort of is. I'm not quite
sure how they measure it, but it's your Netflix subscription,
so it's cultural services. And I was stretching my head
(04:47):
on that category, but then you know, it's streaming. Prices
all went up a lot in the last quarter, and
they were the biggest driver of the increase in the
last quarter.
Speaker 2 (04:55):
I know. So I wanted to go to the Lenny
Kravitz concert. I had tickets to the last Letny Craditz
concert canceled by COVID. He finally says he's coming back
after five years, and we going, Lenny, where are you?
And when he comes back, you know, four ticket, two
hundred and sixty bucks. So we love you, love you Lenny,
but not that much.
Speaker 3 (05:12):
But I don't know, I don't know whether it's or not.
I mean, this is what they bleed into each other
a little bit. In the real world. Tradeables and non
tradeables bleed into each other, because it's not that simple.
You know, he's we're importing Lenny Craven's I guess. But
then spark Arena is providing a service. I don't know
how that works. Ye yeah, yeah, but but those things, yeah,
are outside the control of the Reserve Bank to some extent,
(05:34):
include and so are petrol prices and food prices. So
they they are allowed to look through to a certain
extent and look at core inflation, the things that aren't
so volatile, and looking at that, there should be some
comfort for them. You know, I think we could say
this makes it more likely someone some smart economists might
say locked in. But you know, it looks like we'll
(05:55):
get another rate cut in August.
Speaker 2 (05:58):
Well I've got I've got an opinion on that, and
I'm going to mention that, you know, very very shortly.
But the thing being, if the non tradables cannot be fixed,
therefore the inflation is always there, and those non tradables
are often catch up, you know, so rate catch up.
(06:18):
Our rates are up there. It's not going to be solved.
Those non tradables aren't going to be solved, particularly rates
and power, until we have proper infrastructure development to fix
those systemic problems there, which means, you know, we've branded
the whole inflation thing is a cost of living crisis.
And while we may be able to cut down your
(06:39):
basic inflation, there's other costs of living things like rates,
insurance and all that that we were unable to touch
until we get this space moving.
Speaker 3 (06:47):
Yeah, essentially the bit where we where they do have control,
it's making us poorer so that non tradables so wage
growth will come down. You know, it's not ideal really
when you think about it, but you don't want wage
inflation spiraling. But but you know, if it's wages coming
down and we're getting poorer, I mean, that is what
(07:08):
inflation is, is people getting poorer and we're sort of
is paying that cost for all the all the you know,
stimulus and all that sort of stuff. But you know,
that's where the disinflationary stuff is. It's it's it's in
the in the services costs we're charging each other, These
costs that we can't seem to control that we're hoping
the government might do something about, Like power are a
(07:30):
bit of a bugbear in the whole system.
Speaker 2 (07:32):
Actually, you know, you're telling me you are telling me.
Speaker 3 (07:36):
And then there's the butter. You know, everyone's really animated
about butter, but but food prices are a big chunk
of inflation for those people who are poorer, because the
food bill is a bigger part of their total, you
know experience.
Speaker 2 (07:48):
I don't care about butter because butter is making money
for the farmers, and the farmers are spending with the services,
and that's all good. And if you don't like it,
just go to margarine.
Speaker 3 (07:57):
Yeah, well yeah, country soft these a little bit of yeh.
But I do worry about the beef and things. So
if you can't feed your family, you know, mince meat
is really like a classic working class food and if
that's getting out a range of people's that's tough.
Speaker 2 (08:13):
That's it. I bought two chicken thigh cutlets, bone in
because I was on my own over the course of
the weekend. And you keep the bones in because it
adds the taste.
Speaker 3 (08:23):
A dollar thirty chickens remains in dollar thirty sort of
unnervingly cheap.
Speaker 2 (08:27):
Really gosh. And so I just lived on chicken.
Speaker 3 (08:30):
All weekend, and we don't export the stuff, so I
guess that maybe plays a part.
Speaker 2 (08:34):
Very good, So just in conclusion, you think the Reserve
Bank will go Yeah, I think actually inflation is still
under control and so in August there may be the
possibility of another rate cut.
Speaker 3 (08:43):
Yes, I do think that.
Speaker 2 (08:45):
That's a nice way to finish the interview and I
thank you Andrew. That is Liam dan Our, hair old
business editor at Larger.
Speaker 1 (08:52):
For more from Kerry Wood and Mornings, listen live to
news Talks. It'd be from nine am weekdays, or follow
the podcast on iHeartRadio.
You're listening to the Kerry Wood of Morning's podcast from
News Talk sa'd be.
Speaker 2 (00:11):
The latest news, which came out twenty two minutes ago
was our inflation figures and the latest stats. New Zealand
figures showed the consumer's price in the NEX rows two
point seven percent in the year to June. The two
point seven percent increase follows a two point five percent
annual increase in the twelve months to the March twenty
twenty five quarter. Now, the largest contributor upwards to the
(00:34):
annual inflation rate was local authority rates and payments em
Brace Yourself twelve point two percent. So New Zealand Herald
Business Editor at Large Liam dan is joining me in
our commodity Iliam. Hey, Andrew, So I heard people predicting
two point nine. I know some said two point six.
If it comes in two point seven, good news or bad.
Speaker 3 (00:56):
Yeah, I think it's good news. I mean, it doesn't
change what you're paying at the supermarket for your butter
and your minced beef and all the rest of it,
so that pain still there, but it does provide a
little bit of comfort for the Reserve Bank, whose which
is you know, trying to get interest rates down so
we can get the economy going again and is up
(01:17):
against this risk that inflation is getting up towards their
three percent upper target. So it you know, one of
the things is that you know, the annual rate is
you know, looking backwards quite a lot. So some of
the food prices weren't as bad a year ago. The
quarterly figure though, was only zero point five and that
(01:37):
that's lower than the previous quarterly figure, but it was
flattered by petrol prices which were down quite substantially eight
percent or something like that. So fuel costs were down.
We might not get that in the in the current
quarter we're in, but yeah, the things that annoy people
were certainly there, you know, so rates and.
Speaker 2 (01:57):
Yeah, of course we're talking about that in just a second.
In the last six months we've had the government going well,
inflation has been has been beaten, the beast is beaten,
and it's all good. But we've also heard people warning
about a thing called lag. And it's the same with recessions.
That you think you've turned the corner, that the green
shoots are there, You think you've turned to the corner.
The inflation is down, but it often takes a lot
longer to actually cement itself down than you would hope.
Speaker 3 (02:21):
Yeah. Yeah, So that the inflation coming out of the economy,
which it still is, is in that core domestic end
of it, what we call non tradables. We all learned
a couple of years ago the difference between non tradables
and tradeables and that sort of stuff. But so that
you know, the cost of getting a plumber in or
something like that, all those services costs are sort of
(02:42):
coming out and that's partly more largely because the economy
is so little demand in the economy. The economy is
so stuffed to use a shorthand, that it's disinflationary and
that's continuing to happen. Meanwhile, in the short term, we've
had a big spike in global commodity prices for basically
for proteins, dairy butter. Yeah, all the dairy prices and
(03:05):
the meat price is now. I spend a lot of
time trying to explain to people that this is good
for New Zealand as a net equation, but it isn't
good for you if you're at the supermarket and struggling
with your food price bills. Because we saw last week
with the food price inflation numbers that they've been pretty
ugly in the past, were really in the past couple
of quarters, you know, and they're not going to come
(03:28):
down real fast because the dairy prices are staying elevated,
the meat prices are elevated, and we've seen fruit and
vege ten percent in the quarter, some of that seasonal,
but that's not going to be great in the next
few months because of the flooding we've had, you know. Unfortunately,
whenever we have flooding in places where they grow our
potatoes and stuff, it's no good.
Speaker 2 (03:47):
You talked about the tradables and the non tradables, and
in the non tradables is things like rates, you know.
In the non tradables is things like electricity powers, yeah,
power prices. In the non tradables is things like insurance,
which is being driven up by fears of climate change
and as you quite quite rightly say, whether it's earthquake
or floods, and so the insurance is going up. So
(04:09):
those non tradables cannot really be affected by a reserve bank.
And seeing that the annual inflation rate for local rates
and stuff is twelve point two percent, that shows there
is a level of inflation that is severely baked in.
Speaker 3 (04:25):
Yeah, you mentioned the lag effect. I mean the problem
is you know that those particularly those three areas, the rates,
the power prices, and the insurance we all got hit
with price rises. And add another one which is probably
non tradables, although it sort of is. I'm not quite
sure how they measure it, but it's your Netflix subscription,
so it's cultural services. And I was stretching my head
(04:47):
on that category, but then you know, it's streaming. Prices
all went up a lot in the last quarter, and
they were the biggest driver of the increase in the
last quarter.
Speaker 2 (04:55):
I know. So I wanted to go to the Lenny
Kravitz concert. I had tickets to the last Letny Craditz
concert canceled by COVID. He finally says he's coming back
after five years, and we going, Lenny, where are you?
And when he comes back, you know, four ticket, two
hundred and sixty bucks. So we love you, love you Lenny,
but not that much.
Speaker 3 (05:12):
But I don't know, I don't know whether it's or not.
I mean, this is what they bleed into each other
a little bit. In the real world. Tradeables and non
tradeables bleed into each other, because it's not that simple.
You know, he's we're importing Lenny Craven's I guess. But
then spark Arena is providing a service. I don't know
how that works. Ye yeah, yeah, but but those things, yeah,
are outside the control of the Reserve Bank to some extent,
(05:34):
include and so are petrol prices and food prices. So
they they are allowed to look through to a certain
extent and look at core inflation, the things that aren't
so volatile, and looking at that, there should be some
comfort for them. You know, I think we could say
this makes it more likely someone some smart economists might
say locked in. But you know, it looks like we'll
(05:55):
get another rate cut in August.
Speaker 2 (05:58):
Well I've got I've got an opinion on that, and
I'm going to mention that, you know, very very shortly.
But the thing being, if the non tradables cannot be fixed,
therefore the inflation is always there, and those non tradables
are often catch up, you know, so rate catch up.
(06:18):
Our rates are up there. It's not going to be solved.
Those non tradables aren't going to be solved, particularly rates
and power, until we have proper infrastructure development to fix
those systemic problems there, which means, you know, we've branded
the whole inflation thing is a cost of living crisis.
And while we may be able to cut down your
(06:39):
basic inflation, there's other costs of living things like rates,
insurance and all that that we were unable to touch
until we get this space moving.
Speaker 3 (06:47):
Yeah, essentially the bit where we where they do have control,
it's making us poorer so that non tradables so wage
growth will come down. You know, it's not ideal really
when you think about it, but you don't want wage
inflation spiraling. But but you know, if it's wages coming
down and we're getting poorer, I mean, that is what
(07:08):
inflation is, is people getting poorer and we're sort of
is paying that cost for all the all the you know,
stimulus and all that sort of stuff. But you know,
that's where the disinflationary stuff is. It's it's it's in
the in the services costs we're charging each other, These
costs that we can't seem to control that we're hoping
the government might do something about, Like power are a
(07:30):
bit of a bugbear in the whole system.
Speaker 2 (07:32):
Actually, you know, you're telling me you are telling me.
Speaker 3 (07:36):
And then there's the butter. You know, everyone's really animated
about butter, but but food prices are a big chunk
of inflation for those people who are poorer, because the
food bill is a bigger part of their total, you
know experience.
Speaker 2 (07:48):
I don't care about butter because butter is making money
for the farmers, and the farmers are spending with the services,
and that's all good. And if you don't like it,
just go to margarine.
Speaker 3 (07:57):
Yeah, well yeah, country soft these a little bit of yeh.
But I do worry about the beef and things. So
if you can't feed your family, you know, mince meat
is really like a classic working class food and if
that's getting out a range of people's that's tough.
Speaker 2 (08:13):
That's it. I bought two chicken thigh cutlets, bone in
because I was on my own over the course of
the weekend. And you keep the bones in because it
adds the taste.
Speaker 3 (08:23):
A dollar thirty chickens remains in dollar thirty sort of
unnervingly cheap.
Speaker 2 (08:27):
Really gosh. And so I just lived on chicken.
Speaker 3 (08:30):
All weekend, and we don't export the stuff, so I
guess that maybe plays a part.
Speaker 2 (08:34):
Very good, So just in conclusion, you think the Reserve
Bank will go Yeah, I think actually inflation is still
under control and so in August there may be the
possibility of another rate cut.
Speaker 3 (08:43):
Yes, I do think that.
Speaker 2 (08:45):
That's a nice way to finish the interview and I
thank you Andrew. That is Liam dan Our, hair old
business editor at Larger.
Speaker 1 (08:52):
For more from Kerry Wood and Mornings, listen live to
news Talks. It'd be from nine am weekdays, or follow
the podcast on iHeartRadio.
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