David Farrar: Inflation is still a problem

stats nz reports:

new zealand's consumers price index increased 4.7 percent in the 12 months to the December 2023 quarter, according to figures released by Stats NZ today.

The 4.7 percent increase follows a 5.6 percent increase in the 12 months to the September 2023 quarter.

“While this is the smallest annual rise in the CPI in over two years, it remains above the Reserve Bank of New Zealand's target range of 1 to 3 percent,” consumers prices senior manager Nicola Growden said.

4.7% is still far too high. If you had annual inflation of 4.7% for ten years, then a $200 grocery shop today would cost $330 within a decade.

Non-tradeable inflation was 5.9 percent in the 12 months to the December 2023 quarter, driven by rent, construction, and cigarettes and tobacco.

Tradeable inflation was 3.0 percent in the 12 months to the December 2023 quarter, driven by petrol and confectionery, nuts, and snacks, offset by lower prices for international air transport.

The Reserve Bank should not assume its job is done. They can't really impact tradable inflation, but non-tradable is still at twice the legally agreed range and three times the agreed midpoint.

Tradeable inflation is at an almost three year law. Non-tradeable inflation is still higher than in 2021. Talk of lowering interest rates is premature.

David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders.