David Farrar: Inflation down but not out

The quarterly inflation rate of 0.5% and annual inflation rate of 2.2% is acceptable, even though a bit on the high side (I think the range should be 0 to 2%).

The breakdown annually is 4.5% for non-tradeables and -1.1% for tradeables. 4.5% is still too high and if I was the Reserve Bank I’d be tempted to only do a 0.25% drop in the cash rate.

Against that though the quarterly non-tradeable figure was only 0.7% and if you annualise that out, then that is 2.8% so under the 3% band.

While it is the overall rate that has to be under 3%, we have little control over tradeable inflation, but more so over non-tradeable or domestic.

The annual non-tradeable rate has been:

• 2021: 5.3%
• 2022: 6.6%
• 2023: 5.9%
• 2024: 4.5%

Hopefully in 2025 it will be well below 3%.

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.