Christoph Schumacher

economists would now sort of use a bad word stagflation it's when the economy is slowing down but inflation is going up and unemployment is rising as well so that indicates to us this is not just a short-term issue but there is something more systemic happening and that's what causes i guess the uncertainty the discomfort of people in the gloom is as you have described

It's bad, right, because people instantly associate it with the 70s, the huge unemployment, the double-figure inflations around the world, and we had no idea what to do.

We are nowhere near that, just sort of at the start of that.

So, no, there's no need for panic, and we are much better prepared now.

GDP is always a value you need to look out for because it tells us how our economy is actually doing.

Problem, of course, is it takes about three to six months before we know the figures.

But GDP is a crucial value and inflation, of course, as well.

Look at some of the expectation of yields and bond market to just have an idea what the market thinks.

Again, but the key factors are GDP and inflation because those are the values the Reserve Bank government would use to decide what to do.

4% is probably a realistic value simply because of the oil shock.

Oil prices affect everything.

If you buy something at the supermarket, well, it would have come from a producer, be transported to a processing plant, be transported to a distribution center by the time it hits the supermarket.

A lot of petrol would have been used up and that costs more and that goes straight onto the prices.

And there's a trickle effect.

An economy is not like a finely tuned sports car where a little pull on the steering wheel changes direction.

It's like more a huge cruise liner.

When something happens and you try to change direction, it takes quite some time for it to trickle through.

we haven't quite seen the full impact of the oil crisis yet on all the items we use every day and so that will increase in inflation further on top of this and that's often ignored is that our inflation value is a compound value of imported inflation those are those goods we import and if they become more expensive overseas

Well, we bring that inflation to New Zealand, but also the non-tradable goods, our domestic inflation.

These are goods we don't trade, like electricity, insurance, council rates.