Ryan Bridge: Our economy is still in the wilderness

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Recorded23 Jan 2025

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So we have an inflation number, which is better than not knowing, but it doesn’t tell us much. 2.2 percent for the year to December, no change from the quarter before it and crucially non-tradable inflation, the stuff we should have more control over domestically is sticky at 4.5 percent. Two main problems here, one for us and one for the Government. If the exchange rate keeps tanking, the stuff we buy from the rest of the world - like fuel and food - will get more expensive. And if that stuff gets more expensive, you know what that means, more inflation. Add that to your sticky domestic number and you may have a problem. If that happens, you watch the Reserve Bank get the jitters and hit pause on rate cuts. And then we all get the jitters and pull back on spending. Then we're riding this seemingly never-ending rollercoaster ride that is the cost of living crisis. The gift from Labour that keeps on giving. The other problem in these numbers is for the Government. At the election they promised rents would come down once they delivered landlord interest deductibility relief. I agree with them doing that - it was mad that Labour took it away. But they were wrong to claim it would bring rents down when rents are, by-and-large, dictated by supply and demand. How much the market is willing to pay for a 3-bedroom place in Mount Victoria is what the market is willing to pay. So now 80 percent deductibility has kicked in and guess what? Rents are up 4.2 percent in yesterday’s numbers. So not exactly what was promised. Now, to be fair, they’ll be hoping once the full landlord deduction kicks in and it’s given more time it may help. But it would only be at the margins. It is not and won’t be the main driver of slashing rents - and yesterday’s numbers proved that. LISTEN ABOVESee omnystudio.com/listener for privacy information.

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