Chapter 1: What is the latest inflation data for Q4 and its implications?
Keep in mind that their inflation target is over the medium term, so they're allowed to so-called look through little spikes in inflation for various different things.
Kia ora, and welcome to the New Zealand Property Market Podcast, brought to you by Cotaldi for the 26th of January, 2026. I'm Head of Research, Nick Goodall, and I'm joined as per usual by Chief Economist, Kelvin Davidson. Kelvin, we'll give a final wrap for 2025. off the back of our chart pack release last week.
But first, I want to go deep on the inflation data for Q4, which came out on Friday last week.
Chapter 2: What is the significance of core inflation in economic discussions?
So do you want to kick us off with that, mate? Obviously, we got that 3.1% figure for inflation over the year, higher than Reserve Bank's forecast.
um or much higher than the reserve banks forecast but higher than even the broader market expectations so yeah what does it mean let's get into some of the detail of tradable non-tradable i want to pick apart some of the other terminology that the economists use out there and yeah inflation day let's go yeah okay i've had to educate educate myself a little bit on some of this too because uh you know i might have learned it at one point and then forgotten it as the years have gone by but
Yeah, I mean, for me, headline number 3.1% inflation in the year to Q4 last year. So above the Reserve Bank's target, only slightly, but still above.
Chapter 3: How does inflation affect the official cash rate (OCR)?
You know, they've got that 1% to 3% target band over the medium term. So yeah, definitely not ideal. It was higher than what the Reserve Bank had been anticipating. I mean,
don't have the luxury of revising their forecasts every week or month or whatever that some of the bank economists can do so in the meantime the bank economists had actually raised their forecast so you know it wasn't it was pretty much in line with what bank economists have been saying but that was after they had made revisions so um either way you know still above that target as i say the uh the non-tradable inflation so you sort of more domestically based stuff it was three and a half percent now
That was unchanged from Q3, but 3.5%, still not ideal. It's above that 1-3% target band. And tradable inflation, your sort of imported type stuff or stuff made here that competes with imports, went from 2.2% to 2.6%. So that's where the overall increase came from, was that tradable component increase.
Chapter 4: What factors contribute to the recent increase in inflation?
um now that's 2.6 still kind of within the target yep that's that's kind of good but but that's where the overall increase still came from uh and yeah i mean things like individual items electricity council rates uh you know home insurance or different types of insurance i see health insurance has been going up quite a lot um petrol prices up so yeah there were a lot of things actually that now some of these things within reserve banks control some not um but either way
the the inflation came across quite a few things and actually i think i saw stats new zealand say something like you know if you look at all the components that go into the cpi and measure how many went up and how many were flat or how many went down you know um actually the the proportion of goods and services that went up in q4 was was higher than it's been quite some time so
i suppose that's a wee bit of a concern not only the 3.1 figure above target but also some ways the broad-based nature of it you know a lot of things actually went up in price so um yeah those those items are listed but generally not a great result i suppose you know from from the perspective of wanting inflation to be not only within target but trending lower as well so um yeah a wee bit concerning
Yeah. And I guess, you know, everyone's question is then going to be, so what does it mean about the OCR?
Chapter 5: How do tradable and non-tradable inflation differ?
And I think we'll get to that shortly. I think the thing for me was that there is so much detail. There is a bit of terminology that's thrown out here. One of the things that sort of cropped up to me is people go, where's core inflation at? And core inflation generally is when you strip out some of the more volatile items. Now, this can differ, it looks like.
It doesn't look like there's a consistent definition of this.
Chapter 6: What role do first-time buyers play in the property market?
And I couldn't even find a figure for where core inflation's at. But it pulls out things like food, energy, fuel, and things. And so I was interested to know, you know, why do economists do this? What does it really matter? And then you get this conversation also around, oh, why don't you do a trimmed mean? which, again, is kind of just taking out those volatile ones, I guess.
And I know Reserve Bank have got their own measure of this. You know, what is that?
Chapter 7: How does economic recovery influence inflation trends?
Does that bring it back down again? Does that really matter? Does that give them more confidence that, hey, you know, things in general are going OK, so there's no reason to panic? Like, where does all this come into it?
And just before I pass back to you to give us a bit more of the detail on those definitions, you know, the other thing I think that jumped out was that, you know, all those things you spoke about that are contributing to the stronger inflation are
Chapter 8: What are the potential future implications of current inflation on consumers?
many of them are related to housing right whether it's electricity council rates insurance i know rents have come down a little bit but sort of contributing to those housing factors um but some of those things aren't necessarily controlled by the official cash rate either it's not like they can hike up the ocr and suddenly those things you know the inflation slows down of those things they're kind of independent now
maybe you'd go yeah but if you balance out people's spending by increasing the ocr they're spending less on other things so that inflation slows that means that that can drag down the impact of those other factors so maybe that's the point um but again that's where you come in this conversation about you know what does the ocr actually control you know not those not those international factors that's for sure and that's the one that um increased the most or increased when the other one stayed flat so
But if you can get the domestic inflation down, I suppose, once again, it means that the overall figure would come down, even if the international inflation, that imported inflation, is quite high. And I guess the thing when we consider about the future of this, which is all what everyone's trying to paint the picture of,
There's, of course, going to be these, you know, upside surprises or concerns. You know, we've got the USA and Venezuela at the moment with their conflict and the potential impact that has on oil prices. If it does have an impact on, you know, the ability for that oil to get out around the world or the USA have a really strong impact there.
So, you know, even just having that sort of kind of, you know, dispute about it. you know, can sort of bring that uncertainty, which is not going to be good for the price of oil and then the flow through that to fuel as well.
So, look, I think there's a number of factors I've just sort of thrown back out there that are things that have jumped to my mind, whether it's we need to provide some insight on, well, the definition of, can you give us a bit more understanding of why all these other things are considered? Does it really matter?
Or do we just continue to focus on that headline inflation figure and that's what matters and that's all we should really worry about?
Yeah, so there's a bunch of things to talk about here. I mean, remind me to come back to my overall view right at the end if I forget. But I mean, there's no core inflation measure as such. You know, it's not like Stats New Zealand publishes that here's core inflation. So there's a little bit of judgment in here, a little bit of subjective thing.
I mean, the Reserve Bank has their own measures of what they deem to be core inflation. Stats New Zealand puts out a couple of measures which they have a name for. They don't necessarily call it core inflation. But you're right, in the end, it amounts to kind of taking out stuff that's a bit jumpy, a bit volatile, one-offs, things like that.
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