All about inflation
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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.
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.
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.
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?
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.
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Chapters
8 chapters
1
What is the latest inflation data for Q4 and its implications?
0:00–0:39
2
What is the significance of core inflation in economic discussions?
0:39–1:19
3
How does inflation affect the official cash rate (OCR)?
1:19–2:17
4
What factors contribute to the recent increase in inflation?
2:17–3:33
5
How do tradable and non-tradable inflation differ?
3:33–3:53
6
What role do first-time buyers play in the property market?
3:53–4:14
7
How does economic recovery influence inflation trends?
4:14–4:35
8
What are the potential future implications of current inflation on consumers?
4:35–38:21
Speakers
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