Big jump in inflation forecast this week
Bank economists are forecasting a further jump in inflation when Stats NZ issues its verdict on the December quarter on Wednesday.
Monday, January 24th 2022, 8:40AM 
2 Comments
That could leave many brokers eventually negotiating significantly higher interest rates on loans for their customers.
The ASB expects inflation to reach its highest level in 30 years.
It says a 1.6% increase in the Consumers Price Index (CPI) for the December quarter will bring annual inflation 6.1%.
That is a lot more than the current 4.9%, which is itself far higher than the Reserve Bank is supposed to tolerate.
And 6.1% will not be the last. The bank economist Mark Smith forecasts the rate to go still higher, peaking at 6.3% and remaining high until next year.
Smith is blaming “a relentless stream of price and cost rises from a multitude of domestic and external sources” for the problem, which will prompt “a more aggressive path of OCR tightening” by the Reserve Bank.
Westpac is a little more restrained, but it too sees inflation going higher. Its senior economist Satish Ranchod is forecasting a quarterly rate of 1.2%, which will make the annual rate 5.7%.
“New Zealand is in the midst of a perfect storm of inflation pressures,” Ranchod said.
“Much of this is a result of offshore factors. Disruptions to global manufacturing chains have resulted in shortages of many consumer goods and production inputs.”
Domestic pressures were adding to the problem.
“New Zealand is in the midst of a perfect storm of inflation pressures,” Ranchod said.
Like other economists, Ranchod is forecasting the OCR to be 3% by next year.
This will leave advisers forced to negotiate higher interest rates for their customers. At present, most interest rates are in the 4% to 5% range, with an OCR of 0.75%.
| « ASB warns of high inflation, falling house prices | Resimac seeks to avoid “nit picking” under CCCFA » |
Special Offers
Comments from our readers
It has been suggested that the TRUE inflation rate in NZ is approx 7% more than the projected +- 5% annualised rate indicated here, which is more like 12%pa ?
In a public meeting in Nov 1998 Don Brash exposed that the leaders in Wellington had conveniently removed houses & land from our CPI
Doubters may wish to Google-check this fact?
The result of this has been well-known and well-accepted huge year on year house price increases (way above the normal average of 10% pa) mkuch to the delight of 'local' govt, who have reaped the higher related land taxes (rates).
Obviously, the CPI appears to be a controlled measurement tool to suit whatever outcome they want??
Someone said "that the Reserve Bank Act has suffered a severe breaking of the law because the Act states that inflation is not to rise above 3%pa equivalent for two consecutive quarters!"
He added, "that when Private finance companies were prosecuted for breaking the law around a decade ago, many of them were sent to jail!"
Maybe try working out your own average inflation rate, and determine who is the more accurate.....I'm sure my old calculator still works ok?
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
I'll remind you all WHY, and it came from Don Brash's public speech in Hamilton in 1998 (doubters of my claim can Google it?)
Don Brash clarified WHY
The government removed houses and land out of the CPI
Because they knew they were going to give 'free reign' on house & land prices for a long time....so they could subsequently reap hugely growing land taxes (rates) to line their 'spending' coffers.
That's WHY
So is the Reserve Bank off to jail?
If the RB were to be private enterprise (like many of our old finance companies) the fate of the RB would inevitably be jail, wouldn't it??