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Speaker 1: A good afternoon. Inflation has ticked up again. It's coming

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Speaker 1: at two and a half percent in the first three

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Speaker 1: months of the year. Gareth Kennan is Informetric's chief forecast

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Speaker 1: to Gareth, Hello, hi Heaver. Now this is only marginally

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Speaker 1: higher than what was forecast, right, it was forecast to

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Speaker 1: coming at two point four. It's coming at two point five.

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Speaker 1: Is this worth worrying about?

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Speaker 2: Look, it's just the sort of general sentiment and direction

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Speaker 2: of travel that we're a little bit concerned about. At

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Speaker 2: the moment, there were already expectations that inflation was going

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Speaker 2: to be picking up through the course of this year

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Speaker 2: to some degree. A reserve bank has I think it

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Speaker 2: peaking at two point seven percent later this year. I

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Speaker 2: guess the issue really is that we've come from a

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Speaker 2: period of very higher inflation over the last few years

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Speaker 2: and the Reserve Bank has only just regaining its inflation

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Speaker 2: fighting credibility. So there'll be, you know, some concerns there that,

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Speaker 2: you know, if we're too slow off the mark again

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Speaker 2: or a little bit too relaxed about how inflation is going,

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Speaker 2: then you know where do we end up in eighteen

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Speaker 2: months time.

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Speaker 1: Although on the other hand, Gareth the consensus appears to

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Speaker 1: be growing that what's going on with the tariffs will

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Speaker 1: drop inflation back down.

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Speaker 2: Right, Yeah, Look, it's pretty ambiguous at the moment. I

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Speaker 2: think the general sentiment, you're right, seems to be pushing

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Speaker 2: in the direction of a disinflationary pressure. So less inflation

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Speaker 2: in the system because weaker world growth, less demand means

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Speaker 2: there'll be sort of more discounting going on and products

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Speaker 2: available more cheaply. But at the same time, there is

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Speaker 2: still pockets of the sort of lingering price pressure. Before

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Speaker 2: the tariffs that were out coming out, there was concerns

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Speaker 2: about American inflation just holding up a bit more strongly,

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Speaker 2: and we know there will be some cost pressures that

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Speaker 2: do rise because of the changing trade situation. So it's mixed,

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Speaker 2: But you're right, the sentiment is pushing towards maybe a

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Speaker 2: little less inflation from the tariffs. As a result.

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Speaker 1: We had am Z yesterday saying that they thought the OCR,

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Speaker 1: which is sitting at three point five at the moment's

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Speaker 1: going to bottom out at two point five. Would you

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Speaker 1: agree with that.

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Speaker 2: Our forecast at the moment is for the OCR to

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Speaker 2: get down to three percent over the next three months.

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Speaker 2: But we think the Reserve Bank does need to just

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Speaker 2: sort of take a cautious approach and see how the

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Speaker 2: data unfolds. Beyond that as to whether further rate cuts

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Speaker 2: are possible. If inflation comes in and it's more below

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Speaker 2: expectation and coming quarters, there will be more room to cut.

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Speaker 2: But at the moment it is a mixed situation. I

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Speaker 2: think the reality is the banks core mandate is keeping

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Speaker 2: inflation under control. Yes, we know that prospects around economic

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Speaker 2: growth are weakening and softening as a result of the

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Speaker 2: global situation, but that's not their core mandate. It's effectively inflation.

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Speaker 1: Yeah. Now listen on the GDP growth. I see that

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Speaker 1: you guys have gone from forecasting for next year GDP

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Speaker 1: growth of two point four percent down now to one percent.

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Speaker 1: That's a reasonably significant reduction. Do you think that this

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Speaker 1: is I mean, are we now at the point where

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Speaker 1: Nicola Willis needs to start thinking very carefully and preparing

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Speaker 1: this budget.

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Speaker 2: Well. So, certainly on the revenue side, if you experiencing

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Speaker 2: economy that's growing at one percent rather than close to

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Speaker 2: two and a half percent, that does have implications on

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Speaker 2: the tax site. I don't know if it's going to

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Speaker 2: make too much difference on the other side of the equation,

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Speaker 2: because we know that those that fiscal position is very

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Speaker 2: tight for the government. They're running a surplus for the

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Speaker 2: next four a deficit for the next four or five years.

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Speaker 2: Surpluses nowhere to be seen, and so it's difficult for

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Speaker 2: them to offer a great deal of support for the economy. Obviously,

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Speaker 2: they've talked a lot about infrastructure. That's great, but it's

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Speaker 2: also not something that necessarily stimulates a lot of economic activity,

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Speaker 2: particularly quickly.

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Speaker 1: Good stuff. Gareth, thanks so much, appreciate it. Happy Easter,

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Speaker 1: Gareth Kennan of Informetric's chief forecaster.

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