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Speaker 1: Right.

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Speaker 2: Inflation has remained steady, increasing two point two percent in

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Speaker 2: the year to December, the same increase as the previous

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Speaker 2: September update. Quarterly inflation increased by point five percent. The

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Speaker 2: biggest driver was rent, up four point two percent, accounting

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Speaker 2: for a fifth of the increase, followed by local authority

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Speaker 2: rates which were up twelve point two percent. Domestic non

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Speaker 2: tradable inflation increase by four point five percent annually, also

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Speaker 2: driven by rent. So a lot of numbers. What does

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Speaker 2: it all mean? Westpac Senior economist Satish Renhood is with

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Speaker 2: me now, thank you for your time this morning.

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Speaker 1: Good morning, Francesca.

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Speaker 2: Can you tell me what does the rise and non

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Speaker 2: tradable inflation mean.

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Speaker 1: What we've been seeing are some strong pressures the domestic economy.

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Speaker 1: A lot of households have been feeling that. The good

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Speaker 1: news though, is that those pressures are coming off, especially

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Speaker 1: in areas like hospitality, and that meant healthhold should like

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Speaker 1: to see a little less pressure on their finances this year.

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Speaker 2: Okay, so rent was a big driver of this increase, Well,

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Speaker 2: we see that can continue into the year.

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Speaker 1: I think we're likely to see a bit less push

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Speaker 1: on rents this year. We've seen population growth slow down

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Speaker 1: and big increase in the housing's plat over the past year,

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Speaker 1: and we're already hearing about reduced pressure on rents in

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Speaker 1: areas like Larrington, which often think big increases.

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Speaker 2: Okay, so we shouldn't be too concerned about rents rising

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Speaker 2: throughout twenty twenty five.

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Speaker 1: I think it's still a pretty important concern for a

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Speaker 1: lot of households. It's a big share of this spending,

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Speaker 1: but hopefully those increases that we see will be more

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Speaker 1: moderate over the coming year.

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Speaker 2: What else would household be thinking about heading into twenty

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Speaker 2: twenty five and what these numbers can tell us.

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Speaker 1: We've had a lot of pressure on households finances over

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Speaker 1: the last couple of years. That's been a big squeeze

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Speaker 1: on this spending. But what we're seeing now is a

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Speaker 1: much bitter contained inflation environment. It means that their paychecks

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Speaker 1: aren't going to be eroded at the same pace. This

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Speaker 1: will also be very important for the Reserve Bank.

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Speaker 2: Yeah, so how does this impact a February o c

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Speaker 2: R cut.

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Speaker 1: We now that inflation that's very close to the rbn

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Speaker 1: to target, we're still looking a bit soft. I think

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Speaker 1: put that together and it's a green light for another

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Speaker 1: big fifty basis point cut in February, and politely more

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Speaker 1: seed further rate cuts beyond that.

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Speaker 2: Ye, if we're looking further beyond that, what are you anticipating.

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Speaker 1: I think beyond February, we're likely to see probably a

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Speaker 1: twenty five basis point cut at each of the two

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Speaker 1: following meetings. They'll take cash right down to three twenty

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Speaker 1: five the lost it's been in a long time.

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Speaker 2: So I suppose if you're if you're you've got a

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Speaker 2: mortgage out there, and maybe this year you've got a

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Speaker 2: chance to sort of refix that. Where would you seduce

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Speaker 2: that you kind of start thinking about that if you

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Speaker 2: wouldn't mind just you know, looking into your crystal ball

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Speaker 2: there situation.

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Speaker 1: I think it's a great time to relook at where

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Speaker 1: you're mortgage at that. I can't say exactly what a

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Speaker 1: household could do, but think the big drops over the

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Speaker 1: past year. So if you had fixed us a one

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Speaker 1: or two years a couple of years back, you could

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Speaker 1: see a mortgage rate that's now about one hundred basis

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Speaker 1: points world when you look last fixed. So that could

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Speaker 1: be a big saving for your finances.

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Speaker 2: So when you look at all those inflation figures that

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Speaker 2: were released yesterday. How how are you feeling? How positive

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Speaker 2: are you feeling about twenty twenty five.

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Speaker 1: I think this is a really important it's a really

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Speaker 1: positive development to the economic inflation that's contains me. We'll

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Speaker 1: see a less pressure on household's finances have really been

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Speaker 1: pressured over the last couple of years. But importantly the

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Speaker 1: related reduction and interest rate to put a lot of

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Speaker 1: money back in the house of back pockets, and that

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Speaker 1: will also be positive for economic growth and employment more

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Speaker 1: broadly as we go through twenty twenty five, we.

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Speaker 2: Shall take that positivity. Satish, thank you very much for

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Speaker 2: your time this morning. That was respect seeing the economist

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Speaker 2: Satish Rancherd. For more from Early edition with Ryan Bridge,

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Speaker 2: listen live to News Talks it be from five am weekdays,

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Speaker 2: or follow the podcast on iHeartRadio.