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Speaker 1: Another of those fascinating economic days today with the release

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Speaker 1: of the Q three inflation read a couple of things

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Speaker 1: about it. Is it three or above? And number two?

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Speaker 1: Has it peaked? The last number we had for Q

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Speaker 1: two to June was two point seven. Kelly Echold, as

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Speaker 1: West Paxtief economist, of course, is back with us. Kelly morning,

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Speaker 1: he might what's you call?

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Speaker 2: Well, we think it'll be a three percent annual eight

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Speaker 2: one percent for the quarter. That's more or less what

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Speaker 2: the Reserve Bank's got unless you go down to the

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Speaker 2: second decimal place. Key here is is this the peak?

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Speaker 2: As you pointed out.

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Speaker 1: The psychological effect of anything with the three in it?

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Speaker 1: What's your assessment of that? Do we we're already in

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Speaker 1: a funk. Does this sort of sinkers?

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Speaker 2: Well? I think people already know that the cost of

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Speaker 2: living has been rising quite significantly. I mean, a nice

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Speaker 2: little factoy there inflations back inside the target range. But

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Speaker 2: the level of prices is more than twenty percent high

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Speaker 2: than it doesn't start the pandemic, So people know that

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Speaker 2: they've got less money in the back pocket. The Reserve

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Speaker 2: Bank's kind of interested in do people think that they

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Speaker 2: need to get a bigger pay rise. Are their inflation

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Speaker 2: expectations going to rise? So far they seem pretty senguine

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Speaker 2: about that.

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Speaker 1: See, this is the interesting thing for me, isn't it.

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Speaker 2: So?

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Speaker 1: So so we get to three three point one whatever

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Speaker 1: happens to be, and then we start talking about this,

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Speaker 1: but it's going to come back. What's the stuff that's

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Speaker 1: driving it? Though? How's that come back? Your council rates,

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Speaker 1: your insurance bills, your power bills, that they're going up

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Speaker 1: and continuing to go up.

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Speaker 2: Yeah, Well, council rates is obviously the big bug bearer,

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Speaker 2: and that's going to be the big driver of the

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Speaker 2: CPI this quarter because it is the quarter where it hits.

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Speaker 2: The good news there is that the amount of rates

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Speaker 2: increase we've got in for this year is a little

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Speaker 2: bit lower than it has been in the last couple

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Speaker 2: of years. But I think you're right to point that.

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Speaker 2: You know, what we really need to see evidence here

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Speaker 2: is that a whole lot of the services sector prices

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Speaker 2: in the CPI start to come off a bit in

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Speaker 2: line with this weaker economy, and hence, you know, we're

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Speaker 2: really looking to see as their sides that core inflation

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Speaker 2: is dropping, which case that forecast that inflation heads. You know,

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Speaker 2: at least into the low twos again these few quarters

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Speaker 2: is going to be right.

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Speaker 1: Yeah, So if the RB are expecting this, do they

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Speaker 1: look through it as much as they look through anything.

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Speaker 1: And if they were going to go twenty five, they're

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Speaker 1: still going to go twenty five. In other words, this

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Speaker 1: won't spook them.

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Speaker 2: Well, I don't expect this to spook them because it's

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Speaker 2: in their forecast, even if it was a bit higher,

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Speaker 2: and if the reason was a temporary or one off factor,

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Speaker 2: I don't think they'll be that bothered because their key

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Speaker 2: message here is that they think there's enough excess capacity

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Speaker 2: in economy, which is another word of saying the economy

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Speaker 2: is weak enough that they can focus on that and

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Speaker 2: trust that that will bring things back. And you know,

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Speaker 2: the news we've got on the growth impulse in the

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Speaker 2: thirtain fourth quarters hasn't been that encouraging to be No.

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Speaker 1: Indeed, not twenty five and done.

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Speaker 2: Do you think, Well, I think they would like to

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Speaker 2: get everything done before Christmas. So I've been telling clients

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Speaker 2: that I think they'll be dicing up between twenty five

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Speaker 2: and fifty just to finish off for Christmas and then

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Speaker 2: hopefully net year, get the rates to where they are,

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Speaker 2: leave them there for as long as it takes. Hopefully

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Speaker 2: it's not very long, but we'll see.

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Speaker 1: All right, Kelly, nice to talk to you. Appreciate it, Kelly,

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Speaker 1: you Cole, who's the WHISPAC chief economist.

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