Stats NZ says it doesn't have the money to report more frequently on inflation

Thursday, 27 October 2022

David Boyle discusses the impact of inflation on NZ households.

Stats NZ says it doesn’t have the funding or resources to provide monthly inflation figures, after the Reserve Bank and a top accounting body said more frequent reporting could help ensure interest rates were set at the right level.

Chartered Accountants Australia and New Zealand (Caanz) said the Reserve Bank would be less likely to make a mistake by setting interest rates higher or lower than was necessary if it had more regular information on how inflation was tracking.

The need for more regular reporting was highlighted when Stats NZ reported earlier this month that annual inflation had been running at the unexpectedly fast pace of 7.2% in the three months to the end of September, it said.

The inflation data led some banks to change their forecasts and predict that the Reserve Bank would raise the official cash rate by 75 basis points to 4.25% when it releases its next monetary policy statement on November 23.

Caanz spokesperson Peter Vial said if the Reserve Bank had been able to see how hot inflation was running earlier, then it could have reacted sooner.

* Cost of living outpaces inflation, jumping by 7.7%

Monthly inflation data would allow the Reserve Bank to act on more timely information, the bank has previously said.

* Inflation by the numbers: Food soars, airfares fall, housing stays pricey

Instead, “New Zealanders have had to wait a whole quarter to find out our Reserve Bank’s rate hikes haven’t had the desired effect”, he said.

Stats NZ said in a statement that updating the consumer price index (CPI) every month would “take a lot of additional resource that we don’t currently have”.

“We are constantly in discussions with our customers about their priorities and in the last couple of years have been mainly focused on ensuring that we accurately reflect the impact of Covid,” it said.

Stats NZ pointed out that it did update the price of food and rents each month and said the prices of some products tracked by the CPI, including clothing and appliances, were “unlikely to change monthly”.

Vial said there could be a lag of up to about five months between a swing in inflation occurring and the Reserve Bank resetting interest rates after that was picked up in Stats NZ’s quarterly statistics.

That lag would be greatest if the swing began at the start of a quarter and there was long gap between Stats NZ reporting it and the Reserve Bank’s next scheduled OCR review.

Quarterly inflation is only one of a wide range of economic variables that the Reserve Bank considers when reviewing interest rates, but Vial agreed such lags could also raise the risk that the central bank might be late in detecting an expected drop in inflation.

Economists expect inflation to fall from its current level thanks to rate rises that have already taken place and further falls in commodity prices.

The Ukraine war has been playing havoc with the prices of some commodities, making some unusually volatile.

Council of Trade Unions economist Craig Renney noted that after spiking earlier in the conflict, wholesale natural gas prices in Europe briefly dipped below zero last week, as a result of storage facilities being full up for winter.

But if inflation was to drop sharply in New Zealand today, that would not be picked up by Stats NZ until it reported its fourth-quarter inflation number on January 25, after which the next scheduled monetary policy statement is on February 23.

Many central banks, including the European Central Bank, the Bank of England and the US Federal Reserve update their inflation numbers monthly, and Australia began following suit last month with a limited data set.

“We don’t have far to look for inspiration on more frequent inflation reporting,” Vial said.

A Reserve Bank spokesperson indicated it would be making its own call for monthly inflation updates before the end of the year, when it completed a review of its monetary policy remit.

It observed in 2013 that New Zealand was one of the few industrialised countries not to update its inflation numbers on a monthly basis and said then that it would like that to change.

“A monthly CPI would allow us to incorporate more timely information into the monetary policy process,” it advised at the time.