Independent economist Tony Alexander says there's strong evidence New Zealand inflation will start to drop further, citing a recent survey showing falling pricing intentions from businesses.
"I am referring to the pricing intentions measure contained in the ANZ's monthly Business Outlook Survey. It is not the be all and end all by any means when it comes to monetary policy decisions," Alexander said in his weekly newsletter. "But it gives some insight into the... process and progress".
Alexander said present pricing intention levels, in which 42 percent of businesses surveyed signalled price rises in the coming year, were still too high. But New Zealanders should "anticipate weak economic conditions, pessimism feeding upon itself and no easing of monetary policy through winter and spring", he said.
"The trend is looking better... Come summer with any luck this measure will be below 25 percent and the Reserve Bank will be getting concerned enough about the new weaker state of the economy to cut the official cash rate in their November monetary policy review," he added.
Official data from April showed New Zealand's annual consumer price inflation had dropped to 4 percent in the March quarter, down from 4.7 percent in December and a 7.3 percent peak in June 2022.
The Reserve Bank, which has an inflation target range of between 1 and 3 percent, has forecast consumer price increases will fall to 2.8 percent next year before dropping further towards 2 percent in 2026.
Despite Alexander's optimism, ANZ has not priced in a rate cut by the central bank this year - instead expecting its first move in February. For comparison's sake, the Reserve Bank of Australia was initially expected to start cutting rates later this year - but there were fears of delays and even another hike across the Tasman after inflation there rose to 4 percent from 3.6 percent this week.
The International Monetary Fund expected New Zealand inflation to average 3.1 percent this year and 2.5 percent in 2025, similar to Australia's 3.6 percent and 2.5 percent.
Alexander noted interest rates wouldn't fall until "businesses radically refocus their means of handling cost increases".
"If you are in business and having read this, you say that you still have to pass on your cost increases into selling prices then you will be the one ensuring this recession extends into 2025," he said.
