Both the negative headline inflation figure we now project and the high figure experienced in the mid-nineties are simply the result of the inclusion in New Zealand’s headline inflation figure of interest rates. Most economists are agreed that interest rates should not be in the inflation figure and many major countries already exclude them.
The Government Statistician has agreed to remove them from the official CPI from later this year. Thankfully, this will end the potential for public confusion inherent in the present situation. But in the meantime we ignore the interest-inclusive headline figure, as we have done all decade.