Why research and data are crucial in navigating economic changes

Economist cites the fight against inflation as an example

Why research and data are crucial in navigating economic changes

In a recent speech, Reserve Bank Chief Economist Paul Conway (pictured above) highlighted the profound transformations in the New Zealand and global economies over the past few years, emphasising the significance of quality research and data in understanding and navigating these changes.

Conway noted that the economic landscape has been reshaped by a series of shocks, particularly in the aftermath of the COVID-19 pandemic. According to him, the current state of the economy differs significantly from its pre-pandemic condition, making it essential to comprehend these global changes for informed monetary policy decision-making.

“This means that good research, backed by high-quality data, is more important than ever before,” he said.

Frequent and timely releases of high-quality data serve as the foundation for sound policy decisions and meaningful research.

Conway addressed recent economic data, indicating that monetary policy has been effective in slowing the economy and easing inflation. However, he acknowledged that there is still work to be done to bring inflation back to the target midpoint of 2%.

In the year to December, consumer price inflation (CPI) came in at 4.7%, down from 5.6% in the year to September 2023. Conway pointed out that stubbornly high domestic (non-tradable) inflation was at 5.9%, driven partly by rent and construction costs, while tradable inflation stood at 3%, the lowest annual rate in almost three years.

Gross Domestic Product (GDP) growth in the September 2023 quarter was weaker than expected, with significant downward revisions to historical data. Conway said that some of these revisions are due to methodological changes and may not necessarily indicate substantially lower capacity pressures in the economy than previously assumed.

The Monetary Policy Committee is expected to provide a comprehensive analysis of the economic landscape in the upcoming February 2024 Monetary Policy Statement, considering all incoming data.

Download the RBNZ economist’s speech here. You can also read the RBNZ media release.

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