VIEW: On CPI Westpac write "the.........>

NEW ZEALAND: VIEW: On CPI Westpac write "the weakness in the quarterly result -

and the surprise relative to forecasts - was entirely in the tradables

component. Petrol prices were down 7% on avg over the quarter & international

airfares saw a large seasonal decline. Meanwhile, pricing power remains muted in

import-heavy categories such as electronics & home furnishings. Non-tradable

prices rose by 1.1%, as exp. The largest single contribution came from the

annual increase in tobacco excise duty, though there are signs that retailers

are beginning to struggle to pass on these price hikes. Domestic accommodation &

car rentals had larger than expected price increases during the peak travel

season. The Reserve Bank can look through today's result to some degree - the

surprise was largely in tradables prices, which are more volatile and tend to be

more transitory. Nevertheless, even with petrol prices heading up again in

recent weeks, it looks likely that inflation will remain substantially below the

2% midpoint of the target over the remainder of this year. The RBNZ's dilemma

remains whether the economy can generate enough domestic price pressure to get

overall inflation back to 2% on a sustained basis."