Perspective with Ryan Bridge: What do the latest inflation numbers really mean for the 'squeezed middle'?

Nicola Willis will like the inflation number that's come out. More importantly, she'll like the story that number is telling.

Remember, her target audience is the squeezed middle. This is the battleground. This is the fight for the soft centre at the election: Labour versus National. These are the voters both parties are targeting.

The Stats NZ figure for the year to the June quarter is 3.2 percent. Prices are up for the average Kiwi family. On the face of it, that doesn't sound like good news.

But for the roughly one-third of Kiwis who own a home, aka the squeezed middle, the number is better than it could have been. That's because this figure is based on the Household Living-Costs Price Index, not the Consumers Price Index (CPI).

CPI inflation is 4.1 percent. This measure is lower at 3.2 percent. Why? Because it takes into account the cost of mortgage interest payments.

And the mortgage-interest story is a good one. On these numbers, mortgage interest payments are 15 percent cheaper.

Just imagine how bad this figure could have been if interest rates hadn't fallen, or if the Reserve Bank hadn't had the headroom to cut rates.

You can see where I'm going with this.

If you're an average home-owning family with two kids in New Zealand, you know how important your mortgage is to your sense of financial wellbeing. The smaller it is, the better you feel.

So Nicola Willis will see this number as positive for two reasons. First, she'll claim some credit for helping bring mortgage costs down by 15 percent. Even though that's largely the Reserve Bank's doing, she'll argue that the Government created the conditions that made it possible.

Second, she'll blame Donald Trump for prices continuing to rise, which isn't entirely untrue. A third of the annual increase is due to petrol prices and that's tied to events involving Trump and Iran.

This helps National because it's running this election not only on its own record, which, let's be honest, has been patchy, but also against Labour's record. It's playing the "don't put it all at risk" card and it's playing that card hard.

You would have heard that from Nicola Willis on the show.

The only problem with these numbers is that they're backward-looking. Yes, interest rates have been coming down but they're starting to climb again. Westpac has moved on fixed rates and you can bet your bottom dollar the other banks will soon follow.

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