Kerre Woodham: Are you starting to feel more confident?

Well, did we get some good news with the Reserve Bank's report yesterday? Not as full as their OCR statement that we're expecting in August, but an update nonetheless. Is the long winter of our financial discontent about to be made glorious summer? Will the Reserve Bank ease its restrictive monetary policy this year so that we don't all have to survive to 25, we can thrive in 25, giving those who are paying mortgages and business loans some respite?  

Certainly, indications are that the engineered recession that's affected so many New Zealanders could be coming to an end. The Reserve Bank got what they wanted, business and consumer confidence has plummeted, unemployment has risen, and finally, finally, the battle to restore inflation to the 1- 3% target could be showing signs of being won.  

A lot of conditionals in there: could be, might, should, but CoreLogic NZ’s Chief Property Economist Kelvin Davidson says given the continued weakness of the economy in recent months, there is a chance the August statement from the Reserve Bank could be the one where it softens its tone and starts to lay the groundwork for an OCR cut as early as November. A lot of people had been talking about those cuts happening next year, now there are signs that it could be as early as November. It stayed the same yesterday so you might be wondering why the excitement, but it was in the final comment in the statement that says we could be looking to ease some of the restrictions around economic policy.  

The New Zealand Institute for Economic Research says we expect an OCR cut in the first half of 2025, with the risks increasingly tilted towards February 2025. The release of the June quarter CPI next Wednesday will be an important influence on the timing of when OCR cuts will begin, given that the Reserve Bank is still concerned about non-tradable inflation, they’re concerned that will remain persistently high. So with the non-tradable inflation, that's your insurance going up, that's your council rates, that's your rent, cigarettes and tobacco.  

Kiwibank economists are far more bullish, saying the signs are that interest rate cuts will happen quickly next year. They're saying, perhaps by November. And then once the OCR comes down, then the interest rate cuts will happen early next year. So you need to see the OCR come down, and then the interest rates will follow, and it will happen quickly. We should bear in mind that while interest rate cuts will be good news for those who have home and business loans, those who are living off their term deposits won't be quite so thrilled.  

So August will be the time when we know for sure whether the noose will be loosened. But are you already feeling more optimistic? I am. When you hear Kiwibank saying interest rate cuts will happen really quickly next year, we're looking to November for the OCR to come down, for inflation to get back into that target of 1-3%, that everything that the Reserve Bank has done... It's taken some time because there are some people who have money, there are some people who have profited from the recession and that's what happens in every recession there are winners and losers. So it took them longer than they thought to bring about the unemployment, to bring about the plummeting business confidence, consumer confidence. And so the pain for some people has lasted longer. But are you getting a sense, especially in your business, that things are on the up?  

Confidence is all about propaganda, really. It's all about good news stories. It feeds on itself. When you have people saying, yep, the interest rate cuts are going to happen and they're going to happen quickly, then you start to think, okay, I'll have a little bit more money left in my pocket. If I can set my mortgage to those lower interest rates there'll be a bit leftover. I can spend a little bit more.

Episode Transcript

Speaker 1 (00:06):
You're listening to the Carrywood and Morning's podcast from News
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Speaker 2 (00:12):
Well, do we get a bit of good news with
the Reserve Bank's report yesterday? Not as full as their
ocr statement that we're expecting in August, but an update nonetheless,
is the long winter of our financial discontent about to
be made glorious summer? Will the Reserve Bank ease its
restrictive monetary policy this year so that we don't all

(00:36):
have to survive to twenty five? We can thrive in
twenty five, giving those who are paying mortgages and business
loans some respite. Certainly, indications are that the engineered recession
that's affected so many New Zealanders could be coming to
an end. The Reserve Bank got what they wanted. Business

(00:56):
and consumer confidence has plummeted, unemployment has risen, and finally, finally,
the battle to restore inflation to the one to three
percent target could be showing signs of being one. A
lot of conditionals in there could be might should but

(01:18):
core logic New Zealand Chief Property Economist Calvin Davidson says,
given the continued weakness of the economy in recent months,
there is a chance August statement from the Reserve Bank
could be the one where it softens its tone and
starts to lay the groundwork for an OCR cut as

(01:38):
early as November. A lot of people had been talking
about those cuts happening next year. Now there are signs
that it could be as early as November. It stayed
the same yesterday, so you might be wondering why the excitement,
But it was in the final comment in the statement

(01:59):
that says, well, you know, we could be looking to
ease ease. Some of the restrictions are around economic policy.
The New Zealand Institute for Economic Research says we expect
an OCR cut in the first half of twenty twenty five.
The risks increasingly tilted towards February twenty twenty five. The

(02:25):
release of the June quarter CPI next Wednesday will be
an important influence on the timing of when OCR cuts
will begin. Given that the Reserve Bank is still concerned
about non tradable inflation, they're concerned that will remain persistently high.
So at the non tradable inflation, that's your insurance going up,
that's your council rates, that's your rent, cigarettes and tobacco.

(02:51):
Krybank economists are far more bullish, saying the signs are
that interest rate cuts will happen quickly next year. They're
saying perhaps by November, and then once the OCR comes down,
then the interest rate cuts will happen early next year.
So you need to see the oc I come down

(03:12):
and then the interest rates will follow, and it will
happen quickly. We should bear in mind that while interest
rate cuts will be good news for those who have
home and business loans, those who are living off their
term deposits won't be quite so thrilled. So August will
be the time when we know for sure whether the

(03:34):
noose will be loosened. But are you already feeling more
optimistic like I am when you hear Kiwibank saying interest
rates going to happen? Interest rate cuts will happen really
quickly next year. We're looking to November for the OCR
to come down, for inflation to get back into that
target of one to three percent. You know that everything

(03:55):
that the Reserve Bank has done, it's taken some time
because you know, there are some people who have money,
there are some people who have profited from the recession,
and that's what happens in every recession. There are winners
and losers. So it took them longer than they thought

(04:21):
to bring about the unemployment, to bring about the plummeting
business confidence, consumer confidence, and so the pain for some
people has lasted longer. But are you getting a sense,
especially in your business, that things are on the up?

(04:44):
Confidence is all about, well, propaganda, really, it's all about
good news stories. It's all about it feeds on itself.
When you have people saying, yep, the interest rate cuts
are going to happen, and they're going to happen quickly,
then you start to think, okay, well, you know, I'll

(05:06):
have a little bit more money left in my pocket
if I can set my mortgage to those lower interest rates,
There'll be a bit left over. I can spend a
little bit more. I can start to enjoy life a
bit more, rather than clawing you away from paypack it
to pay packet. I can get into the shops, my
local shops. I can make some of those discretionary spends

(05:31):
I haven't been making. Is that the sense you're getting
if you're in retail, and if you're somebody with a
mortgage alan a business loan, are you starting to think okay, Okay,
I'm going to set for a shorter period and the
hope that I can reset at a lower rate and

(05:52):
say six months a year, even two years. Do you
believe that business will pick up, that you can finally
put your house on the market if you've been holding
off until confidence improves, and that's what it is, that
you will finally have a few more sense left over
after the bills have been paid. Is the phone starting

(06:14):
to ring again with people booking more jobs or are
we not out of the woods yet? What is your
sense on the ground. If you're one of those who's
looking to reset your mortgage, refix your mortgage, are you
looking to six months a year? Are you looking at

(06:37):
two years? If you're a retailer, are you now thinking okay, October, November,
December might be might be a good a good period
for me. I might start to see profit rather than
barely breaking even. And does confidence breed confidence when you're

(06:59):
talking to friends, when you're talking to colleagues, are you
starting to feel more positive? Are there more good news
stories coming from your friends, your colleagues, those in your community.

Speaker 1 (07:15):
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