October 8, 2025 • 10 mins
The Reserve Bank's continuing to walk a fine line, with its move to cut the OCR 50-basis points to 2.5%.
Economic data suggests inflation has now hit 3%.
Finance Minister Nicola Willis is blaming rising rates, saying they’re having a disproportionate impact on overall inflation, whereas other sectors are stabilising.
NZ Herald Business Editor Liam Dann told Kerre Woodham we almost seem to be in a self-fulfilling negative spiral.
He says we should be feeling better, but we aren't, and then we start questioning ourselves and the economy.
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Episode Transcript
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Speaker 1 (00:06):
You're listening to the carry Wood and Morning's podcast from
news Talks, he'd be.
Speaker 2 (00:11):
As we've been discussing the reserve banks continuing to walk
a fine line where it's move to cut the OCR
fifty basis points. Economic data suggests inflation has now hit
three percent. Nicola Willis has directed her pointing finger at
councils and says rights are having a disproportionate effect on
alate on inflation. Other sectors are stabling, are stabilizing. But
(00:33):
it's really a confidence game, isn't it. New Zealand Herald
Business editor at largely m Dan joins me to discuss
good morning to you, carry and thank you very much
for putting the bike into the tent, into the tenth
speed gear and getting here and time.
Speaker 3 (00:47):
Well it's electric, so there.
Speaker 2 (00:49):
I love an election.
Speaker 3 (00:50):
Not too much of us sweat.
Speaker 2 (00:52):
Why are we feeling better? We should be. There's a
lot that's going right.
Speaker 3 (00:55):
Yeah. I think that's it's almost like a self fulfilling thing,
a kind of a negative spiral, because we should be
feeling better, we aren't, and then it's like, oh, you know,
like we're questioning ourselves. I think it's a lack of
confidence and I think, you know, our recovery started, and
that's almost worth The worst part of it is we
had that recovery starting the first quarter. The last quarter
(01:17):
of last year was good growth, and then the first
quarter of this year was good growth, and then of
course it fell off a cliff on the second quarter.
And it's what a confidencenock when you think you're finally
coming back from all the terrible economic ups and downs
of COVID and the after COVID period to sort of
just feel like you're back to square one in the
(01:38):
middle of a pretty lousy New Zealand winter that's really
hit people hard. So yeah, and people aren't spending and
that's really what's affecting retail, out investing, that's affecting construction
and to some extent, manufacturing. So you know, there are signs.
(01:58):
I mean, I was trying to be positive in my
story this morning. An z's Sharon Zolness says, we're definitely
past the worst and we're closer to, you know, something
looking like a recovery than than not. But it does
feel like we're sort of starting again, and that's pretty
It really knocks the stuffing out of you if you
been sort of waiting all that time.
Speaker 2 (02:20):
Did did I mean I think for businesses probably it did.
But did COVID really.
Speaker 3 (02:24):
Maul Us, Yeah, I mean COVID And then and then
the aftermath, you know, the inflation was a real shock
to everybody, and then dealing with the inflation was a shock.
And then you know, inflation hasn't really gone away. They've
they've got it into the right band. So overall inflation.
Speaker 2 (02:41):
Is but they're having to keep it close eye on it. Yeah,
and it's a horse that could bolt at any minute.
Speaker 3 (02:45):
All that's right, and that is this the single mandate
they have now is inflation. So they haven't. I mean
people have said the Reserve Bank didn't cut rates fast
enough this time. Well they they you know, the government
changed the mandate single mandate inflation, and you know, with
some good reason because we saw how bad inflation was.
But it's food. You know, food prices up five percent
in a year power I think they were about eight
(03:07):
point five. I don't know rates, but rates are obviously
being bad. And assurance and so it's the thing that
you everybody kind of has to pay, and it's what
you really feel. There's a whole bunch of other inflationary
things in the economy that because the economy is sort
of flat, they can expect will be disinflationary, will come down.
(03:29):
But the things we actually feel ourselves getting into our
wallets and pulling out the card and paying for are
the things that have kept going up. So people feel
like there's still a cost of living crisis, you know,
And that's what matters. I mean, it's not really about
the numbers on the speedsheet or whatever. If you're paying
more for food and more for power and you're on
(03:50):
a fixed income, that hurts. And then the flip side is,
of course, because of the higher interest rates. Trying to
deal with inflation with the government, he hasn't to say
the government cutting spending because the nominal amount that the
government is spending is still actually going up, and they
they get criticized for that as well, but they have
cut what you'd call the fiscal impulse, so they're not
(04:11):
increasing spending the rate that it was increasing.
Speaker 2 (04:13):
So it'd be a hell of a lot worse. Yeah,
it could be a hell of a lot.
Speaker 3 (04:18):
Worse, but the fiscal impulse isn't there, so that means
that you haven't got the government spending to sort of
boost the economy. Obviously again with good reason because they
saw what happened last time. But that means, you know,
so we have got rising unemployment and job and security,
people losing their jobs at the same time as it
still feels like there's this inflation and that's pretty rough.
(04:40):
That's kind of what economists called stagflation.
Speaker 2 (04:43):
But that's I mean, the government should have more runs
on the board than they do. I mean, when you
look at the latest polls, that says National sucks. But really,
when you look at the factory closures, that's because there
isn't reliability of power and that's on labor. And when
you look at the public service job cuts, they committed
(05:05):
bloody economic vandalism. In the last six months of twenty three.
They went on a hiring spree despite being explicitly told
not to by labor and by National and that as
economic treason. Yeah, I think they cannot moan about losing
their jobs.
Speaker 3 (05:21):
No, I guess, you know, one of the things I think,
where is the government going wrong?
Speaker 2 (05:25):
Then?
Speaker 3 (05:26):
I think, I mean, it's partly it's the storytelling in
the leadership. Unfortunately, I think instead of saying, you know,
look which is what I've been saying, because you know,
me and the economists and the commentators are saying, look,
it's going to get better. It's going to get better
because we believe that monetary policy works. We believe that
the dairy export prices and things will work. But it's
(05:46):
taken so much longer that you get into a situation where,
you know, I'd be skeptical of myself coming in and
saying it's all going to be fantastic next month, But
the government's got themselves in the same trap. I'm just
a newspaper commentator, but the government, you know, they sort
of saying, well, it's getting better, it's getting better. It's
a two speed economy. Well, most people live in the
city's not in the country. I'm sorry that that, so
(06:06):
most people are still feeling that the wrong speed. And
so maybe a bit more focus on telling us why
they're doing the things they're doing that that are not
helping the economy in the short term but are going
to help the economy in the long term.
Speaker 2 (06:20):
Because it's better storytelling, better leadership.
Speaker 3 (06:22):
Well, I mean, I think that that would have to
be their case. So you've had a bunch of what
I would call left leaning economists and or more generously
Kenzian economists who put out a letter this time last
year saying if you don't, you know, if you cut
back on spending, the recession will be worse. And they
put out a letter last week saying, well, we told
(06:43):
you so. Now they're sort of technically correct that that happened.
But National or Crystal Luxe and Nicola Willis had good
reasons for doing what they're doing.
Speaker 2 (06:55):
They did sound reasons, and the economic theory has to do.
Speaker 3 (07:00):
With the long term future of the country, to do with,
you know, a fiscal position, you know, not not letting
debts spiral out of control, getting back to surplus, keeping
our triple A. It's a harder cell, I got to say,
to talk about that stuff because people are very in
the here and now, specially these days, it seems more
and more people are focused on and that makes politics
quite difficult, you know, you know, people are very short
(07:21):
term focused.
Speaker 2 (07:22):
I just received a text from Jeff and this is
something I was thinking too. I am so scared that
the last loot will come back, and I have got
no trust going forward. I've got plenty of money available
to invest, but I will not if there's the possibility
of a Labor Greens to partimoriti government.
Speaker 3 (07:38):
So that's that's an awkward problem for the coalition though,
isn't it. But people aren't getting the economy going, which
would help them, because they're worried that they might lose.
So it's a sort of a lose lose exactly scenario
for them. I look, I think things will change. I mean,
I know I've just said that. It's but I still
have I think so too. I still have faith in
(07:59):
monetary policy. If it goes low enough, We've thought. We
saw what happened in COVID. If you take it super low,
people have there's lots more money in the economy and
people do spend, and you know, people were nervous and COVID.
But then when they really flooded the economy with money,
you know, as it turns out, well.
Speaker 2 (08:16):
The flooring in the car, then people did gangbusters and
the patio furniture people and.
Speaker 3 (08:22):
So that there is confidence to rebuild and that's taking time.
And so what's happening is we're seeing two things are
stopping the money that's already come through from mortgage cuts
go into the retail sector. And hospitality. One of them
is that people are being quite careful about setting their
mortgage rates. So if they think the mortgage rates got
(08:43):
a bit, the ocr's got further to go down. More
people than usual are floating or taking a very short
term rate because they want to lock in for five
years when it's at its absolute lowest. So in a way,
kiwis have got a bit smarter about the whole mortgage
setting game. And so you know, we are nearing the
end of that cycle. There might be another cut. If
(09:04):
things still look really bad, there might be another the
two cuts, but you're getting near the end of what
this cycle is likely to look like. So you'd hope
that more people will lock in the lower rate and
then actually start to get the gain. So people are
leaving money on the table in the hope of getting
a better rate later. The other thing is that lack
of confidence, that real hit that we took is stopping
(09:25):
people from, as you say, spending and investing, and so
the money's going back on the mortgage, it's going into savings,
which is good for people in the long run, but
it reflects the fact that they're insecure about jobs. And
it's also I mean there's this economic cycle, but there's
all this AI tech insecurity as well. If you're in
your forties and fifties and thinking about your retirement or sixties,
(09:51):
and you're noticing that more and more AI can do
your job in the company's not making a big profit,
whatever corporate you might be, and then you're thinking, gee,
am I going to make it through to sixty five?
Speaker 2 (10:01):
And okay, let's end on a positive. Yes, what can
I do to stimulate the economy? Shall I go and
get some new tiles and face flannels?
Speaker 3 (10:07):
And yes, you're going to people who's going to want
to hear your bright and jerry voice on the radio.
So so yeah, No, I mean I think I think,
you know, have some faith that monetary policy will work.
You know, we're going to end up with low interest rates.
We're going to this money from the dairy boom and
the meat beef mystery boom that's still coming in, that's
(10:29):
still booming. Exports are going gangbusters and New Zealand isn't
a big place, so it will start to turn around.
Speaker 2 (10:36):
Yeah, and you heard it here first. Every single time
you heard any first, Liam Dan, New Zealand Terial Business
Editor at Large, thank you so much.
Speaker 1 (10:44):
For more from Kerry Wood and Mornings, listen live to
news talks it'd be from nine am weekdays, or follow
the podcast on iHeartRadio
You're listening to the carry Wood and Morning's podcast from
news Talks, he'd be.
Speaker 2 (00:11):
As we've been discussing the reserve banks continuing to walk
a fine line where it's move to cut the OCR
fifty basis points. Economic data suggests inflation has now hit
three percent. Nicola Willis has directed her pointing finger at
councils and says rights are having a disproportionate effect on
alate on inflation. Other sectors are stabling, are stabilizing. But
(00:33):
it's really a confidence game, isn't it. New Zealand Herald
Business editor at largely m Dan joins me to discuss
good morning to you, carry and thank you very much
for putting the bike into the tent, into the tenth
speed gear and getting here and time.
Speaker 3 (00:47):
Well it's electric, so there.
Speaker 2 (00:49):
I love an election.
Speaker 3 (00:50):
Not too much of us sweat.
Speaker 2 (00:52):
Why are we feeling better? We should be. There's a
lot that's going right.
Speaker 3 (00:55):
Yeah. I think that's it's almost like a self fulfilling thing,
a kind of a negative spiral, because we should be
feeling better, we aren't, and then it's like, oh, you know,
like we're questioning ourselves. I think it's a lack of
confidence and I think, you know, our recovery started, and
that's almost worth The worst part of it is we
had that recovery starting the first quarter. The last quarter
(01:17):
of last year was good growth, and then the first
quarter of this year was good growth, and then of
course it fell off a cliff on the second quarter.
And it's what a confidencenock when you think you're finally
coming back from all the terrible economic ups and downs
of COVID and the after COVID period to sort of
just feel like you're back to square one in the
(01:38):
middle of a pretty lousy New Zealand winter that's really
hit people hard. So yeah, and people aren't spending and
that's really what's affecting retail, out investing, that's affecting construction
and to some extent, manufacturing. So you know, there are signs.
(01:58):
I mean, I was trying to be positive in my
story this morning. An z's Sharon Zolness says, we're definitely
past the worst and we're closer to, you know, something
looking like a recovery than than not. But it does
feel like we're sort of starting again, and that's pretty
It really knocks the stuffing out of you if you
been sort of waiting all that time.
Speaker 2 (02:20):
Did did I mean I think for businesses probably it did.
But did COVID really.
Speaker 3 (02:24):
Maul Us, Yeah, I mean COVID And then and then
the aftermath, you know, the inflation was a real shock
to everybody, and then dealing with the inflation was a shock.
And then you know, inflation hasn't really gone away. They've
they've got it into the right band. So overall inflation.
Speaker 2 (02:41):
Is but they're having to keep it close eye on it. Yeah,
and it's a horse that could bolt at any minute.
Speaker 3 (02:45):
All that's right, and that is this the single mandate
they have now is inflation. So they haven't. I mean
people have said the Reserve Bank didn't cut rates fast
enough this time. Well they they you know, the government
changed the mandate single mandate inflation, and you know, with
some good reason because we saw how bad inflation was.
But it's food. You know, food prices up five percent
in a year power I think they were about eight
(03:07):
point five. I don't know rates, but rates are obviously
being bad. And assurance and so it's the thing that
you everybody kind of has to pay, and it's what
you really feel. There's a whole bunch of other inflationary
things in the economy that because the economy is sort
of flat, they can expect will be disinflationary, will come down.
(03:29):
But the things we actually feel ourselves getting into our
wallets and pulling out the card and paying for are
the things that have kept going up. So people feel
like there's still a cost of living crisis, you know,
And that's what matters. I mean, it's not really about
the numbers on the speedsheet or whatever. If you're paying
more for food and more for power and you're on
(03:50):
a fixed income, that hurts. And then the flip side is,
of course, because of the higher interest rates. Trying to
deal with inflation with the government, he hasn't to say
the government cutting spending because the nominal amount that the
government is spending is still actually going up, and they
they get criticized for that as well, but they have
cut what you'd call the fiscal impulse, so they're not
(04:11):
increasing spending the rate that it was increasing.
Speaker 2 (04:13):
So it'd be a hell of a lot worse. Yeah,
it could be a hell of a lot.
Speaker 3 (04:18):
Worse, but the fiscal impulse isn't there, so that means
that you haven't got the government spending to sort of
boost the economy. Obviously again with good reason because they
saw what happened last time. But that means, you know,
so we have got rising unemployment and job and security,
people losing their jobs at the same time as it
still feels like there's this inflation and that's pretty rough.
(04:40):
That's kind of what economists called stagflation.
Speaker 2 (04:43):
But that's I mean, the government should have more runs
on the board than they do. I mean, when you
look at the latest polls, that says National sucks. But really,
when you look at the factory closures, that's because there
isn't reliability of power and that's on labor. And when
you look at the public service job cuts, they committed
(05:05):
bloody economic vandalism. In the last six months of twenty three.
They went on a hiring spree despite being explicitly told
not to by labor and by National and that as
economic treason. Yeah, I think they cannot moan about losing
their jobs.
Speaker 3 (05:21):
No, I guess, you know, one of the things I think,
where is the government going wrong?
Speaker 2 (05:25):
Then?
Speaker 3 (05:26):
I think, I mean, it's partly it's the storytelling in
the leadership. Unfortunately, I think instead of saying, you know,
look which is what I've been saying, because you know,
me and the economists and the commentators are saying, look,
it's going to get better. It's going to get better
because we believe that monetary policy works. We believe that
the dairy export prices and things will work. But it's
(05:46):
taken so much longer that you get into a situation where,
you know, I'd be skeptical of myself coming in and
saying it's all going to be fantastic next month, But
the government's got themselves in the same trap. I'm just
a newspaper commentator, but the government, you know, they sort
of saying, well, it's getting better, it's getting better. It's
a two speed economy. Well, most people live in the
city's not in the country. I'm sorry that that, so
(06:06):
most people are still feeling that the wrong speed. And
so maybe a bit more focus on telling us why
they're doing the things they're doing that that are not
helping the economy in the short term but are going
to help the economy in the long term.
Speaker 2 (06:20):
Because it's better storytelling, better leadership.
Speaker 3 (06:22):
Well, I mean, I think that that would have to
be their case. So you've had a bunch of what
I would call left leaning economists and or more generously
Kenzian economists who put out a letter this time last
year saying if you don't, you know, if you cut
back on spending, the recession will be worse. And they
put out a letter last week saying, well, we told
(06:43):
you so. Now they're sort of technically correct that that happened.
But National or Crystal Luxe and Nicola Willis had good
reasons for doing what they're doing.
Speaker 2 (06:55):
They did sound reasons, and the economic theory has to do.
Speaker 3 (07:00):
With the long term future of the country, to do with,
you know, a fiscal position, you know, not not letting
debts spiral out of control, getting back to surplus, keeping
our triple A. It's a harder cell, I got to say,
to talk about that stuff because people are very in
the here and now, specially these days, it seems more
and more people are focused on and that makes politics
quite difficult, you know, you know, people are very short
(07:21):
term focused.
Speaker 2 (07:22):
I just received a text from Jeff and this is
something I was thinking too. I am so scared that
the last loot will come back, and I have got
no trust going forward. I've got plenty of money available
to invest, but I will not if there's the possibility
of a Labor Greens to partimoriti government.
Speaker 3 (07:38):
So that's that's an awkward problem for the coalition though,
isn't it. But people aren't getting the economy going, which
would help them, because they're worried that they might lose.
So it's a sort of a lose lose exactly scenario
for them. I look, I think things will change. I mean,
I know I've just said that. It's but I still
have I think so too. I still have faith in
(07:59):
monetary policy. If it goes low enough, We've thought. We
saw what happened in COVID. If you take it super low,
people have there's lots more money in the economy and
people do spend, and you know, people were nervous and COVID.
But then when they really flooded the economy with money,
you know, as it turns out, well.
Speaker 2 (08:16):
The flooring in the car, then people did gangbusters and
the patio furniture people and.
Speaker 3 (08:22):
So that there is confidence to rebuild and that's taking time.
And so what's happening is we're seeing two things are
stopping the money that's already come through from mortgage cuts
go into the retail sector. And hospitality. One of them
is that people are being quite careful about setting their
mortgage rates. So if they think the mortgage rates got
(08:43):
a bit, the ocr's got further to go down. More
people than usual are floating or taking a very short
term rate because they want to lock in for five
years when it's at its absolute lowest. So in a way,
kiwis have got a bit smarter about the whole mortgage
setting game. And so you know, we are nearing the
end of that cycle. There might be another cut. If
(09:04):
things still look really bad, there might be another the
two cuts, but you're getting near the end of what
this cycle is likely to look like. So you'd hope
that more people will lock in the lower rate and
then actually start to get the gain. So people are
leaving money on the table in the hope of getting
a better rate later. The other thing is that lack
of confidence, that real hit that we took is stopping
(09:25):
people from, as you say, spending and investing, and so
the money's going back on the mortgage, it's going into savings,
which is good for people in the long run, but
it reflects the fact that they're insecure about jobs. And
it's also I mean there's this economic cycle, but there's
all this AI tech insecurity as well. If you're in
your forties and fifties and thinking about your retirement or sixties,
(09:51):
and you're noticing that more and more AI can do
your job in the company's not making a big profit,
whatever corporate you might be, and then you're thinking, gee,
am I going to make it through to sixty five?
Speaker 2 (10:01):
And okay, let's end on a positive. Yes, what can
I do to stimulate the economy? Shall I go and
get some new tiles and face flannels?
Speaker 3 (10:07):
And yes, you're going to people who's going to want
to hear your bright and jerry voice on the radio.
So so yeah, No, I mean I think I think,
you know, have some faith that monetary policy will work.
You know, we're going to end up with low interest rates.
We're going to this money from the dairy boom and
the meat beef mystery boom that's still coming in, that's
(10:29):
still booming. Exports are going gangbusters and New Zealand isn't
a big place, so it will start to turn around.
Speaker 2 (10:36):
Yeah, and you heard it here first. Every single time
you heard any first, Liam Dan, New Zealand Terial Business
Editor at Large, thank you so much.
Speaker 1 (10:44):
For more from Kerry Wood and Mornings, listen live to
news talks it'd be from nine am weekdays, or follow
the podcast on iHeartRadio
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