Brad Olsen: Infometrics Principal Economist unpacks the Half Year Economic and Fiscal Update

The grim outlook for the economy in the coming years doesn't come as a surprise to experts.

Treasury's opened its books for the Half Year Economic and Fiscal Update - showing the expected surplus has been pushed out from 2027 to beyond 2030.

Infometrics Principal Economist Brad Olsen says economic recovery will likely be a slow-burn process - slower than the 'survive til '25' timeline.

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Episode Transcript

Speaker 1 (00:09):
You're listening to a podcast from Newstalks. The'd be follow
this and our wide range of podcasts now on iHeartRadio.

Speaker 2 (00:16):
We're talking about the half yearly economic and fiscal update
to get an economics point of view on it. We're
joined by brd Olsen, Infometrics chief executive and friend of
the show, Get a brand Good afternoon.

Speaker 3 (00:27):
Any big surprises for you in today's announcement in a sense,
not really.

Speaker 4 (00:31):
I mean, most of the economic indicators were going to
be better, but they're not going to be quite as
good as we expected when they were forecast at the budget.
Probably the big surprise was a new fiscal indicator, the
old obigal X, which talking to a colleague before, we
think sounds like either a new edition of the iPhone
or maybe a new Pokemon game. But apart from that,

(00:52):
I mean, I think the big challenge though for the
government we knew it was coming, we probably didn't have
as good of a handle on how bad it was.
It was just how much less money the government is
going to bring in despite the economy recovering. I mean
over the forecast period over the four years to mid
twenty twenty eight. The government's now expecting to bring in
thirteen billion dollars less in tax but also still spend

(01:13):
nearly six billion dollars more on government services and similar
that's a big gap that you have to borrow in
the middle to pay for and that does make the
government accounts look a whole lot worse than it might
have been.

Speaker 2 (01:24):
Expecting any nervousness from you for next year, brad Olsen,
it was long indicated survived till twenty twenty five, but
that looks like it might be pushed out a bit
further than that now.

Speaker 4 (01:34):
Well, I think the big challenge in the Treasury did
highlight this as well. It was survived till twenty five.
No one said it was survived till the first of
January twenty twenty five, and then everything picks up immediately.
It is going to be a bit of a slower burn,
and even Treasury is highlighted that yes, there are better
things to come, but no, they won't be quite as
upbeat or as fast to recover as might have all expected.

(01:54):
Productivity hasn't been growing, In fact, it's sort of been
reversing back in some areas, and the expectations are for
pretty subdued still growth next year it's growth. The Treasury
now expects twenty twenty five GP to be up zero
zero point five percent. That's again the turnaround front of
the zero point two percent four or contraction we've seen
in twenty in this year, but then a bit of

(02:16):
a strong attack up in the year after twenty twenty six,
they think is when the economy really gets going. So
maybe it's survived for twenty five that thrive and twenty
three point three percent growth though, guys, I mean that
is that is pretty substantial. The challenge, of course for
the government is that you know it won't be able
to contribute a lot to that, and even with strong growth,
doesn't get a lot of money. So you know i'd

(02:38):
be if I'm them. I'm looking at the numbers and
going better for the economy, but it's not reflected in
my books, and that means that I'm still going to
be spending a lot to service provide those services out
to kiwis, but I'm not getting nearly as much as
they want, and that's a problem for them.

Speaker 3 (02:53):
So survive to twenty five, then get your cacks in
twenty six. Maybe that works.

Speaker 4 (02:57):
That's a better one.

Speaker 3 (02:58):
Now in your opinion. How much is this the world
economy's fault with things that we can't control. How much
is it this current government's fault, and how much is
it the previous government's fault.

Speaker 4 (03:07):
I mean, look, everyone likes to plat politics with it,
and and sure there's elements there. I mean, certainly you
look at the level of government spending and where it
will be into the future is still sort of unstainably
higher than what it's been in the past. It was
understandable during the pandemic and even to point during the
high in flashing period, but coming out the other side
when we try and find where the new sort of

(03:28):
economic normal is, having that much spending really don't suggest
that we are still not sort of cutting out our
costs properly. You're right as well, the global conditions aren't fantastic.
I see, you know with it, Germany that you know,
lost their government overnight. Canada is in a bit of disarray.
France has done the same thing recently. Long story short,
Treasury did say that they expected that our trading partners

(03:49):
will be growing, but still themselves not as fast as
everyone wants, and so won't be sort of growing our
exports as quickly as we might have liked it, does,
I think just set the tone for a more difficult
couple of years. And the challenges for the government is
that they've got these conditions in front of them, some
of which they can't do a whole lot about, which
means I've got a very narrow number of choices to

(04:11):
make that have some pretty big implications. It is going
to be a very difficult period, I think for the
government to figure out what it spends on, what it
tries to save on, and what it actually wants to do.
Because it doesn't have a lot of options it can
spend a lot more. That's got to make a lot
of other cuts in other areas to offset that. It's
a narrow playing field that they've got in front of them.

Speaker 2 (04:29):
Brad, thank you very much for the expertise. As always,
thank you catch up. So that is brand Olson Infometrics,
Chief executive and economist.

Speaker 1 (04:38):
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