March 23, 2025 • 40 mins
While the economy is looking up, the forecasts from economists aren't sending a clear message.
Some are saying that even with a positive GDP result this week, we still have tough times ahead - while others say the state of global economics is an opportunity for growth in New Zealand.
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News Talks,
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Speaker 2 (00:11):
Down, notice swollen make you happy a babe. We saw
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been doing all this Leaner talking about anything.
Speaker 3 (00:31):
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Speaker 4 (00:38):
Your half time. Very good afternoon to you. If you've
just joined us, well, welcome back, which a wife you've
missed any of our previous hours. We had an interesting
chat with well with a couple of them on a
couple of issues. Cameron Luxton X Housing spokesperson around some
of the ridiculous results that and how herded us to
a bit Tenants. It's from King Aura with the Tennants
(01:00):
Tribunal ruling in a particularly egregious case because there wasn't
enough evidence because he went too terrified, and we had
a bit of talk back on that as well, as
well as having a chat with Winston Peters following his
State of the Nation's speech and for the health up
which you just missed or caught Greg Pain talking about.
We were talking about how important core strength is in
your exercise regime, among other things. So if you've missed
(01:22):
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then go to news Talks hed B or to iHeartRadio
and just basically look for the weekend Collective and there
we go. But now it is time for a completely
different hour, and to do with health in a way,
because financial health is always important. This is smart money,
and we're going to be a chat about well just
(01:44):
looking ahead with while the economists are not particularly clear
about what's going on, probably because no one's very clear
about what's going on, but we have had a positive
GDP result this week, and we're going to dig dig
into that a little bit and joining us. He is
managing director at Harbor Asset Management, and his name is
Andrew Bascan. Andrew, good afternoon, How are you afternoon?
Speaker 3 (02:05):
And what a great session that was you've just had.
I learned something very important, did you. What was that
I only have to do a thirty second plank twice
a week rather than that one minute plank, and I
can dedicate more time to do some dead lifts maybe,
but no, that was good. We always do one minute plank,
but I don't need to do that anymore.
Speaker 4 (02:21):
That's well, well, he did actually show me the technique
as well, which involves first when you get into the plank,
you arch your back first and then you tuck your
pelvis under. And I did that for about twenty seconds
and I was like, oh, it's a different game altogether.
Yeah about deactivating you. But but we will will have
to dig into that another another time. Hey, look, let's
just kick off with the Well, we have had a
(02:44):
bit of good news at least for the economy. But
I mean it's I did see that. Jared Kerr, the
Kiwibank economists said we were crawling out of recession. But
we have had the surprise with the GDP figures being
a bit better. We'd had that zero point seven percent
in the December quarter. What did you What do you
make of all that?
Speaker 3 (03:03):
Well? I think data is important. I've just spent the
last couple of weeks traveling a bit of into the hawks,
bad Christ to Auckland and then I had it actually
had three or four days in Sydney to compare and contrast.
So anecdotes are as important as the data. But the
data is right, we are crawling out of a recession.
In Australia is doing about the same, but it feels
(03:25):
better than it did a year ago, and I think
that's that's the change. You can run through a bit
of that, but it does feel in parts of the
economy better than it did a year ago.
Speaker 4 (03:36):
What does it mean that? Can you read anything into it?
Because it's better than the well actually tell you what?
Is it a big deal this result?
Speaker 3 (03:45):
No, because a lot of it was restocking government and
other things. But it's a setup. We're setting ourselves up
for a better second half of this year. Not right now,
but we're setting ourselves up for a better second half
of this year.
Speaker 4 (04:03):
Does it mean anything for from the point of view
of the Reserve Bank because they won't have seen well,
they were expecting more cautious or not as much growth
because it's better than we thought. Does that have any
implications for future cash rate announcements?
Speaker 3 (04:21):
Because that is Oh, I don't think so, because we're
still but the economy is still running beneath its potential
full stop, and inflation is coming right back down, you know,
sort of into the middle of that one to three.
And so if we're running beneath potential, even though GDP
is a bit better and inflation is getting closer to
the middle of that one to three, we are still
(04:41):
I think on a track they have some more rate cuts.
Speaker 4 (04:45):
Oh that's good news then, So basically, I mean I
was thinking that we were starting to probably look at
flattening out. At least we still look but we are
looking at further rate cuts, and that certainly that news
will not have undermined that, I guess, is the thing?
Is it?
Speaker 3 (04:58):
No, that's right. Look, I don't think it's a million
miles away that most most market people appreciate. We've probably
got a couple more rate cups to go. But if
you're a business or if you're a household, you're already
feeling that positive cash flow impact, and I think that's
going to continue. That's going to continue.
Speaker 4 (05:19):
Yeah, Okay, Look, I would say I was actually doing
the Drive show when the news about GDP had broken,
and it just seemed that even Nikola Willis, I thought,
in her comments to me, sounded that she wasn't going
to make too much about it. But I mentioned Jared
Kerr talked about us crawling out of recession, and I
(05:40):
still saw a lot of cautious commentary and no one
was reaching for the champagne quite yet. Do you think
I mean, is it we're a bit pessimistic at the moment,
and is that the right sort of attitude to have
at the moment or should we be a bit more
bullish about what's ahead of us?
Speaker 3 (05:57):
Oh? Look, I already think it's important that you look forward.
D me a bit of an optimistic person. But if
you look forward as opposed to how we're living exactly
this minute, on this lovely autumn day. And but if
you look forward, yes, beautiful, if you look for there
are five things that I think you can attach yourself
to that that give me, you know, a better prospect
(06:19):
that things will feel better again in the second half
of this year. And there's one thing holding me right
back that we can talk about it this which is
obviously tariffs and things. But those five things that the
number one we can tenderly put numbers around is the
fact we've just had a fifty basis point rate caut
in February, and that brings us to a one and
three quarter rate cut from the top. And you can
(06:41):
add it up to the average mortgage holder out there.
You know that that's the average mortgage holder. You know
it's it's a significant five hundred, five hundred and fifty
dollars a month for the average mortgage holder if they
are on a floating rate notes and it's you will
take either side of that. That's pretty good. And let's
simplify it a bit further. If you're a first home
(07:02):
buyer and you paid initially, you know, turn years ago
at the top of the cycle interest rate and what
you're paying today means that you'll be paying somewhere between
seven hundred and fifty and eight hundred and fifty dollars
a month less and interest rate costs than what you
work for a first home buyer, Actually, that's probably incredibly
(07:24):
important because typically they're right up against the wall in
terms of their cash flow, and you know, they might
choose to actually use their offset accounts or pay down
a bit more. Principle, that's all cool, but they might
actually choose just to buy the more of what they need.
And I think that's that's that's step number one of
(07:44):
five things that looking out six months makes me a
little bit more optimistic.
Speaker 4 (07:49):
I was actually wondering how because you know, we have
these figures about GDP and growth and you know what
a what our trade deficitors or whatever. But I have
before we receive the GDP figures. The day before we'd
had that consumer confidence survey which showed that, you know,
(08:09):
consumer confidence wasn't that great? Am I right? In taking
everything I'd say is coming from a layperson's perspective, really,
But my guess would be that it's mortgage rates are
the thing that can make the largest difference to people's
sense of well being. Because you know, you can talk
about GDP all you like, but when people suddenly can
(08:30):
find that when they reset their mortgage they're saving either
half a point or maybe even a point, that that's
the thing that can make the biggest difference to how
we feel about ourselves. What are your observations about it?
Speaker 3 (08:43):
Right on the short term that you're dead right right
on the short term, that's the number one thing that
people focus on. But in fact, in the medium term,
like out of twelve months or a bit longer, there
are other things that I think are more important than
the mortgage rate. And the next biggest thing is what
did I get paid in my paypack at last month?
(09:05):
Was it higher or lower than the inflation I'm experiencing?
Were my wages actually beating inflation? And that hasn't been
the case for a couple of years. It's hardly anyone. Right.
Wage inflation has been dragging along at three to four,
which has been the normal wage inflation for the last
(09:25):
two or three decades, I guess, but inflation has been
way up higher than that. Now we can say inflation
is two point two, probably going to trade between that
and a bit lower and a bit higher for a
week while and could go lower. And the latest wage
inflation data we've got, I think was three point three.
It might be going to three, but for the first
time in a couple of years. So I think this
(09:45):
is important. This is more important than the medium tom
than interest rates are going People will say, actually, I've
noticed I can buy a bit more with my wages.
Now that's the average person someone will be. But that
I think, I personally think that is step two of
me feeling more optimistic. That's step two.
Speaker 4 (10:05):
As I guess. The thing is, it's one thing for
the for the inflation to chill out, but when do
wages actually catch up with that? Because I don't know
what's the pressure on the labor markets actually pay per
for more.
Speaker 3 (10:21):
Well, here here's it. People will get paid more if
if in certain sectors we're having difficulty finding labor, and
then that that catches on even further. And I don't
think we're going to get four four and a half
five percent wage inflation. But if you're getting above two,
if you're getting above two percent, you can two and
a half or three. That is a hell of a
(10:42):
lot better, excuse me, than it was when inflation was
running along at six seven percent. Okay, it's just and
it's crawling out of recession. Thing I'm not talking about
a boom out of it's crawling out of recession. Is
that gradually, gradually, the average household is going to feel better.
Speaker 4 (10:58):
Well that Jared Kurr, he had the right here, I
had the right adjective for it.
Speaker 3 (11:01):
Then possibly, but that's at the moment. I think six
months time it will feel a bit better. And here's
the third part. I just jumping road. Yeah, house price
has eve been falling across the country for the best
part of I don't know how long, maybe two years,
and in some regions that certainly stopped, and on average
it certainly stopped. So a lot of people really feel
(11:22):
their own wealth, you know what's happening. Not that I'm
buying and selling my house, but they know sort of
what's happening to their wealth. And we know through long
term studies that once house price is stabilized, about six
months to twelve months later, people feel a little bit
more confident and not hoarding and saving so much. So
(11:47):
it takes time. It takes time. It does take time
TOI but I think if house prices just stay stable,
they don't have to go up, that is another little
building block of doing a bit more than crawling.
Speaker 4 (12:00):
Actually, yeah, I actually the I guess, I mean I
asked this all. I made an interesting chat with Ashley
Church about this and just about you know, the house
prices and what they're looking like doing. Because I have
had a few people say that they think that the
housing markets we're not going to see any boom times
for quite some time yet, because that would require our
(12:20):
economy to really get moving. Where do you guys? And
I think I've seen some stuff from harbor Asset Management.
I'm not referring to anything specific, but I think in
the last week or two I saw something where you
guys might have been talking about the renewed interest in
people sticking their money anywhere other than anywhere else. Well, sorry,
I'm exper not in the property market, but into shares
(12:44):
and things like that.
Speaker 3 (12:46):
About senses that it will take quite a long time
unless we get a big migration burst and we get
a lot more confident employment for house prices to do much.
And you know, I think the story with employment. I
think Nicole Willis is right. Employment is probably the very
very last indicator, and I personally don't think it's the
second half of this year. I check it out to
(13:08):
twenty twenty six. I just think that that's you know,
it'll be, and even then we won't we won't know
till then. So I'm not in the camp that says
house prices are about to move significantly significantly higher. I
mean they could, they could move a little bit larger,
a little bit higher, and therefore stability, to me is
(13:29):
what I think in the near term is actually quite
good for households. Yeah, that's that's that's right.
Speaker 4 (13:35):
Okay, Look, if I want to join the conversation, by
the way, on e one hundred and eighty ten eighty,
we're with Andrew Bascanty's the managing director of Harbor Asset Management.
He's portfolio manager as well, And if you've got any takes,
I think the broader question is is that as we
started well earlier on when we were talking about how
there does seem to be quite a lot of pessimism around,
(13:56):
but Andrew's a little bit more optimistic about it. I'd
like to know what is it that are you feeling
optimistic about just where we're heading now that we've had
some rough times, we've had some higher interest rates, it
looks like they're going to continue to fall. Are you
feeling cautiously optimistic? Which maybe I could describe that would
be or what Andrew's words will be, but he can
(14:17):
correct me after the break. We'll be back in just
a moment. The number is eight hundred and eight ten eighty.
We've got lots to Andrew and I have lots to
talk about, including we have a talking about Australia and
China and what we're going to be doing there in
trade and also the tariffs and all that sort of.
We've got a lot of ground to cover, so we
better get into it. But we will do so in
just a minute. But you can join the conversation anytime
you like with your reckons on eight hundred and eighty
(14:39):
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Speaker 1 (15:40):
Parentech, Property, politics plus Money, Health and the week's debates.
It's all on the Weekend. Collective with Tim Beveridge us
talk Zevvy.
Speaker 4 (15:49):
As we'll speak of the devil. It's Andrew Bascan. He
is portfolio manager and managing director of Harbor Asset Management,
and we're talking by the way. Actually, I've got to say, Andrew,
I actually was quite I was looking forward to this
discussion because you know, a lot of the time, I
think people see the headlines and they see our GDP
point seven, or they hear the cash rates changed, and
it's nice to have a chance to have a chat
about the stuff and put it in perspective what it means.
(16:11):
And as you've said, you know there's a bit of
pessimism around, but you're a little bit more optimistic.
Speaker 3 (16:15):
Yeah, I mean we've discussed a few of those things.
I mean business, the business sentiment and household sentiment, I
would say is mixed. I mean it's mixed. I mean,
if you are an agricultural sector right now, you're feeling
pretty good. It's been a good production season, it's rained
done a few things. Well, we had a.
Speaker 4 (16:31):
Dairy announcement and what does that mean for what does
that put it in context for New Zealand and the
average you know punter?
Speaker 3 (16:40):
Yeah, Well, that's a good actually a mystery mystery creek
this day the first time in a couple of years.
This year you're going there.
Speaker 4 (16:47):
Are you going to feel?
Speaker 3 (16:48):
Yeah, I'm going to feel this and I want to
I want to see you know what's actually going you
only see. I think the data is one thing that
you've got to see. And my sense is that it
means quite a lot to certain regions. As I said,
I mean the Hawks, BA mean to Canterbury recently, it
feels I mean, you go expect to ports in those regions.
We're actually exporting more product. You know, these areas, I
(17:11):
think employment will pick up more rapidly and they will elsewhere,
and that's what we want. I mean, part of us
is the New Zealand dollars, but lower part of us
is like we've produce more goods and part of it
is that export markets. I think that as bad as
we make out.
Speaker 4 (17:26):
You know, I was wondering in your job, because you
obviously are intensely into data analysis and watching markets as
they shift and move. How much I mean, what does
it mean for you? You're saying you're going to go
to feed down field days and meet people. I mean,
how much does it inform the way you can paint
the picture as to how investments are going to go
just by meeting people on the ground. What is it?
(17:48):
How does that fit into the picture of what you
guys do?
Speaker 3 (17:51):
Yeah, I think it's really quite important because the data
needs color, and it needs color through real time experience
of what that average or median data points is compared
with the whole risk spectrum of you know what, one
data point is an average of hundreds of thousands of
observations and that could be really really wide or actually
(18:15):
there could be a thematic coming through and you get
a feeling I think by meeting people, by talking to businesses,
by talking to households, and one a great example of
course the field dates right, it's one of it's an
iconic events. So a couple of days there will I
think influence a bit more our funking.
Speaker 4 (18:34):
Probably quite good fun to go to them actually as well,
I'd say, I think.
Speaker 3 (18:38):
Certainly red bands are important part.
Speaker 4 (18:39):
Of you got them in your wardrobe, read to go,
you better scuff them up a bit. Don't polish your
red bands there.
Speaker 3 (18:46):
Andrew, No, no, no, let's.
Speaker 4 (18:49):
Talk about our largest trading partners and what it looks
like for them, and therefore there for US. I guess
as a result, Australia and China. So what's Australia looking like?
Speaker 3 (18:59):
Yeah, and so I think it's quite important. You can't
be at all optimistic about New Zealand unless our trading partners,
largest ones are you feel similarly okay about them. So
you know, I was an aussy last week for the
threefold days and I was pretty genuinely lucky to bump
into and see some of the finance leaders and it
(19:20):
feels okay there. You know, last year Ozzie grew by
one point two one point three percent. It wasn't a
great year. This year they've pulled their socks up. For
most people think of two two and a half percent
stronger than New Zealand. The reason rationale for that is
multiple and it's quite hard to put your finger on it.
But households over there in a better state. They've got
higher savings that you know, for thirty years they've been
(19:44):
saving for their retirements. There's a whole demographic of people
who actually have got you know, true savings balances of
a large number. And then importantly the household sector and
the housing sector, I feel as if that twenty twenty
(20:04):
five will be the year in which they continue to
be interested in the housing sector. You know, we've had
household borrowing lifts by five and a half six percent,
stronger than New Zealand And. But there's another jump coming.
You speak to people the resources sector, you know, they
might be worried about what's happening in the US, but
they're not worried about what's happening in China compared with
(20:26):
maybe a year ago.
Speaker 4 (20:27):
Okay, well, they're not worried about China.
Speaker 3 (20:30):
Yeah, well, since about October of last year, China haven't
thrown out a big bazooka. They haven't like shot a
whole lot of money into the economy. But like every weekend,
there has been a more sensible announcement regarding improving the
quality of their investment. Looking. I mean, they know they've
got a problem in shining. They're running out of labor
quite quickly. They need to lift productivity. They need to
(20:53):
invest in technology and robotics. That's a key sector. They're
looking to do that. As you know, they're electrifying their
economy faster than anywhere else in the world. But their
key problem has been mums and dads and how solds
have been very conservative. They awarding their cash like nothing.
Their savings rate is close to forty percent. What, yes,
(21:14):
close to forty percent. They have to pay for their
own healthcare of course, the education for their kids, and
they've been worried about the state of their economy. And
so in the last two or three weeks, China has
continued the strip feeding of reasonably sensible policies and then
they issued this thirty point plan to lift household consent,
which including and encouraging a list of the birth rate,
(21:37):
improved maternity paternity lead and improved childcare facilities, healthcare policies,
a whole range of things. Then actually, if it was
announced anywhere else in the world, you'd say, well, that
sounds pretty good, and yet people are still skipedical. What
is that?
Speaker 4 (21:54):
What are our savings? Right? Just put that into.
Speaker 3 (21:57):
Single digit single digit number, yeah, low, single digit fourst
of sixes. Yeah, and Australia you're sort of six to
six to eighth.
Speaker 4 (22:08):
Actually, just on that, I've so Australia's savings, their retirement
super annual, you know, their scheme as everyone's been putting
on where fortune compared to us, does that sort of
forever sort of condemn us to be the sort of
poorest sort of cousin because their level of savings is
just so high, and they're going to have an older
population who are able to spend more and they'll have
(22:30):
a more borlant economy as a result. How does that
all play out in terms of the comparison between us
and them.
Speaker 3 (22:35):
We're certainly coming through the pipe at the moment as
the first large cohort of Australian baby burners, but effectively
funded their own retirement. Yeah, and that started, you know,
in the late nineteen eighties into the early nineteen nineties,
and they've created this light So we already started here
(22:55):
with Kiwi sava, not compulsory small numbers you know in
the noughties, and now we're beginning. We've got a decade
ahead of us of building and you know the key issue,
we're only saving six percent and they had best. The
averages are quoted a four percent.
Speaker 4 (23:13):
Do you think that's By the way, this is a
political question. I've seen people who say that it's a
mistake to allow people to access the kei wei saving
for the first house, because that's something that bites into
people's savings and they might have been spending fifteen years
saving and all of a sudden they're bought house in
their back at zero. I mean, it's easy to sort
of say, from a numbers point of view, will ideally
be nice if we didn't have to touch that money,
(23:34):
But the reality is houses are expensive. It takes it's
hard to do everything, isn't it.
Speaker 3 (23:40):
My answer to this is we should start saving earlier.
This should be we should bring forward the age of
people really getting stuck into the Kiwi save earlier, and
there should be a capacity for that saving to be
used for education and first home ownership. Starting saving at
eighteen might sound good, but starting saving small amounts of
(24:02):
money earlier is is I think an ideal way of
thinking about it. I think the other thought, I've died.
And if people know this idea generation, you know, everyone
who's in the kiwisaver who saves over a thousand and
ninety dollars a year gets five hundred and twenty something
from the government. It's a universal benefit. Maybe at some
(24:23):
point we could think about the targeting of that benefit.
Maybe at some point and don't have a whole lot
of people call me up, and they weren't like that idea.
But it seems to me that are targeted. If we're
going to spend five hundred and twenty bucks when everyone
is in the k saves over a thousand a year,
I think maybe we should repurpose some of that.
Speaker 4 (24:43):
Okay, by the way, with China, are they it's one
of those things. We've got so many distractions going on
in the geopolitical world that we're talking about American and
Ukraine and Russia and things like that. Does that sort
of mean that we've mean you talked about the level
of electrification and things like that, the rate at which
China is changing, and I mean, is that right? We've
(25:08):
sort of we sort of miss it in a way
because when you mentioned it to me, I sort of thought, gosh,
I haven't thought about China much lately.
Speaker 3 (25:14):
The world is fixated on one country, right and one guy, Yeah,
maybe maybe two guys, and all the news streams sort
of comes through right the whole time. In the meantime,
the world's second largest economy has just been actually, rather
than facing into that, they've been facing into some of
their own significant challenges and issues and quietly leading a
(25:34):
reform which looks a little bit more sensible than what
we've seen before. And why I think this is more real.
Look at the share price response to the Chinese market,
of the Hong Kong market year the day, you know,
flat flat to up compared to the US and companies
that are facing into that Chinese market. And we've got
a few in New Zealand actually doing fine. Go and
talk to A two milk.
Speaker 4 (25:54):
For example, Yeah, well, how are they doing?
Speaker 3 (25:56):
The share price is up forty five percent year to day.
Well that's not share price is up forty five percent
year the day or forty maybe on fidy up sharp.
This is why because investors now now truly who are
doing there analysis and seeing what's going on, actually believes
that there's some fundamental change. Yeah.
Speaker 4 (26:15):
Actually, because we're going to get onto the elephant in
the room, which is the United States economy. And but
just just on the on that the A two how
big a deal? Where does that sit in terms of
our general dairy exports? A two milk and where it
belongs with other products? Is it just a niche? Is
that just a small.
Speaker 3 (26:36):
By by volume, those little cans of infant formula highly
valuable compared to the larger sacks of whole milk powder.
The export this value added product in this in this
tin is you know, it's got a lot of new ingredients,
it's got capability especially designed for infants. So it's you know,
(26:57):
high level of you know, robustness in terms of the product.
But it truly the high added value ingredients.
Speaker 4 (27:04):
But yeah, and is that do you think That's one
of the reasons that I had chat with Miles Harrol
and we were talking about the elephant in the room
will get onto but he was talking about evaluated products
and some of the things we've got is does the
products like a two milk are they something that we
have well that we we be putting a bit of
stock in or not. How does that set in terms
(27:28):
of our exports in the future. So, for instance, if
we had tariffs and I'm trying to avoid getting onto
the elephants in the room till after the brain well.
Speaker 3 (27:35):
I we clearly you should give him the other But
I mean the key is, obviously we want a diverse
range of markets. In New Zealand free trade agreement. First one,
they have a free trade agreement. Try in a first
country in the world. Still, it's really important, but free
trade agreements and trade access to the rest of Asia.
I think it's critically important. You know what was in
nineteen seventy three we got kicked out of the UK
(27:59):
European Union. It took us a decade or more to
find these other markets, and the US was a big one.
Right now, who knows what's going to happen, but it's
really important we get access to India, Indonesia, Vietnam, Philippines
and of course China India.
Speaker 4 (28:14):
I mean, it's guessing game at the moment, but I
was surprised at the I'm surprised at the level of
optimism and confidence that our delegations seem to be indicating
about reaching an agreement. How does that percolate down to
people like in your business.
Speaker 3 (28:30):
I think this has been going on for three or
four decades. We had Tim Grocer and the other day
and obviously he was the guy who's got our closer
economic relations together with Australia and then the free trade agreement,
and then obviously worked over in Washington when Trump was
there to start with, and he said, in India, really
is the market that we are putting a lot of
work into. At the moment and that's been going on
(28:52):
for decades. Yeah, and so I don't know how optimistic
we should be, but I can tell you I think
the work is really going in.
Speaker 4 (28:59):
Yeah, good, Okay, Right, we're going to get We're going
to well, the elephants are the room. It's not the
huge elephant, or is it. We're going to check about
tariffs and the unpredictability of the White House administration and
how that what that means for us, and among other things.
So you want to you can add your two tuppenny
peneth or whatever the expression is if you like, and
give us a call one hundred eighty ten eighty. But
we're talking with Andrew Bascan. He is the managing director
(29:22):
and portfolio and manager at Harbor Asset Management. This is
News Talks be twenty one and a half to six.
(29:52):
Miss Yes, Welcome back to the weekend collective of i'nton
Beverages a Smart Money. My guest is Andrew Bascant, He's
managing director of Harbor Asset Management, talking about just as
well reasons to be optimist. So so far and by the way,
you can go back and listen to our podcaster if
you have missed the earlier comments because he has been
a bit of caution and pessimism around. But Andrew has
(30:13):
been outlining for us I think reads me convincingly actually
why there are some reasons for a bit of optimism
with interest rates and the cost of living rise as
chilling out a bit. House prizes have stopped falling. Agriculture,
we've had some good figures Australia and China looking like
they're going to be growing. That's good for us. Is
that a good summary Andrew so far?
Speaker 3 (30:33):
I think yeah, apart from one thing, right, what was that?
Oh well, you need to talk about it?
Speaker 4 (30:39):
Oh yeah, so well, I wonder if it's the reason
so we had this, the GDP figures, and I wonder
why it's because we don't know what's happening on the
trade front. We've had Winston Peters I think actually he
made a good point when I interviewed him in politics.
He said that we are spending a lot of time
focusing on things that are outside of our control and
we need to focus on our knitting as well. But
(31:02):
I guess when it comes to focusing on a knitting
we don't know what's going to happen with tariffs. We
have no idea what's going to happen with tariffs. We
know that Winston will have put his best foot forward
with Marco Rubio and we'll be doing our best to
have a good relationship. But anyway, uh, what do you reckon?
Speaker 3 (31:22):
What I reckon is Buffett was right. Buffett said tariffs
are an act of war on consumers. The tooth theory
doesn't pay tariffs. Someone pays for them. That's what Buffets
he did, right, you know, I mean when did he.
Speaker 4 (31:38):
Say this just recently or is this something he said
over the course of his life.
Speaker 3 (31:41):
Probably think I think he said that. I think he
said it the last time we had Trump and we
had a crack with this and Buffett was like, this
is not good for my companies in the US. Basically,
this isn't. This isn't great for profits, isn't. So that's
what Buffet's interested. This is a great profits. And so
you did right. This is the no and unknown Apparently
(32:03):
on the second of April, no more. But what we
know is we'll know more on the second of April.
But we still actually we actually don't know. And the
one thing we do know, why don't know about you?
But I did a trade policy as a university subject,
believe it or not, in nineteen eighty three, and I
don't think much has changed since then. We do know
(32:26):
that tariffs are not good for seven or eight reasons,
and you know we actually terrific summary of this. But yeah,
we know, we know that's right.
Speaker 4 (32:35):
Do you do you think that? I mean, I don't
want to get into what American think and know about
understand about tariffs. But I'm not sure if people, I'm
not sure if people who are trying to defend the
tariff approach understand that tariff's hit the consumer, like the
Americans consumer is going to be hit hard. I saw
a farmer who was talking about the mulch and feed
(32:57):
that he imports from Canada's bill's gone up twenty thousand
dollars a month.
Speaker 3 (33:02):
So bring it home. An element baseball bat is going
to go up by about fifty to seventy five dollars.
Speaker 4 (33:10):
I understand, Wow, are they reach?
Speaker 3 (33:13):
Well? The aluminium price is up in the US by
from forty percent, right, so it's come from In fact,
since since November last year when Trump came and the
aluminium price has gone up in the US from four
hundred and forty dollars a time to eight hundred and
fifty bucks a time. So this is this is the
price of an average Ford car one thousand to two
(33:34):
thousand dollars more expensive because of the aluminium alone alone.
A can of beer cannon coat twenty to twenty five cents.
Speaker 4 (33:43):
Just because of the aluminium can.
Speaker 3 (33:45):
Yep, that'll go through. Imagine that and so and that's
just aluminium. This isn't anything else. This is not the
cost of vegetables coming across the border from Mexico or
you know, it's just unreasonable. The consumer bears this burden.
Speaker 4 (34:02):
So what is it likely to trigger in the States
if these tariff threats, You know, if most of the
threats come true.
Speaker 3 (34:11):
It's just really hard to predict because these things will
come in a completely different sequence. But I mean, economic
growth ought to be lower, unemployment ought to go up,
profitability in many sectors ought to decline. I've got a
long list here. And the worst thing is that it
will certainly deteriorate the already badder quality of society in
(34:34):
the US because tariffs are a burden that's an average
cost across every one. So the poorest get a tariff
the same way, as the rich people and the poor
people have a lot more that they consume, a lot
more goods, a lot more fruit and vegetables and basic commodities.
Whereas the richest people, you know, like they have a
(34:57):
surplus of incarmbon and it's just the poor people that
will have at least two or three times the impact
on them then it will the average person in the state.
Speaker 4 (35:08):
Okay, so that's bad news for the United States consumer.
How does how does that? Does does their struggle impact us?
Speaker 3 (35:18):
Well, it does in two or three different ways. The
first way is obviously the US equity markets down what
seven percent on is that five percent for the main market,
even though we've had bounces and things, So we have
a we have a wealth of pack well, a wealth
impact on our que. We say it's small, one and
a half percent maybe, but that's that's a wealth effect.
And we're all a little bit concerned because this uncertainty.
(35:41):
We haven't really seen it play out yet, but we
know something more is coming. And nothing has happened to
tariffs on New Zealand yet right Obviously in Australia they've
had their aluminum and steel sectors, which by the way,
I don't know why they made such a hohoha over
there about that. I don't think to set the analysis
because aliminium prices have gone up on the state so
much to compensate. And actually Australia has more steel and
(36:04):
more steel production plants, believe it or not in America
and instead of having Australia. So I'm not sure why
Australia has made such a big scene over this. And
I think the way we're playing it is like not
trying to plat like when we're not trying to be
the noise in the room.
Speaker 4 (36:21):
Just be head down, hit down, hit down.
Speaker 3 (36:24):
You don't want to be a Canadian, Well.
Speaker 4 (36:26):
They've got no choice, the Canadians. They do they because
they I mean, he's even wanting to turn them into
a state of America that you know, there's no way
they can keep their head down, is there.
Speaker 3 (36:36):
Well no, no, that's true. And what they do and
actually here's Europe over the weekend. What have they done.
They had just enacted an anti coersion instrument, Like so
Europe's going to get their back up here as well.
And so you know, like we want to be.
Speaker 4 (36:54):
So who's who's enacted what instrument?
Speaker 3 (36:56):
France had just suggested Europe and acts an anti coersion
instrument against America, should tariffs be implemented? Again, what is that?
Speaker 4 (37:05):
What does that look like? What is an answer?
Speaker 3 (37:07):
It's got pages and pages on it, but basically as
reciprocal tariffs and other non trade tech.
Speaker 4 (37:12):
Okay, so you slap slap.
Speaker 3 (37:14):
I'll slap you. Yeah, which currently Europe have got in
their constitution. We don't do that. We don't do that.
You know, we're good guys to play well.
Speaker 4 (37:22):
Yeah, so okay, do you use how much? How nimble
are we when it comes to trade of tariffs that
we've got. I mean, as you were talking about Australia
and China looking like they're growing and there's some good
signs there. How nimble are we in terms of being
(37:42):
able to ameliorate the effects of any tariffs that get
slapped on our dairy for instance?
Speaker 3 (37:49):
More nimble than we were in nineteen seventy three because
in nineteen seventy three, eighty percent of our dairy exports
went to one market, and it was the UK nineteen
seventy three. Now China is by far the largest market,
and in other parts of Asia big the US is important,
but not. That's important for our beef sheep meet exports,
and it's right down there in terms of being a
(38:12):
trading partner in that regard. So I think we're better
sitting now. We're much better set now Australia. Of course,
if it impacts Astralia a lot, you know, that's not
terrific for us. So we've got to watch out there
how Ali plays this will be quite important. Once again,
Australia's playing it to China. So just I personally would
(38:32):
back off the noise because we can't we can't impluence it.
Speaker 4 (38:36):
Uh And and yeah, that's is it dairy that would
have any tariffs? Is it dairy? Where would we'd be
concerned about tariffs on that? Is that a.
Speaker 3 (38:46):
Little bit because of the second round effects, because of
everyone's facing dairy tariffs and to the US and Canada
in particular, they'll look to chase our markets in Asia.
Speaker 4 (38:58):
Ah, yes, that's quite get you.
Speaker 3 (39:02):
Yeah, that's the right place. It doesn't play that we
suddenly worried about that play places that those exports we're
going to go to the US actually would be more
profitable for Canada. Now to look at, do we.
Speaker 4 (39:15):
Have certain types of dairy products, which we do which
sort of unique ish to us, that we might be
able to get some exemption for all.
Speaker 3 (39:22):
What infant formula in particular. And that's what that's what
you know, we're all looking at because well, not just
say two, but in general in general, the supply of ingredients,
ingredients of an infant formula, ingredients. You know, because you
can imagine the headlines in the US, you know, this
is the worst thing they can do.
Speaker 4 (39:44):
Hey, Andrew, gosh, time flies when you're having fun. Thanks
so much, been great to all that stuff.
Speaker 3 (39:48):
And yeah, remember optimism first and then uncertainty seconds exactly.
Speaker 4 (39:54):
And if people want to check out your your work
of course, harbor Asset dot co dot Nz. Thanks mate,
really appreciate your time. That is Andrew Baskan from harbor
Asset Management. We'll be back in just a minute to
wrap up at seven and a half minutes to six.
Speaker 1 (40:08):
For more from the Weekend Collective, listen live to newth
Talk ZEDB weekends from three pm, or follow the podcast
on iHeartRadio.
You're listening to the Weekend Collective podcast from News Talks,
i'd be if you're feeling.
Speaker 2 (00:11):
Down, notice swollen make you happy a babe. We saw
around not to swallow make you happy a babe. We've
been doing all this Leaner talking about anything.
Speaker 3 (00:31):
You honor to the morning.
Speaker 2 (00:34):
Now you're in my life, get.
Speaker 4 (00:38):
Your half time. Very good afternoon to you. If you've
just joined us, well, welcome back, which a wife you've
missed any of our previous hours. We had an interesting
chat with well with a couple of them on a
couple of issues. Cameron Luxton X Housing spokesperson around some
of the ridiculous results that and how herded us to
a bit Tenants. It's from King Aura with the Tennants
(01:00):
Tribunal ruling in a particularly egregious case because there wasn't
enough evidence because he went too terrified, and we had
a bit of talk back on that as well, as
well as having a chat with Winston Peters following his
State of the Nation's speech and for the health up
which you just missed or caught Greg Pain talking about.
We were talking about how important core strength is in
your exercise regime, among other things. So if you've missed
(01:22):
any of those hours, you want to check them out,
then go to news Talks hed B or to iHeartRadio
and just basically look for the weekend Collective and there
we go. But now it is time for a completely
different hour, and to do with health in a way,
because financial health is always important. This is smart money,
and we're going to be a chat about well just
(01:44):
looking ahead with while the economists are not particularly clear
about what's going on, probably because no one's very clear
about what's going on, but we have had a positive
GDP result this week, and we're going to dig dig
into that a little bit and joining us. He is
managing director at Harbor Asset Management, and his name is
Andrew Bascan. Andrew, good afternoon, How are you afternoon?
Speaker 3 (02:05):
And what a great session that was you've just had.
I learned something very important, did you. What was that
I only have to do a thirty second plank twice
a week rather than that one minute plank, and I
can dedicate more time to do some dead lifts maybe,
but no, that was good. We always do one minute plank,
but I don't need to do that anymore.
Speaker 4 (02:21):
That's well, well, he did actually show me the technique
as well, which involves first when you get into the plank,
you arch your back first and then you tuck your
pelvis under. And I did that for about twenty seconds
and I was like, oh, it's a different game altogether.
Yeah about deactivating you. But but we will will have
to dig into that another another time. Hey, look, let's
just kick off with the Well, we have had a
(02:44):
bit of good news at least for the economy. But
I mean it's I did see that. Jared Kerr, the
Kiwibank economists said we were crawling out of recession. But
we have had the surprise with the GDP figures being
a bit better. We'd had that zero point seven percent
in the December quarter. What did you What do you
make of all that?
Speaker 3 (03:03):
Well? I think data is important. I've just spent the
last couple of weeks traveling a bit of into the hawks,
bad Christ to Auckland and then I had it actually
had three or four days in Sydney to compare and contrast.
So anecdotes are as important as the data. But the
data is right, we are crawling out of a recession.
In Australia is doing about the same, but it feels
(03:25):
better than it did a year ago, and I think
that's that's the change. You can run through a bit
of that, but it does feel in parts of the
economy better than it did a year ago.
Speaker 4 (03:36):
What does it mean that? Can you read anything into it?
Because it's better than the well actually tell you what?
Is it a big deal this result?
Speaker 3 (03:45):
No, because a lot of it was restocking government and
other things. But it's a setup. We're setting ourselves up
for a better second half of this year. Not right now,
but we're setting ourselves up for a better second half
of this year.
Speaker 4 (04:03):
Does it mean anything for from the point of view
of the Reserve Bank because they won't have seen well,
they were expecting more cautious or not as much growth
because it's better than we thought. Does that have any
implications for future cash rate announcements?
Speaker 3 (04:21):
Because that is Oh, I don't think so, because we're
still but the economy is still running beneath its potential
full stop, and inflation is coming right back down, you know,
sort of into the middle of that one to three.
And so if we're running beneath potential, even though GDP
is a bit better and inflation is getting closer to
the middle of that one to three, we are still
(04:41):
I think on a track they have some more rate cuts.
Speaker 4 (04:45):
Oh that's good news then, So basically, I mean I
was thinking that we were starting to probably look at
flattening out. At least we still look but we are
looking at further rate cuts, and that certainly that news
will not have undermined that, I guess, is the thing?
Is it?
Speaker 3 (04:58):
No, that's right. Look, I don't think it's a million
miles away that most most market people appreciate. We've probably
got a couple more rate cups to go. But if
you're a business or if you're a household, you're already
feeling that positive cash flow impact, and I think that's
going to continue. That's going to continue.
Speaker 4 (05:19):
Yeah, Okay, Look, I would say I was actually doing
the Drive show when the news about GDP had broken,
and it just seemed that even Nikola Willis, I thought,
in her comments to me, sounded that she wasn't going
to make too much about it. But I mentioned Jared
Kerr talked about us crawling out of recession, and I
(05:40):
still saw a lot of cautious commentary and no one
was reaching for the champagne quite yet. Do you think
I mean, is it we're a bit pessimistic at the moment,
and is that the right sort of attitude to have
at the moment or should we be a bit more
bullish about what's ahead of us?
Speaker 3 (05:57):
Oh? Look, I already think it's important that you look forward.
D me a bit of an optimistic person. But if
you look forward as opposed to how we're living exactly
this minute, on this lovely autumn day. And but if
you look forward, yes, beautiful, if you look for there
are five things that I think you can attach yourself
to that that give me, you know, a better prospect
(06:19):
that things will feel better again in the second half
of this year. And there's one thing holding me right
back that we can talk about it this which is
obviously tariffs and things. But those five things that the
number one we can tenderly put numbers around is the
fact we've just had a fifty basis point rate caut
in February, and that brings us to a one and
three quarter rate cut from the top. And you can
(06:41):
add it up to the average mortgage holder out there.
You know that that's the average mortgage holder. You know
it's it's a significant five hundred, five hundred and fifty
dollars a month for the average mortgage holder if they
are on a floating rate notes and it's you will
take either side of that. That's pretty good. And let's
simplify it a bit further. If you're a first home
(07:02):
buyer and you paid initially, you know, turn years ago
at the top of the cycle interest rate and what
you're paying today means that you'll be paying somewhere between
seven hundred and fifty and eight hundred and fifty dollars
a month less and interest rate costs than what you
work for a first home buyer, Actually, that's probably incredibly
(07:24):
important because typically they're right up against the wall in
terms of their cash flow, and you know, they might
choose to actually use their offset accounts or pay down
a bit more. Principle, that's all cool, but they might
actually choose just to buy the more of what they need.
And I think that's that's that's step number one of
(07:44):
five things that looking out six months makes me a
little bit more optimistic.
Speaker 4 (07:49):
I was actually wondering how because you know, we have
these figures about GDP and growth and you know what
a what our trade deficitors or whatever. But I have
before we receive the GDP figures. The day before we'd
had that consumer confidence survey which showed that, you know,
(08:09):
consumer confidence wasn't that great? Am I right? In taking
everything I'd say is coming from a layperson's perspective, really,
But my guess would be that it's mortgage rates are
the thing that can make the largest difference to people's
sense of well being. Because you know, you can talk
about GDP all you like, but when people suddenly can
(08:30):
find that when they reset their mortgage they're saving either
half a point or maybe even a point, that that's
the thing that can make the biggest difference to how
we feel about ourselves. What are your observations about it?
Speaker 3 (08:43):
Right on the short term that you're dead right right
on the short term, that's the number one thing that
people focus on. But in fact, in the medium term,
like out of twelve months or a bit longer, there
are other things that I think are more important than
the mortgage rate. And the next biggest thing is what
did I get paid in my paypack at last month?
(09:05):
Was it higher or lower than the inflation I'm experiencing?
Were my wages actually beating inflation? And that hasn't been
the case for a couple of years. It's hardly anyone. Right.
Wage inflation has been dragging along at three to four,
which has been the normal wage inflation for the last
(09:25):
two or three decades, I guess, but inflation has been
way up higher than that. Now we can say inflation
is two point two, probably going to trade between that
and a bit lower and a bit higher for a
week while and could go lower. And the latest wage
inflation data we've got, I think was three point three.
It might be going to three, but for the first
time in a couple of years. So I think this
(09:45):
is important. This is more important than the medium tom
than interest rates are going People will say, actually, I've
noticed I can buy a bit more with my wages.
Now that's the average person someone will be. But that
I think, I personally think that is step two of
me feeling more optimistic. That's step two.
Speaker 4 (10:05):
As I guess. The thing is, it's one thing for
the for the inflation to chill out, but when do
wages actually catch up with that? Because I don't know
what's the pressure on the labor markets actually pay per
for more.
Speaker 3 (10:21):
Well, here here's it. People will get paid more if
if in certain sectors we're having difficulty finding labor, and
then that that catches on even further. And I don't
think we're going to get four four and a half
five percent wage inflation. But if you're getting above two,
if you're getting above two percent, you can two and
a half or three. That is a hell of a
(10:42):
lot better, excuse me, than it was when inflation was
running along at six seven percent. Okay, it's just and
it's crawling out of recession. Thing I'm not talking about
a boom out of it's crawling out of recession. Is
that gradually, gradually, the average household is going to feel better.
Speaker 4 (10:58):
Well that Jared Kurr, he had the right here, I
had the right adjective for it.
Speaker 3 (11:01):
Then possibly, but that's at the moment. I think six
months time it will feel a bit better. And here's
the third part. I just jumping road. Yeah, house price
has eve been falling across the country for the best
part of I don't know how long, maybe two years,
and in some regions that certainly stopped, and on average
it certainly stopped. So a lot of people really feel
(11:22):
their own wealth, you know what's happening. Not that I'm
buying and selling my house, but they know sort of
what's happening to their wealth. And we know through long
term studies that once house price is stabilized, about six
months to twelve months later, people feel a little bit
more confident and not hoarding and saving so much. So
(11:47):
it takes time. It takes time. It does take time
TOI but I think if house prices just stay stable,
they don't have to go up, that is another little
building block of doing a bit more than crawling.
Speaker 4 (12:00):
Actually, yeah, I actually the I guess, I mean I
asked this all. I made an interesting chat with Ashley
Church about this and just about you know, the house
prices and what they're looking like doing. Because I have
had a few people say that they think that the
housing markets we're not going to see any boom times
for quite some time yet, because that would require our
(12:20):
economy to really get moving. Where do you guys? And
I think I've seen some stuff from harbor Asset Management.
I'm not referring to anything specific, but I think in
the last week or two I saw something where you
guys might have been talking about the renewed interest in
people sticking their money anywhere other than anywhere else. Well, sorry,
I'm exper not in the property market, but into shares
(12:44):
and things like that.
Speaker 3 (12:46):
About senses that it will take quite a long time
unless we get a big migration burst and we get
a lot more confident employment for house prices to do much.
And you know, I think the story with employment. I
think Nicole Willis is right. Employment is probably the very
very last indicator, and I personally don't think it's the
second half of this year. I check it out to
(13:08):
twenty twenty six. I just think that that's you know,
it'll be, and even then we won't we won't know
till then. So I'm not in the camp that says
house prices are about to move significantly significantly higher. I
mean they could, they could move a little bit larger,
a little bit higher, and therefore stability, to me is
(13:29):
what I think in the near term is actually quite
good for households. Yeah, that's that's that's right.
Speaker 4 (13:35):
Okay, Look, if I want to join the conversation, by
the way, on e one hundred and eighty ten eighty,
we're with Andrew Bascanty's the managing director of Harbor Asset Management.
He's portfolio manager as well, And if you've got any takes,
I think the broader question is is that as we
started well earlier on when we were talking about how
there does seem to be quite a lot of pessimism around,
(13:56):
but Andrew's a little bit more optimistic about it. I'd
like to know what is it that are you feeling
optimistic about just where we're heading now that we've had
some rough times, we've had some higher interest rates, it
looks like they're going to continue to fall. Are you
feeling cautiously optimistic? Which maybe I could describe that would
be or what Andrew's words will be, but he can
(14:17):
correct me after the break. We'll be back in just
a moment. The number is eight hundred and eight ten eighty.
We've got lots to Andrew and I have lots to
talk about, including we have a talking about Australia and
China and what we're going to be doing there in
trade and also the tariffs and all that sort of.
We've got a lot of ground to cover, so we
better get into it. But we will do so in
just a minute. But you can join the conversation anytime
you like with your reckons on eight hundred and eighty
(14:39):
ten eighty text nine two nine two it's twenty one
past five news talk sa'd b are you fun worried
about funding a comfortable retirement? Well you're not alone. The
cost of living crisis is hitting home for a lot
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Speaker 1 (15:40):
Parentech, Property, politics plus Money, Health and the week's debates.
It's all on the Weekend. Collective with Tim Beveridge us
talk Zevvy.
Speaker 4 (15:49):
As we'll speak of the devil. It's Andrew Bascan. He
is portfolio manager and managing director of Harbor Asset Management,
and we're talking by the way. Actually, I've got to say, Andrew,
I actually was quite I was looking forward to this
discussion because you know, a lot of the time, I
think people see the headlines and they see our GDP
point seven, or they hear the cash rates changed, and
it's nice to have a chance to have a chat
about the stuff and put it in perspective what it means.
(16:11):
And as you've said, you know there's a bit of
pessimism around, but you're a little bit more optimistic.
Speaker 3 (16:15):
Yeah, I mean we've discussed a few of those things.
I mean business, the business sentiment and household sentiment, I
would say is mixed. I mean it's mixed. I mean,
if you are an agricultural sector right now, you're feeling
pretty good. It's been a good production season, it's rained
done a few things. Well, we had a.
Speaker 4 (16:31):
Dairy announcement and what does that mean for what does
that put it in context for New Zealand and the
average you know punter?
Speaker 3 (16:40):
Yeah, Well, that's a good actually a mystery mystery creek
this day the first time in a couple of years.
This year you're going there.
Speaker 4 (16:47):
Are you going to feel?
Speaker 3 (16:48):
Yeah, I'm going to feel this and I want to
I want to see you know what's actually going you
only see. I think the data is one thing that
you've got to see. And my sense is that it
means quite a lot to certain regions. As I said,
I mean the Hawks, BA mean to Canterbury recently, it
feels I mean, you go expect to ports in those regions.
We're actually exporting more product. You know, these areas, I
(17:11):
think employment will pick up more rapidly and they will elsewhere,
and that's what we want. I mean, part of us
is the New Zealand dollars, but lower part of us
is like we've produce more goods and part of it
is that export markets. I think that as bad as
we make out.
Speaker 4 (17:26):
You know, I was wondering in your job, because you
obviously are intensely into data analysis and watching markets as
they shift and move. How much I mean, what does
it mean for you? You're saying you're going to go
to feed down field days and meet people. I mean,
how much does it inform the way you can paint
the picture as to how investments are going to go
just by meeting people on the ground. What is it?
(17:48):
How does that fit into the picture of what you
guys do?
Speaker 3 (17:51):
Yeah, I think it's really quite important because the data
needs color, and it needs color through real time experience
of what that average or median data points is compared
with the whole risk spectrum of you know what, one
data point is an average of hundreds of thousands of
observations and that could be really really wide or actually
(18:15):
there could be a thematic coming through and you get
a feeling I think by meeting people, by talking to businesses,
by talking to households, and one a great example of
course the field dates right, it's one of it's an
iconic events. So a couple of days there will I
think influence a bit more our funking.
Speaker 4 (18:34):
Probably quite good fun to go to them actually as well,
I'd say, I think.
Speaker 3 (18:38):
Certainly red bands are important part.
Speaker 4 (18:39):
Of you got them in your wardrobe, read to go,
you better scuff them up a bit. Don't polish your
red bands there.
Speaker 3 (18:46):
Andrew, No, no, no, let's.
Speaker 4 (18:49):
Talk about our largest trading partners and what it looks
like for them, and therefore there for US. I guess
as a result, Australia and China. So what's Australia looking like?
Speaker 3 (18:59):
Yeah, and so I think it's quite important. You can't
be at all optimistic about New Zealand unless our trading partners,
largest ones are you feel similarly okay about them. So
you know, I was an aussy last week for the
threefold days and I was pretty genuinely lucky to bump
into and see some of the finance leaders and it
(19:20):
feels okay there. You know, last year Ozzie grew by
one point two one point three percent. It wasn't a
great year. This year they've pulled their socks up. For
most people think of two two and a half percent
stronger than New Zealand. The reason rationale for that is
multiple and it's quite hard to put your finger on it.
But households over there in a better state. They've got
higher savings that you know, for thirty years they've been
(19:44):
saving for their retirements. There's a whole demographic of people
who actually have got you know, true savings balances of
a large number. And then importantly the household sector and
the housing sector, I feel as if that twenty twenty
(20:04):
five will be the year in which they continue to
be interested in the housing sector. You know, we've had
household borrowing lifts by five and a half six percent,
stronger than New Zealand And. But there's another jump coming.
You speak to people the resources sector, you know, they
might be worried about what's happening in the US, but
they're not worried about what's happening in China compared with
(20:26):
maybe a year ago.
Speaker 4 (20:27):
Okay, well, they're not worried about China.
Speaker 3 (20:30):
Yeah, well, since about October of last year, China haven't
thrown out a big bazooka. They haven't like shot a
whole lot of money into the economy. But like every weekend,
there has been a more sensible announcement regarding improving the
quality of their investment. Looking. I mean, they know they've
got a problem in shining. They're running out of labor
quite quickly. They need to lift productivity. They need to
(20:53):
invest in technology and robotics. That's a key sector. They're
looking to do that. As you know, they're electrifying their
economy faster than anywhere else in the world. But their
key problem has been mums and dads and how solds
have been very conservative. They awarding their cash like nothing.
Their savings rate is close to forty percent. What, yes,
(21:14):
close to forty percent. They have to pay for their
own healthcare of course, the education for their kids, and
they've been worried about the state of their economy. And
so in the last two or three weeks, China has
continued the strip feeding of reasonably sensible policies and then
they issued this thirty point plan to lift household consent,
which including and encouraging a list of the birth rate,
(21:37):
improved maternity paternity lead and improved childcare facilities, healthcare policies,
a whole range of things. Then actually, if it was
announced anywhere else in the world, you'd say, well, that
sounds pretty good, and yet people are still skipedical. What
is that?
Speaker 4 (21:54):
What are our savings? Right? Just put that into.
Speaker 3 (21:57):
Single digit single digit number, yeah, low, single digit fourst
of sixes. Yeah, and Australia you're sort of six to
six to eighth.
Speaker 4 (22:08):
Actually, just on that, I've so Australia's savings, their retirement
super annual, you know, their scheme as everyone's been putting
on where fortune compared to us, does that sort of
forever sort of condemn us to be the sort of
poorest sort of cousin because their level of savings is
just so high, and they're going to have an older
population who are able to spend more and they'll have
(22:30):
a more borlant economy as a result. How does that
all play out in terms of the comparison between us
and them.
Speaker 3 (22:35):
We're certainly coming through the pipe at the moment as
the first large cohort of Australian baby burners, but effectively
funded their own retirement. Yeah, and that started, you know,
in the late nineteen eighties into the early nineteen nineties,
and they've created this light So we already started here
(22:55):
with Kiwi sava, not compulsory small numbers you know in
the noughties, and now we're beginning. We've got a decade
ahead of us of building and you know the key issue,
we're only saving six percent and they had best. The
averages are quoted a four percent.
Speaker 4 (23:13):
Do you think that's By the way, this is a
political question. I've seen people who say that it's a
mistake to allow people to access the kei wei saving
for the first house, because that's something that bites into
people's savings and they might have been spending fifteen years
saving and all of a sudden they're bought house in
their back at zero. I mean, it's easy to sort
of say, from a numbers point of view, will ideally
be nice if we didn't have to touch that money,
(23:34):
But the reality is houses are expensive. It takes it's
hard to do everything, isn't it.
Speaker 3 (23:40):
My answer to this is we should start saving earlier.
This should be we should bring forward the age of
people really getting stuck into the Kiwi save earlier, and
there should be a capacity for that saving to be
used for education and first home ownership. Starting saving at
eighteen might sound good, but starting saving small amounts of
(24:02):
money earlier is is I think an ideal way of
thinking about it. I think the other thought, I've died.
And if people know this idea generation, you know, everyone
who's in the kiwisaver who saves over a thousand and
ninety dollars a year gets five hundred and twenty something
from the government. It's a universal benefit. Maybe at some
(24:23):
point we could think about the targeting of that benefit.
Maybe at some point and don't have a whole lot
of people call me up, and they weren't like that idea.
But it seems to me that are targeted. If we're
going to spend five hundred and twenty bucks when everyone
is in the k saves over a thousand a year,
I think maybe we should repurpose some of that.
Speaker 4 (24:43):
Okay, by the way, with China, are they it's one
of those things. We've got so many distractions going on
in the geopolitical world that we're talking about American and
Ukraine and Russia and things like that. Does that sort
of mean that we've mean you talked about the level
of electrification and things like that, the rate at which
China is changing, and I mean, is that right? We've
(25:08):
sort of we sort of miss it in a way
because when you mentioned it to me, I sort of thought, gosh,
I haven't thought about China much lately.
Speaker 3 (25:14):
The world is fixated on one country, right and one guy, Yeah,
maybe maybe two guys, and all the news streams sort
of comes through right the whole time. In the meantime,
the world's second largest economy has just been actually, rather
than facing into that, they've been facing into some of
their own significant challenges and issues and quietly leading a
(25:34):
reform which looks a little bit more sensible than what
we've seen before. And why I think this is more real.
Look at the share price response to the Chinese market,
of the Hong Kong market year the day, you know,
flat flat to up compared to the US and companies
that are facing into that Chinese market. And we've got
a few in New Zealand actually doing fine. Go and
talk to A two milk.
Speaker 4 (25:54):
For example, Yeah, well, how are they doing?
Speaker 3 (25:56):
The share price is up forty five percent year to day.
Well that's not share price is up forty five percent
year the day or forty maybe on fidy up sharp.
This is why because investors now now truly who are
doing there analysis and seeing what's going on, actually believes
that there's some fundamental change. Yeah.
Speaker 4 (26:15):
Actually, because we're going to get onto the elephant in
the room, which is the United States economy. And but
just just on the on that the A two how
big a deal? Where does that sit in terms of
our general dairy exports? A two milk and where it
belongs with other products? Is it just a niche? Is
that just a small.
Speaker 3 (26:36):
By by volume, those little cans of infant formula highly
valuable compared to the larger sacks of whole milk powder.
The export this value added product in this in this
tin is you know, it's got a lot of new ingredients,
it's got capability especially designed for infants. So it's you know,
(26:57):
high level of you know, robustness in terms of the product.
But it truly the high added value ingredients.
Speaker 4 (27:04):
But yeah, and is that do you think That's one
of the reasons that I had chat with Miles Harrol
and we were talking about the elephant in the room
will get onto but he was talking about evaluated products
and some of the things we've got is does the
products like a two milk are they something that we
have well that we we be putting a bit of
stock in or not. How does that set in terms
(27:28):
of our exports in the future. So, for instance, if
we had tariffs and I'm trying to avoid getting onto
the elephants in the room till after the brain well.
Speaker 3 (27:35):
I we clearly you should give him the other But
I mean the key is, obviously we want a diverse
range of markets. In New Zealand free trade agreement. First one,
they have a free trade agreement. Try in a first
country in the world. Still, it's really important, but free
trade agreements and trade access to the rest of Asia.
I think it's critically important. You know what was in
nineteen seventy three we got kicked out of the UK
(27:59):
European Union. It took us a decade or more to
find these other markets, and the US was a big one.
Right now, who knows what's going to happen, but it's
really important we get access to India, Indonesia, Vietnam, Philippines
and of course China India.
Speaker 4 (28:14):
I mean, it's guessing game at the moment, but I
was surprised at the I'm surprised at the level of
optimism and confidence that our delegations seem to be indicating
about reaching an agreement. How does that percolate down to
people like in your business.
Speaker 3 (28:30):
I think this has been going on for three or
four decades. We had Tim Grocer and the other day
and obviously he was the guy who's got our closer
economic relations together with Australia and then the free trade agreement,
and then obviously worked over in Washington when Trump was
there to start with, and he said, in India, really
is the market that we are putting a lot of
work into. At the moment and that's been going on
(28:52):
for decades. Yeah, and so I don't know how optimistic
we should be, but I can tell you I think
the work is really going in.
Speaker 4 (28:59):
Yeah, good, Okay, Right, we're going to get We're going
to well, the elephants are the room. It's not the
huge elephant, or is it. We're going to check about
tariffs and the unpredictability of the White House administration and
how that what that means for us, and among other things.
So you want to you can add your two tuppenny
peneth or whatever the expression is if you like, and
give us a call one hundred eighty ten eighty. But
we're talking with Andrew Bascan. He is the managing director
(29:22):
and portfolio and manager at Harbor Asset Management. This is
News Talks be twenty one and a half to six.
(29:52):
Miss Yes, Welcome back to the weekend collective of i'nton
Beverages a Smart Money. My guest is Andrew Bascant, He's
managing director of Harbor Asset Management, talking about just as
well reasons to be optimist. So so far and by the way,
you can go back and listen to our podcaster if
you have missed the earlier comments because he has been
a bit of caution and pessimism around. But Andrew has
(30:13):
been outlining for us I think reads me convincingly actually
why there are some reasons for a bit of optimism
with interest rates and the cost of living rise as
chilling out a bit. House prizes have stopped falling. Agriculture,
we've had some good figures Australia and China looking like
they're going to be growing. That's good for us. Is
that a good summary Andrew so far?
Speaker 3 (30:33):
I think yeah, apart from one thing, right, what was that?
Oh well, you need to talk about it?
Speaker 4 (30:39):
Oh yeah, so well, I wonder if it's the reason
so we had this, the GDP figures, and I wonder
why it's because we don't know what's happening on the
trade front. We've had Winston Peters I think actually he
made a good point when I interviewed him in politics.
He said that we are spending a lot of time
focusing on things that are outside of our control and
we need to focus on our knitting as well. But
(31:02):
I guess when it comes to focusing on a knitting
we don't know what's going to happen with tariffs. We
have no idea what's going to happen with tariffs. We
know that Winston will have put his best foot forward
with Marco Rubio and we'll be doing our best to
have a good relationship. But anyway, uh, what do you reckon?
Speaker 3 (31:22):
What I reckon is Buffett was right. Buffett said tariffs
are an act of war on consumers. The tooth theory
doesn't pay tariffs. Someone pays for them. That's what Buffets
he did, right, you know, I mean when did he.
Speaker 4 (31:38):
Say this just recently or is this something he said
over the course of his life.
Speaker 3 (31:41):
Probably think I think he said that. I think he
said it the last time we had Trump and we
had a crack with this and Buffett was like, this
is not good for my companies in the US. Basically,
this isn't. This isn't great for profits, isn't. So that's
what Buffet's interested. This is a great profits. And so
you did right. This is the no and unknown Apparently
(32:03):
on the second of April, no more. But what we
know is we'll know more on the second of April.
But we still actually we actually don't know. And the
one thing we do know, why don't know about you?
But I did a trade policy as a university subject,
believe it or not, in nineteen eighty three, and I
don't think much has changed since then. We do know
(32:26):
that tariffs are not good for seven or eight reasons,
and you know we actually terrific summary of this. But yeah,
we know, we know that's right.
Speaker 4 (32:35):
Do you do you think that? I mean, I don't
want to get into what American think and know about
understand about tariffs. But I'm not sure if people, I'm
not sure if people who are trying to defend the
tariff approach understand that tariff's hit the consumer, like the
Americans consumer is going to be hit hard. I saw
a farmer who was talking about the mulch and feed
(32:57):
that he imports from Canada's bill's gone up twenty thousand
dollars a month.
Speaker 3 (33:02):
So bring it home. An element baseball bat is going
to go up by about fifty to seventy five dollars.
Speaker 4 (33:10):
I understand, Wow, are they reach?
Speaker 3 (33:13):
Well? The aluminium price is up in the US by
from forty percent, right, so it's come from In fact,
since since November last year when Trump came and the
aluminium price has gone up in the US from four
hundred and forty dollars a time to eight hundred and
fifty bucks a time. So this is this is the
price of an average Ford car one thousand to two
(33:34):
thousand dollars more expensive because of the aluminium alone alone.
A can of beer cannon coat twenty to twenty five cents.
Speaker 4 (33:43):
Just because of the aluminium can.
Speaker 3 (33:45):
Yep, that'll go through. Imagine that and so and that's
just aluminium. This isn't anything else. This is not the
cost of vegetables coming across the border from Mexico or
you know, it's just unreasonable. The consumer bears this burden.
Speaker 4 (34:02):
So what is it likely to trigger in the States
if these tariff threats, You know, if most of the
threats come true.
Speaker 3 (34:11):
It's just really hard to predict because these things will
come in a completely different sequence. But I mean, economic
growth ought to be lower, unemployment ought to go up,
profitability in many sectors ought to decline. I've got a
long list here. And the worst thing is that it
will certainly deteriorate the already badder quality of society in
(34:34):
the US because tariffs are a burden that's an average
cost across every one. So the poorest get a tariff
the same way, as the rich people and the poor
people have a lot more that they consume, a lot
more goods, a lot more fruit and vegetables and basic commodities.
Whereas the richest people, you know, like they have a
(34:57):
surplus of incarmbon and it's just the poor people that
will have at least two or three times the impact
on them then it will the average person in the state.
Speaker 4 (35:08):
Okay, so that's bad news for the United States consumer.
How does how does that? Does does their struggle impact us?
Speaker 3 (35:18):
Well, it does in two or three different ways. The
first way is obviously the US equity markets down what
seven percent on is that five percent for the main market,
even though we've had bounces and things, So we have
a we have a wealth of pack well, a wealth
impact on our que. We say it's small, one and
a half percent maybe, but that's that's a wealth effect.
And we're all a little bit concerned because this uncertainty.
(35:41):
We haven't really seen it play out yet, but we
know something more is coming. And nothing has happened to
tariffs on New Zealand yet right Obviously in Australia they've
had their aluminum and steel sectors, which by the way,
I don't know why they made such a hohoha over
there about that. I don't think to set the analysis
because aliminium prices have gone up on the state so
much to compensate. And actually Australia has more steel and
(36:04):
more steel production plants, believe it or not in America
and instead of having Australia. So I'm not sure why
Australia has made such a big scene over this. And
I think the way we're playing it is like not
trying to plat like when we're not trying to be
the noise in the room.
Speaker 4 (36:21):
Just be head down, hit down, hit down.
Speaker 3 (36:24):
You don't want to be a Canadian, Well.
Speaker 4 (36:26):
They've got no choice, the Canadians. They do they because
they I mean, he's even wanting to turn them into
a state of America that you know, there's no way
they can keep their head down, is there.
Speaker 3 (36:36):
Well no, no, that's true. And what they do and
actually here's Europe over the weekend. What have they done.
They had just enacted an anti coersion instrument, Like so
Europe's going to get their back up here as well.
And so you know, like we want to be.
Speaker 4 (36:54):
So who's who's enacted what instrument?
Speaker 3 (36:56):
France had just suggested Europe and acts an anti coersion
instrument against America, should tariffs be implemented? Again, what is that?
Speaker 4 (37:05):
What does that look like? What is an answer?
Speaker 3 (37:07):
It's got pages and pages on it, but basically as
reciprocal tariffs and other non trade tech.
Speaker 4 (37:12):
Okay, so you slap slap.
Speaker 3 (37:14):
I'll slap you. Yeah, which currently Europe have got in
their constitution. We don't do that. We don't do that.
You know, we're good guys to play well.
Speaker 4 (37:22):
Yeah, so okay, do you use how much? How nimble
are we when it comes to trade of tariffs that
we've got. I mean, as you were talking about Australia
and China looking like they're growing and there's some good
signs there. How nimble are we in terms of being
(37:42):
able to ameliorate the effects of any tariffs that get
slapped on our dairy for instance?
Speaker 3 (37:49):
More nimble than we were in nineteen seventy three because
in nineteen seventy three, eighty percent of our dairy exports
went to one market, and it was the UK nineteen
seventy three. Now China is by far the largest market,
and in other parts of Asia big the US is important,
but not. That's important for our beef sheep meet exports,
and it's right down there in terms of being a
(38:12):
trading partner in that regard. So I think we're better
sitting now. We're much better set now Australia. Of course,
if it impacts Astralia a lot, you know, that's not
terrific for us. So we've got to watch out there
how Ali plays this will be quite important. Once again,
Australia's playing it to China. So just I personally would
(38:32):
back off the noise because we can't we can't impluence it.
Speaker 4 (38:36):
Uh And and yeah, that's is it dairy that would
have any tariffs? Is it dairy? Where would we'd be
concerned about tariffs on that? Is that a.
Speaker 3 (38:46):
Little bit because of the second round effects, because of
everyone's facing dairy tariffs and to the US and Canada
in particular, they'll look to chase our markets in Asia.
Speaker 4 (38:58):
Ah, yes, that's quite get you.
Speaker 3 (39:02):
Yeah, that's the right place. It doesn't play that we
suddenly worried about that play places that those exports we're
going to go to the US actually would be more
profitable for Canada. Now to look at, do we.
Speaker 4 (39:15):
Have certain types of dairy products, which we do which
sort of unique ish to us, that we might be
able to get some exemption for all.
Speaker 3 (39:22):
What infant formula in particular. And that's what that's what
you know, we're all looking at because well, not just
say two, but in general in general, the supply of ingredients,
ingredients of an infant formula, ingredients. You know, because you
can imagine the headlines in the US, you know, this
is the worst thing they can do.
Speaker 4 (39:44):
Hey, Andrew, gosh, time flies when you're having fun. Thanks
so much, been great to all that stuff.
Speaker 3 (39:48):
And yeah, remember optimism first and then uncertainty seconds exactly.
Speaker 4 (39:54):
And if people want to check out your your work
of course, harbor Asset dot co dot Nz. Thanks mate,
really appreciate your time. That is Andrew Baskan from harbor
Asset Management. We'll be back in just a minute to
wrap up at seven and a half minutes to six.
Speaker 1 (40:08):
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