January 13, 2025 • 6 mins
Bagrie Economics’ managing director gives his thoughts on how the economy is shaping up for the first half of 2025 and why the NZD is still falling. Plus, what should we keep an eye on globally and what chance are sub 5% home loans before the year is out?
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Episode Transcript
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Speaker 1 (00:00):
Joining us for the first time in twenty twenty five.
The managing director of Bank Greek Economics, Cameron bag Gree,
Good afternoon, Happy.
Speaker 2 (00:07):
New Year, New year to you. I hope you had
a great break.
Speaker 1 (00:10):
I did, indeed, and if I know you, which I do,
you would have spent a bit of time near some lakes.
Speaker 2 (00:15):
There were down on Lake Rothkana for a bit of boating,
got a knee boarding. Wakeboarding with the girls was good.
Speaker 1 (00:21):
One nice nice? How good are you on a kneeboard
or a wakeboard.
Speaker 2 (00:24):
On the Muket? I get behind the boat and drive nice.
Speaker 1 (00:29):
I was going to expecting you to say something like, yeah,
I jumped the wake She's all good. But we are
back in work mode now. It seems like not long
since we caught up at the end of last year. Though.
First question for you, though, why is the New Zealand
dollar still falling?
Speaker 2 (00:45):
I would have seen a pretty big move in intrastrate
markets in the United States over their inflations, looking a
little bit more sticky, a little bit more stubborn. We
get another read in a couple of ays, which is
going to be pretty important, but financial markets have get
back your expectations as to how far and fast the
US feder Reserve is going to be cutting infrast rates.
(01:06):
In fact, in the yield on the US ten year bond,
it's risen about one hundred basis points in the last
three months. So here's some irony. Your short term interest rates,
the FED funds rate, the policy rate that's dropped one
hundred basis points in the last three months, and the
long term infist rates a ten year bond has risen
one hundred basis points. So it looks like our central
bank is going to keep putting rates for Fed's not
(01:26):
when they see further continue pressure on the new zeandal
and that's good new spreads borders. It's not going to
be such great news over the coming month or so
in regard to the cost of fuel that you're only
put into the vehicles.
Speaker 1 (01:36):
Yeah, there's always swings and roundabouts there. I saw an
article recently floating the possibility of sub five percent home
loans before the end of the year. What chance do
you give something like that.
Speaker 2 (01:49):
That's a possibility, particularly if we see competitive pressures across
the banks start to eat up. But we've still got
an economy that's and what you call recessionary mode. We're starting.
It's a little bit of improvement, you know. I think
the economy's actually bounced out of recession. Now we've got
a little bit more forward propulsion. But we're not going
(02:10):
to be moving too fast over twenty twenty five. It's
still a disinflationary environment, and a disinflation environment the reserve
back can take the official care strode back to what's
called a more neutral policy setting. That number is around
three percent. Whether they don't have the foot on the
accelerator or the break we see a three percent official
cares shtrow, we're going to see sub five percent morgage rates.
Speaker 1 (02:32):
What do you think will happen with commodity prices. We're
hearing a bit of optimism from the primary sector for
their individual industries. But where do you see things heading.
Speaker 2 (02:44):
I think the big story here it's not commodity prices.
It's Indy dollar commodity prices. Each red meat prices affirmed
a bit, dairy prices obviously bounced up, but the cream
on the cake he is coming through that New Zealand
dollar which is now down towards fifty five cents, and
that's going to boost New Zealand rural and comes quite
(03:05):
nicely up of twenty twenty five. I guess there's a
bit of a catch to this because the inco costs
will be going up on the other side as well.
Speaker 1 (03:14):
What do you see as the next big stories for
the next couple of months.
Speaker 2 (03:18):
Oh, the US inflation is what we've got our eyes
off at the moment that that is going to take
the path for the US FED, the Reserve for each
of market three months ago thought they're going to be
cutting rates pretty aggressively. Of twenty twenty five, your mark
is completely backed off that story. In fact, I think
there's a teacher that the US Better Reserve could have
to do a you tube and flip flop and hype
rates in twenty and twenty five. And if they are
(03:39):
hypen rates in twenty twenty five and we're cutting that
New Zealand dollars heating down below fifty five cents.
Speaker 1 (03:44):
Okay, with the new change in president coming up, will
we see some impact on that here in New Zealand.
Speaker 2 (03:52):
Everybody who's watching for the policy platform, particularly in regard
to tallis there's some writer that's flowing around, is going
to be twenty percent powers cost on certain products, whether
that's a bit of whether it's talk or not, we
don't know yet. But what we do know around the
(04:12):
globe is that the process of globalization, the process of
free open trade, has been seriously dented in the past
few years, and we like to live in a globalized,
well connected world. The world is fracturing into trading blocks,
so that's going to make a lot tougher in regard
to getting trade deals together and pushing products into markets
(04:35):
because we like a coordinated world wherever we place bread
fear that's what we've been used to for sort of
thirty to forty years. There is certainly not that economic
environment going forward.
Speaker 1 (04:47):
Finally, China's economy. Are we going to see this bounced
back in twenty twenty five or will it depend on
what's happening with America and tariffs.
Speaker 2 (04:56):
Well, it's all connected now. So China's got its oimes,
the economic problems and the forms of demographics aging population.
They're in a bit of a deflationary rut at the moment.
They've also got an awful lot of debt, the property
markets in trouble. The Chinese currency is under a feverit
of pressure. But at the moment, as we've seen those
US interstrates here long term infrastrates have been moving up
(05:19):
and Chinese infrastrates to be moving down. That's attracting capital
out of China into the United States. So we're seeing
the Chinese you are, and remember is under the fever
of pressure. And that's the matter of not just what's
going on in regard to Paris. Because the towers do
tamn around the robe. Then the trading nations take the
biggest tip or trading nations that are keeped to trading nations,
(05:41):
and that's China, that's Australia, that's you you see on
get All. So there's an awful lot we're going to
be watching in twenty twenty five.
Speaker 1 (05:48):
Trade Minister Todd mclaig's and for an interesting year.
Speaker 2 (05:52):
It is going to be interesting. Yeah, we've we've managed
to knock off a trade deal, which is good news.
We're going to have to get more attration. We have
to go a little bit harder into existing markets plus
in Japan. But always our at environment on what being
company president in the United States and we retakes things
in regard to trade policy.
Speaker 1 (06:10):
And Daed Cameron bankre Managing director of Bank Grey economics,
Appreciate your time as always on the country.
Speaker 2 (06:16):
All the best
Joining us for the first time in twenty twenty five.
The managing director of Bank Greek Economics, Cameron bag Gree,
Good afternoon, Happy.
Speaker 2 (00:07):
New Year, New year to you. I hope you had
a great break.
Speaker 1 (00:10):
I did, indeed, and if I know you, which I do,
you would have spent a bit of time near some lakes.
Speaker 2 (00:15):
There were down on Lake Rothkana for a bit of boating,
got a knee boarding. Wakeboarding with the girls was good.
Speaker 1 (00:21):
One nice nice? How good are you on a kneeboard
or a wakeboard.
Speaker 2 (00:24):
On the Muket? I get behind the boat and drive nice.
Speaker 1 (00:29):
I was going to expecting you to say something like, yeah,
I jumped the wake She's all good. But we are
back in work mode now. It seems like not long
since we caught up at the end of last year. Though.
First question for you, though, why is the New Zealand
dollar still falling?
Speaker 2 (00:45):
I would have seen a pretty big move in intrastrate
markets in the United States over their inflations, looking a
little bit more sticky, a little bit more stubborn. We
get another read in a couple of ays, which is
going to be pretty important, but financial markets have get
back your expectations as to how far and fast the
US feder Reserve is going to be cutting infrast rates.
(01:06):
In fact, in the yield on the US ten year bond,
it's risen about one hundred basis points in the last
three months. So here's some irony. Your short term interest rates,
the FED funds rate, the policy rate that's dropped one
hundred basis points in the last three months, and the
long term infist rates a ten year bond has risen
one hundred basis points. So it looks like our central
bank is going to keep putting rates for Fed's not
(01:26):
when they see further continue pressure on the new zeandal
and that's good new spreads borders. It's not going to
be such great news over the coming month or so
in regard to the cost of fuel that you're only
put into the vehicles.
Speaker 1 (01:36):
Yeah, there's always swings and roundabouts there. I saw an
article recently floating the possibility of sub five percent home
loans before the end of the year. What chance do
you give something like that.
Speaker 2 (01:49):
That's a possibility, particularly if we see competitive pressures across
the banks start to eat up. But we've still got
an economy that's and what you call recessionary mode. We're starting.
It's a little bit of improvement, you know. I think
the economy's actually bounced out of recession. Now we've got
a little bit more forward propulsion. But we're not going
(02:10):
to be moving too fast over twenty twenty five. It's
still a disinflationary environment, and a disinflation environment the reserve
back can take the official care strode back to what's
called a more neutral policy setting. That number is around
three percent. Whether they don't have the foot on the
accelerator or the break we see a three percent official
cares shtrow, we're going to see sub five percent morgage rates.
Speaker 1 (02:32):
What do you think will happen with commodity prices. We're
hearing a bit of optimism from the primary sector for
their individual industries. But where do you see things heading.
Speaker 2 (02:44):
I think the big story here it's not commodity prices.
It's Indy dollar commodity prices. Each red meat prices affirmed
a bit, dairy prices obviously bounced up, but the cream
on the cake he is coming through that New Zealand
dollar which is now down towards fifty five cents, and
that's going to boost New Zealand rural and comes quite
(03:05):
nicely up of twenty twenty five. I guess there's a
bit of a catch to this because the inco costs
will be going up on the other side as well.
Speaker 1 (03:14):
What do you see as the next big stories for
the next couple of months.
Speaker 2 (03:18):
Oh, the US inflation is what we've got our eyes
off at the moment that that is going to take
the path for the US FED, the Reserve for each
of market three months ago thought they're going to be
cutting rates pretty aggressively. Of twenty twenty five, your mark
is completely backed off that story. In fact, I think
there's a teacher that the US Better Reserve could have
to do a you tube and flip flop and hype
rates in twenty and twenty five. And if they are
(03:39):
hypen rates in twenty twenty five and we're cutting that
New Zealand dollars heating down below fifty five cents.
Speaker 1 (03:44):
Okay, with the new change in president coming up, will
we see some impact on that here in New Zealand.
Speaker 2 (03:52):
Everybody who's watching for the policy platform, particularly in regard
to tallis there's some writer that's flowing around, is going
to be twenty percent powers cost on certain products, whether
that's a bit of whether it's talk or not, we
don't know yet. But what we do know around the
(04:12):
globe is that the process of globalization, the process of
free open trade, has been seriously dented in the past
few years, and we like to live in a globalized,
well connected world. The world is fracturing into trading blocks,
so that's going to make a lot tougher in regard
to getting trade deals together and pushing products into markets
(04:35):
because we like a coordinated world wherever we place bread
fear that's what we've been used to for sort of
thirty to forty years. There is certainly not that economic
environment going forward.
Speaker 1 (04:47):
Finally, China's economy. Are we going to see this bounced
back in twenty twenty five or will it depend on
what's happening with America and tariffs.
Speaker 2 (04:56):
Well, it's all connected now. So China's got its oimes,
the economic problems and the forms of demographics aging population.
They're in a bit of a deflationary rut at the moment.
They've also got an awful lot of debt, the property
markets in trouble. The Chinese currency is under a feverit
of pressure. But at the moment, as we've seen those
US interstrates here long term infrastrates have been moving up
(05:19):
and Chinese infrastrates to be moving down. That's attracting capital
out of China into the United States. So we're seeing
the Chinese you are, and remember is under the fever
of pressure. And that's the matter of not just what's
going on in regard to Paris. Because the towers do
tamn around the robe. Then the trading nations take the
biggest tip or trading nations that are keeped to trading nations,
(05:41):
and that's China, that's Australia, that's you you see on
get All. So there's an awful lot we're going to
be watching in twenty twenty five.
Speaker 1 (05:48):
Trade Minister Todd mclaig's and for an interesting year.
Speaker 2 (05:52):
It is going to be interesting. Yeah, we've we've managed
to knock off a trade deal, which is good news.
We're going to have to get more attration. We have
to go a little bit harder into existing markets plus
in Japan. But always our at environment on what being
company president in the United States and we retakes things
in regard to trade policy.
Speaker 1 (06:10):
And Daed Cameron bankre Managing director of Bank Grey economics,
Appreciate your time as always on the country.
Speaker 2 (06:16):
All the best
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