The Country 24/09/24: Cameron Bagrie talks to Jamie Mackay

 We ask an Independent Economist what he expects ahead of the October 9 OCR review. Plus we look at National Super and KiwiSaver. 

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Episode Transcript

Speaker 1 (00:00):
He's an independent economist. His name is Cameron Bagriy Cameron
a starter for ten for you and next o CR
announcement is due on October the ninth. The Federal Reserve
went fifty basis points?

Speaker 2 (00:12):
Will we If you look at the state of the economy,
there's a strong case for going fifty basis points, But
ultimately it's going to come down to inflation. The Reserve
Bank's got a mandate to get inflation back to two percent.
If we see within the next quarterly inflation numbers a
surprise on the downside by the inflation's moving a little

(00:33):
bit more aggressively back towards two percent, then you can
argue the case for fifty basis points. But if it's
a sort of slow meander, which I think it's going
to be, then your meander along the rate cart trajectory,
which is probably twenty fifth.

Speaker 1 (00:47):
Do we get that information before October nine?

Speaker 2 (00:50):
No, Well, that's part of the part of the problems.
If you're thinking about when I think we could see
the Reserve Bank move in largest gets roll scroll forward
to before monetary policy statement, which is a November reading
as opposed to October. Yeah, Oktoba is what's called an
OCR review, and you tend to want the benefit of

(01:12):
a full fourth forecasting round if you're going to go back. Yes,
So ultimately, if there's a fifty basis point move to
take place, I think it's more likely in the month
of November as opposed to October. But look, they're necessari
a look at the data and what's going on. One
of the key pieces of informacing to keep an eye on,
and there's going to be the labor market. And if
that labor market softens up by e we start to

(01:35):
see a lot more evidence of job losses, then you're
going to see a lot more of this conviction in
the view that reserve event's going to have to go
in fifty basis point clips at some stage. But at
the moment, let's keep an eye on the inflation numbers. Two.

Speaker 1 (01:46):
Well, confidence in the job market has fallen to its
lowest level since twenty twenty. There are plenty of people
out there losing their jobs, and from what I can
see camera and there are plenty of people out there
looking for a job at the moment, which is in
some ways good news for the economy because we went
in the COVID times to full employment when no one

(02:07):
seemed to want a job or didn't need a job
because there was you could walk across the road and
get one. Yeah.

Speaker 2 (02:14):
Well we went a little bit too far into the
party zone in regard to how this economy performed in
that twenty twenty one and two thousand and twenty two environment.
Of course you have good ee can I'm got to
use became bad econ I'm using the form of inflation
in the form of high infrastruates. Yeah, so economics is
a funny our game, Jamie. Bad needs to be good

(02:35):
and good needs to be bad. I'm obviously at the
moment is that bad economic news comes with the good
economic association in the form of lower interest rates.

Speaker 1 (02:42):
Cameron Drum, I've been banging recently. I'm in a good
position to do this because I'm on the cusp of
becoming a pension in the South National super I don't
believe we can afford to keep it at sixty five.
In fact, I know we can't. And then I look
at the key. We some key, we save a numbers out.
We've broken through the one hundred billion dollar bear. We've
got one hundred and ten billion dollars invested in Key

(03:03):
We Saver, but when you break that down it's still
only an average of thirty two thousand dollars per key
We Save account. We need to learn to be better
savers as a nation.

Speaker 2 (03:16):
Well there's two prongs to that, Jamie. Look, one is
that savings culture and to be seeing New Zealand are
better savers and what we were ten to twenty years ago.
And let's give a hat to aln Clark and Michael
Cullen from the Labor government because they left the legacy.
They left the legacy in the form of the New
Zealand Super Fun They left the legacy in the form

(03:37):
of qv say, which is New Zealand has now got
a savings paul where we can reinvest in New Zealand
denominated assets. Here we can use the fund New Zealand
Investment Roads that sort of stuff in a similar vein
to what the Australians are doing. But your saving is
only part of having a savings mentality. Ultimately, you need
to be an indecent coin. You've got to have enough

(03:59):
sort of money that you can squirrel away so you're
not living sort of day to day or week to week.
And that's one of the big economic problems we've got
here in this zyland Charmie is that we're not exactly
a well to do income economy. Yes, we're up the
Oe City rankings, but we've been progressively slipping down the
Oe City rankings. Why slow productivity growth? If you have

(04:19):
a look at productivity growth over the past ten years,
it's average zero point two percent per year. That's basically zero.
What does that mean of practice? A living standards, a
moving sideways? So it's fine to talk about saving Jamie,
but ultimately people got to be earning more money, and
to earn more money, you've got to be more productive.
In New Zealand is not a productive economy just.

Speaker 1 (04:39):
To finish on really quickly. The New Zealand dollar buying
over sixty two US cents at the moment. Is that
a good news or a bad news story? Or are
we are we in roughly a happy place? There? Is
that a good level?

Speaker 2 (04:49):
Well? Yeah, well you can slice and dice a couple
of ways. So if you look at sixty two compared pestory,
and I'm talking about gone back thirty years, you're still
slow below average. So that's a sixty two is still
number that favors of the exporters at the expense of
the imports. Yeah. The glass I've emptied here is that
obviously we've seen a bit of a movement up in

(05:10):
the past month. You know, the US fit a reserve
game by fifty basis points has obviously meant you know,
their currency has gone down, so our currency has gone
up the other side. But ultimately, if you look at
our current account numbers, Jamie, and we've got these figures
out last week, Yeah, current account six point seven percent
of GDP. Exports used to be three percent of GDP.
It's now down around twenty five percent of GDP. Ultimately,

(05:33):
New Zealand is going to need a sustained period where
the currency is low for the next decade. And we
can sort of nickel and diland about whether that's sixty
or sixty two cents, but sixty sixty two is still
a number that plays an export sector.

Speaker 1 (05:45):
Hey, Cameron Bagery, always good to catch up on the country.
Thanks for letting me pick your brain or the best
I