January 23, 2025 • 18 mins
New Zealand's economic outlook for 2025 is expected to be a recovery from the previous two years of weakness.
With inflation stagnant and the number of Kiwis leaving the country appearing to have peaked, economists are predicting we will see an uptick.
Yet it could be a long road to get to the light at the end of the tunnel – with the Government’s books at the end of December painting a grim picture for the years ahead, and the impacts of job cuts likely to still be felt this year.
But, the Government has the economy on its hit list – with Prime Minister Christopher Luxon focusing on it in his State of the Nation speech – saying that ‘economic growth is the key to better days ahead’.
So how long do we have to wait for some good news, and what are the Government’s plans to get on top of things?
Today on The Front Page, NZ Herald business editor at large Liam Dann is with us to dig into the economic outlook for 2025.
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You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
Host: Chelsea Daniels
Sound Engineer/Producer: Richard Martin
Producer: Ethan Sills
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Kiyota.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. New Zealand's
economic outlook for twenty twenty five is expected to be
a recovery from the previous two years of weakness. With
inflation stagnant and the number of kiwis leaving the country
(00:28):
appearing to have peaked. Economists are predicting we will see
an uptick, yet it could be a long road to
get to the light of the end of the tunnel,
with the government's books at the end of December painting
a grim picture for the years ahead and the impacts
of job cuts likely to still be felt this year.
But the government has the economy on its hit list,
(00:51):
with Prime Minister Christopher Luxen focusing on it in his
State of the Nation's speech, saying that economic growth is
the key to better days ahead. So how long do
we have to wait for some good news and what
are the government's plans to get on top of things today?
(01:13):
On the Front Page ends at Herald Business Editor at
Large Liam dan Is with us to dig into the
economic outlook for twenty twenty five. Liam, Let's start with
a trip back to twenty twenty four. The half year
economic fiscal update at the end of last year revealed
some pretty bleak figures, didn't it.
Speaker 1 (01:35):
Yeah.
Speaker 3 (01:35):
What it basically showed was that the economy has been
in such bad shape that the government isn't taking enough
tax or as much tax as it's expected to take,
which means that they have an even bigger challenge in
front of them in terms of getting the country's books
back into surplus or back in good shape. That means
they have to make some really hard choices about either
cutting back on spending or you know, what they do
(01:57):
to promote growth, and sometimes those two things.
Speaker 2 (01:59):
Sort of Is that why we're anticipating the most boring
budget ever come May?
Speaker 3 (02:04):
I hope it isn't. I know, I'm going to have
to be I'm going to be one of the people
having to sort of make something exciting out of it
whatever they say. I guess there's not going to be
a lot of spending. But at the same time, I
don't think they want to do a big slash and burn,
so I guess you could say it might be quite
boring in the sense that hopefully it's not a sort
of a nineteen ninety one Mother of All budgets, So
they're not panicking that badly yet, so that would of
(02:25):
course be interesting. And they really are not going to
have a lot of money to splash around, so it's
not going to be that interesting in terms of, you know,
what's in it for people's pockets or for even many
of the industries looking for expansion and that sort of thing.
But for all that, they're going to have to think
very creatively, and I expect we'll see some policy stuff
in the next couple of weeks or so, because there's
(02:45):
got to be something coming from government to sort of
try and improve the pace at which the economy is improving.
I mean, I think we can say the economy is
going through the cyclical recovery, but it's looking a bit
lackluster at the moment and needs some sort of fuel
injection from the government.
Speaker 2 (03:00):
I read Keaweibank's commentary around twenty twenty five. Their economists
are picking this year should be better than last, but
it'll be a year of two halves.
Speaker 1 (03:08):
Would you agree with that?
Speaker 3 (03:10):
Yeah, I mean, I guess it's how long it takes
to actually feel better. So we know the interest rates
have come down and inflations more or less back under control. Now,
that doesn't necessarily mean people are feeling a lot better suddenly,
because some people are still stuck on fixed rates for
a while and will still be paying higher rates until
they get off those inflations cumulative. You know, even though
(03:30):
that's back at two percent or whatever, it's still on
top of all the inflation we've had for the past
few years. So people still feel the cost of living
if it's a crisis, but they still feel that that acutely,
the high cost of living and until wages catch up.
And on top of that, we know that the employment stuff,
so unemployment and job losses tends to be at the
tail end of an economic cycle, so we're expecting to
(03:51):
see unemployment continue to rise through the first half of
the year, which which adds another layer of pressure. So
I guess the point that Kiwibank is making there is
that it's probably while you'll hear a lot of talk
about recovery and have done really since those first interest
rate cuts last year, a lot of people won't really
be feeling like the economy is that much better for
a while yet.
Speaker 1 (04:12):
And I want New Zealand to be a country of aspiration,
of ambition, and of opportunity. But to meet that moment
and to make that vision of reality, we have to
go for growth. And it's just not up for negotiation anymore.
If we want a better standard of living, we have
to go out and we have to make it happen. Now,
(04:35):
I tell your change isn't easy, but it is so
worth it to once again allow us to take on
the best in the world and to win. But that
change is already underway. We've already got a year of
substantive structural change under our belts.
Speaker 2 (04:53):
Now you mentioned inflation, and that's finally down to I
think two point two percent after three years of being
above three and it was that seven points something at
one point as well. But what is keeping it stagnated
at this point? Do you think?
Speaker 3 (05:05):
Yeah? Well, inflation tends to get looked at in two parts,
and one is the cost of all the stuff that
we import into the economy, and some really basic stuff
we don't have a lot of control over it, so
like petrol prices or oil prices. And also a big
factor there is the value of the Kiwi dollar, which
has been heading down against the US dollar. So those
things we don't have much control over, so they all
(05:27):
came off. They all got very very high during COVID,
and that was what was sort of the trigger. One
of the triggers for the high inflation was suddenly the
spiking commodity prices and oil prices. The other one, of course,
was the stimulus that was unleashed in the extra money
that was printed. So there's that part, the international costs,
and then there's the domestic part, which really was stimulated
(05:48):
more by the money printing and the low interist rates.
What we're seeing now is last year we saw the
international commodity costs, oil prices and things come down a lot,
and that really helped get inflation back under control. Of course,
we had the interest rates go up and that slowed
the New Zealand economy, but that took a bit takes
a bit longer, so we're starting to see the New
Zealand domestic inflation come down quite a bit now. The
(06:11):
worry is that, you know what's happening in the rest
of the world and whether we start to see prices
for oil and imported goods rising again. So it remains
pretty crucial for the Reserve Bank to watch it closely.
And to make sure that it's not going to flare
up on us again. But I think you know the
latest starter we've seen that New Zealand component of the inflation,
and that's the domestic stuff that's like what you're paying
(06:31):
to get someone into I don't know who you're plumbing
or fix your deck, or what you're paying for a
haircut or all of the local costs. That's starting to
come down, not quickly, but at a fairly steady pace,
which is what you'd expect when the economy's slowing so much.
Speaker 2 (06:46):
The largest contributor, you wrote in an article I read
this week to the annual inflation rate was rent. So
that's up four point two percent according to stats and
Z figures. How worrying is this. It feels like non
homeowners or already have a tough go of it at
the best of times.
Speaker 3 (07:02):
Yeah, I hope that is trending down too. So it
gets complicated because the way we measure it. Rent was
the biggest contributor when we looked at the annual inflation rate,
and it has been one of the really high rising
sort of costs for people over the past few years.
And that's still spilled over into the twenty twenty four numbers,
but it is slowly easing a little bit. That rate
(07:23):
of growth is easing, and you'd expect that because the
property market is lowing and there's not the high rate
of net migration that we had seen previously. So hopefully
there's some good news there. When we just looked at
the last quarter of the year and the inflation there,
it was actually some more discretionary stuff that was pushing
(07:44):
that up, like international travel, for example, really went up
on that last quarter of twenty twenty four. So I
think while rents played a big part in the twenty
twenty four inflation number, that was across the whole year,
and I'm hopeful that we'll see that sort of mitigate
over this year.
Speaker 2 (08:10):
How are banks responding to the current state of the economy.
What sort of mortgage cuts and the like have there
been recently?
Speaker 3 (08:17):
Noticed them moving again a little bit last week or so,
so you know, there's an expectation that the Reserve Bank
will keep cutting the official cash rate for a while yet,
that we probably should get another fifty basis point cut.
We've had two of those, and you know, so that
they're bringing the official cash rate down quite quickly. Initially
we saw a pretty sizeable drop in mortgage rates, and
(08:39):
then it sort of stalled for a bit and people
started to get a bit grumpy about that, and the
banks said, oh, well, that's you know, there's there's international
costs to worry about as well, and there's also some
issues with the terms that people are taking in the pricing.
So there's it's taking a while for the rates to
come down at that sort of one year level where
a lot of people tend to pick their fixed rate to.
(09:00):
But there's been a little bit of movement on that.
So I think they are starting to expect that we're
going to get another fifty basis point cut and that
they see the pathway to the ocr coming down to
around three point twenty five something like that. I don't
think we'll see, you know, all those fifty basis points
passed through either. You know, it'll be a slow and
steady thing for mortgage rates through this year, but they
(09:21):
should have fair winds from the Reserve Bank. It will
again be a little bit of an issue, and I'm
sure we're going to get onto this, but around what
happens internationally and the huge variable around the United.
Speaker 2 (09:32):
States are you going to say the T word.
Speaker 3 (09:34):
Well, the man who's in charge of the United States now,
he tends to keep everyone guessing around what his policy
is going to be until it actually drop. And so
in the build up to Trump arriving, markets have been
pricing in this Trump effect and making assumptions about what's
going to happen. And they've been assuming that if he
does the tariff stuff and stimulates the economy with tax cuts,
(09:56):
that some of that could be inflationary. And if that's
inflationary again in the U, yes, then their interest rates
don't come down so fast, and that has implications for
the rest of the world. It means that their dollar
stays stronger and our dollar probably gets weaker, and we've
already seen that in the past couple of months, and
it means that probably keeps up the international borrowing costs
for our local banks. And so I guess we have
(10:18):
to wait and see on that because we don't know
what he's going to deliver, and it's really a game
of what the market expects versus what actually happens. And
if he doesn't deliver as much as he says he's
going to deliver, then the markets might be quietly happy,
and we might see a positive reaction. We might see
sheer markets go up and interest rates come down. But
if he really goes to town on the tariffs, boy,
(10:38):
then you know it's sort of all bets are off.
Speaker 2 (10:40):
When it comes to tariffs. Though, So if we're thinking
New Zealand exports, he has floated every number under the
sun on the election trial, but anywhere between ten to fifteen, right,
the ones on China that everyone expects him to bring
through are going to be significantly higher. Would we see
any kickback from that? If China were to divert their
exporto and would they have to lower their prices? Would
(11:02):
we get a better deal so to speak?
Speaker 3 (11:04):
It could do Yeah. I mean the same with any
of the European Union as well, if if they copp tariffs.
So there is a chance, you know, it would be
in specific goods that we need. But yeah, there's absolutely
a chance that we could see some weird knock on
effects like cheaper goods for countries that become targets who
don't have tariffs. So the Chinese, the Canadians, the Mexicans,
European Union might all start pushing you know, it might
(11:27):
make their goods cheaper around the rest of the world.
It's still not really clear, you know, it really isn't
clear what he's going to do. He talked about fifty
or sixty percent tariffs on China on the campaign trail,
and so somewhere the markets priced in some expectations. He's
now said, well, there's a ten percent tariff coming on
February one, probably, he always says probably, So we don't
know that for sure yet either, but you know, ten
(11:47):
percent might actually be a pleasant surprise to the markets,
even to the Chinese. And then from there, you know,
it's also possible that he puts tariffs on and then
starts working out a whole bunch of carve outs for
specific goods and things that the US needs, because it's
been pointed out by many people that the US is
reliant on a whole bunch of cheap stuff that comes
(12:07):
out of Mexico and China and even Canada, and then
if you put tariff's on it, it really makes huge
problems for even for US manufacturers because they're getting secondary
parts or the parts that they then use to build
stuff come from these places. So you know, it's very
difficult to see how he can do it in a
way that he's talked about on the campaign trail, and
(12:29):
from what I've seen so far in the first few
days of his term, he's said some stuff that sounds
like he's, you know, he's going to take it slowly,
and then he said some other stuff saying, oh, this
is happening, twenty five percent tariffs for Canada. Yeah, who knows.
Speaker 2 (12:44):
Very bicking on tariffs on Mexico's given the action through
siding on the border.
Speaker 4 (12:49):
Well, we're thinking in terms of twenty five percent on
Mexico and Canada because they're allowing vast numbers of people.
Canada is a very bad abuser of the vast numbers
of people to come in and fantanol to come in.
When I think bl've worry first, funny, I think I
think we'll do it about work for it.
Speaker 2 (13:15):
Back to New Zealand, Treasury forecasts that real GDP will
grow zero point five percent in twenty twenty four to
twenty twenty five and three point three percent in twenty
twenty five twenty twenty six. What does this mean, Well, it.
Speaker 3 (13:28):
Goes back to that point about the two halves of
the year, so we know recessionary really in twenty twenty
four and then twenty twenty four to twenty five. Well,
that means that it's still pretty marginal going into this year.
For the first part of this year the growth, we
might not be in recession anymore, but we're really just
ticking along with it with a marginal amount of growth.
That suggests that there'd be a fair old bump of
(13:50):
growth coming off the back of that in the years
ahead of that, because you know, there's there's some things
that are going well, are in our favor. So it's
not the thing that's going to transform our economy and
make all those people who want New Zealand to be
the tech capital of the South Pacific happy. But the
dairy industry is having a fantastic season, and that is
(14:11):
a very big variable in our economy. So the kind
of season they're having, with the really good prices for
dairy products around the world, and the bumper season they're
having in terms of production, I've seen numbers up to
four billion dollars extra into the economy. So that's like,
you know, adding a whole wine industry plus the film
industry all in one hit of extra money coming to
the country. Just because the dairy's going well, it's a
(14:32):
reminder of that our economy is still very, very reliant
on dairy and well.
Speaker 2 (14:36):
It's almost like back to basics.
Speaker 3 (14:38):
You wouldn't want to be having a bad season right now,
that's for sure, but you know, if we're getting lucky
on that, we'll take it.
Speaker 2 (14:42):
The government's appointed Nikola Willis to be the Minister of
Economic Growth, with a big emphasis on driving investment in
this country. What do you make of this way of
approaching the economy.
Speaker 3 (14:54):
Oh well, I mean I think it's a good idea.
This National has been talking about it to Luxe and
Nicola Willis has been talking about it since before the election.
I think we just need to see what they're planning
to do, and hopefully in the next few weeks I
think we might actually see some policy around foreign direct
investment and various you know, visa changes and all that
(15:15):
sort of stuff that I don't know. You know, the
governments can only encourage investment, but the idea is to
make New Zealand attractive place to invest. Now, what was
the reason that it went the other way? Well, I
guess we had a big boom under John Key of
money coming in and we had a housing boom, and
the previous labor led governments felt that, you know, it
was causing price asset price growth that was disadvantaging Kiwis
(15:38):
who already here. And so you know one of the
big ones obviously around that is the foreign buyer ban
on housing. So we might I think, you know, there's
been a lot of talk about possibly a change there
at the top level. They have to get this past
Winston Peters. They've got ACT as one coalition partner that
absolutely just would love to open New Zealand up to
foreign capital and see how much wealth that could generate.
(16:00):
Believes it would trickle down, I guess is the way
of talking about it. And then the other coalition partner
is Winston and New Zealand First, who utterly opposed to that.
You know, so National has got to find a pathway
through there. I think they sort of want to do it.
They wouldn't be as extreme as ACT. They would definitely
have some checks and balances around it. I don't think
they'd be talking about it unless they'd found a way
(16:21):
to keep mister Peters and the New Zealand First Party happy.
Speaker 2 (16:24):
And finally, Liam, what would be your big prediction for
the economy this year.
Speaker 3 (16:29):
Well, my big prediction, or my big hope is things
just progressively improve, And so I would say, all things
being equal, there is no reason why we shouldn't be
expecting to see unemployment peak and the end of the
sort of recessionary cycle. In twenty twenty five. We should
start to see some real growth again. And I hope
(16:50):
the government can, you know, continue with some policy changes
that sort of push that along, and that New Zealand
with those fear winds of a strong, strong dairy season
and maybe a bit of life in the housing market.
I know these are old faithfuls that kind of people
like me off and say we can't rely on forever,
but I hope they do their job. My prediction is
(17:11):
that those parts of the New Zealand economy do their
job and get us back into good enough shape that
we can really focus on some of the longer term
challenges and get some thinking going about all the productivity
stuff and all that. But I do think the fundamentals
of the New Zealand economy are still there to see
us coming right over the next six or eight months.
(17:32):
If I had a negative or a pessimistic prediction that
I might just throw in there an outside chance that
it all gets thrown up. It's that I am a
bit concerned about the US share market and cryptocurrencies because
they are already by whatever you might call an ordinary ordinary,
the metrics we used to use in the financial world.
They are overvalued already, and Donald Trump is going to
(17:54):
pump and pump those and I think we'll see a
strong share market run and a strong cryptocurrency run for
several months. I just hope that doesn't all go pop,
because the world does not need a massive sheer market
meltdown and financial crisis in twenty twenty five.
Speaker 2 (18:11):
Thanks for joining us, Liam, Thank you. That's it for
this episode of The Front Page. You can read more
about today's stories and extensive news coverage at enzadherld dot
co dot nz. The Front Page is produced by Ethan
Sills and Richard Martin, who is also our sound engineer.
(18:32):
I'm Chelsea Daniels. Subscribe to The Front Page on iHeartRadio
or where can you get your podcasts, and tune in
on Monday for another look behind the headlines.
Kiyota.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. New Zealand's
economic outlook for twenty twenty five is expected to be
a recovery from the previous two years of weakness. With
inflation stagnant and the number of kiwis leaving the country
(00:28):
appearing to have peaked. Economists are predicting we will see
an uptick, yet it could be a long road to
get to the light of the end of the tunnel,
with the government's books at the end of December painting
a grim picture for the years ahead and the impacts
of job cuts likely to still be felt this year.
But the government has the economy on its hit list,
(00:51):
with Prime Minister Christopher Luxen focusing on it in his
State of the Nation's speech, saying that economic growth is
the key to better days ahead. So how long do
we have to wait for some good news and what
are the government's plans to get on top of things today?
(01:13):
On the Front Page ends at Herald Business Editor at
Large Liam dan Is with us to dig into the
economic outlook for twenty twenty five. Liam, Let's start with
a trip back to twenty twenty four. The half year
economic fiscal update at the end of last year revealed
some pretty bleak figures, didn't it.
Speaker 1 (01:35):
Yeah.
Speaker 3 (01:35):
What it basically showed was that the economy has been
in such bad shape that the government isn't taking enough
tax or as much tax as it's expected to take,
which means that they have an even bigger challenge in
front of them in terms of getting the country's books
back into surplus or back in good shape. That means
they have to make some really hard choices about either
cutting back on spending or you know, what they do
(01:57):
to promote growth, and sometimes those two things.
Speaker 2 (01:59):
Sort of Is that why we're anticipating the most boring
budget ever come May?
Speaker 3 (02:04):
I hope it isn't. I know, I'm going to have
to be I'm going to be one of the people
having to sort of make something exciting out of it
whatever they say. I guess there's not going to be
a lot of spending. But at the same time, I
don't think they want to do a big slash and burn,
so I guess you could say it might be quite
boring in the sense that hopefully it's not a sort
of a nineteen ninety one Mother of All budgets, So
they're not panicking that badly yet, so that would of
(02:25):
course be interesting. And they really are not going to
have a lot of money to splash around, so it's
not going to be that interesting in terms of, you know,
what's in it for people's pockets or for even many
of the industries looking for expansion and that sort of thing.
But for all that, they're going to have to think
very creatively, and I expect we'll see some policy stuff
in the next couple of weeks or so, because there's
(02:45):
got to be something coming from government to sort of
try and improve the pace at which the economy is improving.
I mean, I think we can say the economy is
going through the cyclical recovery, but it's looking a bit
lackluster at the moment and needs some sort of fuel
injection from the government.
Speaker 2 (03:00):
I read Keaweibank's commentary around twenty twenty five. Their economists
are picking this year should be better than last, but
it'll be a year of two halves.
Speaker 1 (03:08):
Would you agree with that?
Speaker 3 (03:10):
Yeah, I mean, I guess it's how long it takes
to actually feel better. So we know the interest rates
have come down and inflations more or less back under control. Now,
that doesn't necessarily mean people are feeling a lot better suddenly,
because some people are still stuck on fixed rates for
a while and will still be paying higher rates until
they get off those inflations cumulative. You know, even though
(03:30):
that's back at two percent or whatever, it's still on
top of all the inflation we've had for the past
few years. So people still feel the cost of living
if it's a crisis, but they still feel that that acutely,
the high cost of living and until wages catch up.
And on top of that, we know that the employment stuff,
so unemployment and job losses tends to be at the
tail end of an economic cycle, so we're expecting to
(03:51):
see unemployment continue to rise through the first half of
the year, which which adds another layer of pressure. So
I guess the point that Kiwibank is making there is
that it's probably while you'll hear a lot of talk
about recovery and have done really since those first interest
rate cuts last year, a lot of people won't really
be feeling like the economy is that much better for
a while yet.
Speaker 1 (04:12):
And I want New Zealand to be a country of aspiration,
of ambition, and of opportunity. But to meet that moment
and to make that vision of reality, we have to
go for growth. And it's just not up for negotiation anymore.
If we want a better standard of living, we have
to go out and we have to make it happen. Now,
(04:35):
I tell your change isn't easy, but it is so
worth it to once again allow us to take on
the best in the world and to win. But that
change is already underway. We've already got a year of
substantive structural change under our belts.
Speaker 2 (04:53):
Now you mentioned inflation, and that's finally down to I
think two point two percent after three years of being
above three and it was that seven points something at
one point as well. But what is keeping it stagnated
at this point? Do you think?
Speaker 3 (05:05):
Yeah? Well, inflation tends to get looked at in two parts,
and one is the cost of all the stuff that
we import into the economy, and some really basic stuff
we don't have a lot of control over it, so
like petrol prices or oil prices. And also a big
factor there is the value of the Kiwi dollar, which
has been heading down against the US dollar. So those
things we don't have much control over, so they all
(05:27):
came off. They all got very very high during COVID,
and that was what was sort of the trigger. One
of the triggers for the high inflation was suddenly the
spiking commodity prices and oil prices. The other one, of course,
was the stimulus that was unleashed in the extra money
that was printed. So there's that part, the international costs,
and then there's the domestic part, which really was stimulated
(05:48):
more by the money printing and the low interist rates.
What we're seeing now is last year we saw the
international commodity costs, oil prices and things come down a lot,
and that really helped get inflation back under control. Of course,
we had the interest rates go up and that slowed
the New Zealand economy, but that took a bit takes
a bit longer, so we're starting to see the New
Zealand domestic inflation come down quite a bit now. The
(06:11):
worry is that, you know what's happening in the rest
of the world and whether we start to see prices
for oil and imported goods rising again. So it remains
pretty crucial for the Reserve Bank to watch it closely.
And to make sure that it's not going to flare
up on us again. But I think you know the
latest starter we've seen that New Zealand component of the inflation,
and that's the domestic stuff that's like what you're paying
(06:31):
to get someone into I don't know who you're plumbing
or fix your deck, or what you're paying for a
haircut or all of the local costs. That's starting to
come down, not quickly, but at a fairly steady pace,
which is what you'd expect when the economy's slowing so much.
Speaker 2 (06:46):
The largest contributor, you wrote in an article I read
this week to the annual inflation rate was rent. So
that's up four point two percent according to stats and
Z figures. How worrying is this. It feels like non
homeowners or already have a tough go of it at
the best of times.
Speaker 3 (07:02):
Yeah, I hope that is trending down too. So it
gets complicated because the way we measure it. Rent was
the biggest contributor when we looked at the annual inflation rate,
and it has been one of the really high rising
sort of costs for people over the past few years.
And that's still spilled over into the twenty twenty four numbers,
but it is slowly easing a little bit. That rate
(07:23):
of growth is easing, and you'd expect that because the
property market is lowing and there's not the high rate
of net migration that we had seen previously. So hopefully
there's some good news there. When we just looked at
the last quarter of the year and the inflation there,
it was actually some more discretionary stuff that was pushing
(07:44):
that up, like international travel, for example, really went up
on that last quarter of twenty twenty four. So I
think while rents played a big part in the twenty
twenty four inflation number, that was across the whole year,
and I'm hopeful that we'll see that sort of mitigate
over this year.
Speaker 2 (08:10):
How are banks responding to the current state of the economy.
What sort of mortgage cuts and the like have there
been recently?
Speaker 3 (08:17):
Noticed them moving again a little bit last week or so,
so you know, there's an expectation that the Reserve Bank
will keep cutting the official cash rate for a while yet,
that we probably should get another fifty basis point cut.
We've had two of those, and you know, so that
they're bringing the official cash rate down quite quickly. Initially
we saw a pretty sizeable drop in mortgage rates, and
(08:39):
then it sort of stalled for a bit and people
started to get a bit grumpy about that, and the
banks said, oh, well, that's you know, there's there's international
costs to worry about as well, and there's also some
issues with the terms that people are taking in the pricing.
So there's it's taking a while for the rates to
come down at that sort of one year level where
a lot of people tend to pick their fixed rate to.
(09:00):
But there's been a little bit of movement on that.
So I think they are starting to expect that we're
going to get another fifty basis point cut and that
they see the pathway to the ocr coming down to
around three point twenty five something like that. I don't
think we'll see, you know, all those fifty basis points
passed through either. You know, it'll be a slow and
steady thing for mortgage rates through this year, but they
(09:21):
should have fair winds from the Reserve Bank. It will
again be a little bit of an issue, and I'm
sure we're going to get onto this, but around what
happens internationally and the huge variable around the United.
Speaker 2 (09:32):
States are you going to say the T word.
Speaker 3 (09:34):
Well, the man who's in charge of the United States now,
he tends to keep everyone guessing around what his policy
is going to be until it actually drop. And so
in the build up to Trump arriving, markets have been
pricing in this Trump effect and making assumptions about what's
going to happen. And they've been assuming that if he
does the tariff stuff and stimulates the economy with tax cuts,
(09:56):
that some of that could be inflationary. And if that's
inflationary again in the U, yes, then their interest rates
don't come down so fast, and that has implications for
the rest of the world. It means that their dollar
stays stronger and our dollar probably gets weaker, and we've
already seen that in the past couple of months, and
it means that probably keeps up the international borrowing costs
for our local banks. And so I guess we have
(10:18):
to wait and see on that because we don't know
what he's going to deliver, and it's really a game
of what the market expects versus what actually happens. And
if he doesn't deliver as much as he says he's
going to deliver, then the markets might be quietly happy,
and we might see a positive reaction. We might see
sheer markets go up and interest rates come down. But
if he really goes to town on the tariffs, boy,
(10:38):
then you know it's sort of all bets are off.
Speaker 2 (10:40):
When it comes to tariffs. Though, So if we're thinking
New Zealand exports, he has floated every number under the
sun on the election trial, but anywhere between ten to fifteen, right,
the ones on China that everyone expects him to bring
through are going to be significantly higher. Would we see
any kickback from that? If China were to divert their
exporto and would they have to lower their prices? Would
(11:02):
we get a better deal so to speak?
Speaker 3 (11:04):
It could do Yeah. I mean the same with any
of the European Union as well, if if they copp tariffs.
So there is a chance, you know, it would be
in specific goods that we need. But yeah, there's absolutely
a chance that we could see some weird knock on
effects like cheaper goods for countries that become targets who
don't have tariffs. So the Chinese, the Canadians, the Mexicans,
European Union might all start pushing you know, it might
(11:27):
make their goods cheaper around the rest of the world.
It's still not really clear, you know, it really isn't
clear what he's going to do. He talked about fifty
or sixty percent tariffs on China on the campaign trail,
and so somewhere the markets priced in some expectations. He's
now said, well, there's a ten percent tariff coming on
February one, probably, he always says probably, So we don't
know that for sure yet either, but you know, ten
(11:47):
percent might actually be a pleasant surprise to the markets,
even to the Chinese. And then from there, you know,
it's also possible that he puts tariffs on and then
starts working out a whole bunch of carve outs for
specific goods and things that the US needs, because it's
been pointed out by many people that the US is
reliant on a whole bunch of cheap stuff that comes
(12:07):
out of Mexico and China and even Canada, and then
if you put tariff's on it, it really makes huge
problems for even for US manufacturers because they're getting secondary
parts or the parts that they then use to build
stuff come from these places. So you know, it's very
difficult to see how he can do it in a
way that he's talked about on the campaign trail, and
(12:29):
from what I've seen so far in the first few
days of his term, he's said some stuff that sounds
like he's, you know, he's going to take it slowly,
and then he said some other stuff saying, oh, this
is happening, twenty five percent tariffs for Canada. Yeah, who knows.
Speaker 2 (12:44):
Very bicking on tariffs on Mexico's given the action through
siding on the border.
Speaker 4 (12:49):
Well, we're thinking in terms of twenty five percent on
Mexico and Canada because they're allowing vast numbers of people.
Canada is a very bad abuser of the vast numbers
of people to come in and fantanol to come in.
When I think bl've worry first, funny, I think I
think we'll do it about work for it.
Speaker 2 (13:15):
Back to New Zealand, Treasury forecasts that real GDP will
grow zero point five percent in twenty twenty four to
twenty twenty five and three point three percent in twenty
twenty five twenty twenty six. What does this mean, Well, it.
Speaker 3 (13:28):
Goes back to that point about the two halves of
the year, so we know recessionary really in twenty twenty
four and then twenty twenty four to twenty five. Well,
that means that it's still pretty marginal going into this year.
For the first part of this year the growth, we
might not be in recession anymore, but we're really just
ticking along with it with a marginal amount of growth.
That suggests that there'd be a fair old bump of
(13:50):
growth coming off the back of that in the years
ahead of that, because you know, there's there's some things
that are going well, are in our favor. So it's
not the thing that's going to transform our economy and
make all those people who want New Zealand to be
the tech capital of the South Pacific happy. But the
dairy industry is having a fantastic season, and that is
(14:11):
a very big variable in our economy. So the kind
of season they're having, with the really good prices for
dairy products around the world, and the bumper season they're
having in terms of production, I've seen numbers up to
four billion dollars extra into the economy. So that's like,
you know, adding a whole wine industry plus the film
industry all in one hit of extra money coming to
the country. Just because the dairy's going well, it's a
(14:32):
reminder of that our economy is still very, very reliant
on dairy and well.
Speaker 2 (14:36):
It's almost like back to basics.
Speaker 3 (14:38):
You wouldn't want to be having a bad season right now,
that's for sure, but you know, if we're getting lucky
on that, we'll take it.
Speaker 2 (14:42):
The government's appointed Nikola Willis to be the Minister of
Economic Growth, with a big emphasis on driving investment in
this country. What do you make of this way of
approaching the economy.
Speaker 3 (14:54):
Oh well, I mean I think it's a good idea.
This National has been talking about it to Luxe and
Nicola Willis has been talking about it since before the election.
I think we just need to see what they're planning
to do, and hopefully in the next few weeks I
think we might actually see some policy around foreign direct
investment and various you know, visa changes and all that
(15:15):
sort of stuff that I don't know. You know, the
governments can only encourage investment, but the idea is to
make New Zealand attractive place to invest. Now, what was
the reason that it went the other way? Well, I
guess we had a big boom under John Key of
money coming in and we had a housing boom, and
the previous labor led governments felt that, you know, it
was causing price asset price growth that was disadvantaging Kiwis
(15:38):
who already here. And so you know one of the
big ones obviously around that is the foreign buyer ban
on housing. So we might I think, you know, there's
been a lot of talk about possibly a change there
at the top level. They have to get this past
Winston Peters. They've got ACT as one coalition partner that
absolutely just would love to open New Zealand up to
foreign capital and see how much wealth that could generate.
(16:00):
Believes it would trickle down, I guess is the way
of talking about it. And then the other coalition partner
is Winston and New Zealand First, who utterly opposed to that.
You know, so National has got to find a pathway
through there. I think they sort of want to do it.
They wouldn't be as extreme as ACT. They would definitely
have some checks and balances around it. I don't think
they'd be talking about it unless they'd found a way
(16:21):
to keep mister Peters and the New Zealand First Party happy.
Speaker 2 (16:24):
And finally, Liam, what would be your big prediction for
the economy this year.
Speaker 3 (16:29):
Well, my big prediction, or my big hope is things
just progressively improve, And so I would say, all things
being equal, there is no reason why we shouldn't be
expecting to see unemployment peak and the end of the
sort of recessionary cycle. In twenty twenty five. We should
start to see some real growth again. And I hope
(16:50):
the government can, you know, continue with some policy changes
that sort of push that along, and that New Zealand
with those fear winds of a strong, strong dairy season
and maybe a bit of life in the housing market.
I know these are old faithfuls that kind of people
like me off and say we can't rely on forever,
but I hope they do their job. My prediction is
(17:11):
that those parts of the New Zealand economy do their
job and get us back into good enough shape that
we can really focus on some of the longer term
challenges and get some thinking going about all the productivity
stuff and all that. But I do think the fundamentals
of the New Zealand economy are still there to see
us coming right over the next six or eight months.
(17:32):
If I had a negative or a pessimistic prediction that
I might just throw in there an outside chance that
it all gets thrown up. It's that I am a
bit concerned about the US share market and cryptocurrencies because
they are already by whatever you might call an ordinary ordinary,
the metrics we used to use in the financial world.
They are overvalued already, and Donald Trump is going to
(17:54):
pump and pump those and I think we'll see a
strong share market run and a strong cryptocurrency run for
several months. I just hope that doesn't all go pop,
because the world does not need a massive sheer market
meltdown and financial crisis in twenty twenty five.
Speaker 2 (18:11):
Thanks for joining us, Liam, Thank you. That's it for
this episode of The Front Page. You can read more
about today's stories and extensive news coverage at enzadherld dot
co dot nz. The Front Page is produced by Ethan
Sills and Richard Martin, who is also our sound engineer.
(18:32):
I'm Chelsea Daniels. Subscribe to The Front Page on iHeartRadio
or where can you get your podcasts, and tune in
on Monday for another look behind the headlines.
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