October 10, 2024 • 15 mins
The Official Cash Rate’s been cut to 4.75 percent – which is being touted as welcome news for households all over New Zealand. It’s the lowest the OCR has been in 18 months.
The Monetary Policy Committee said that annual consumer price inflation was within its 1 to 3% inflation target range and converging on the 2% midpoint.
While plenty of people are popping the champagne over this announcement, is this latest cut masking some of the other issues in the economy?
Today on The Front Page, Herald Business-editor-at-large Liam Dann joins us to discuss the stats you need to know.
Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.
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: Paddy Fox
Producer: Ethan Sills
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Kiodra. I'm Chelsea Daniels and this is the Front Page,
a daily podcast presented by the New Zealand Herald. The
official cash rate has been cut to four point seventy
five percent, which is being touted as welcome news for
households all over New Zealand. It's the lowest the OSA
(00:29):
has been in eighteen months. The Monetary Policy Committee said
that annual consumer price inflation was within its one to
three percent inflation target range and converging on the two
percent midpoint. While plenty of people are popping the champagne
over this announcement is the latest cut, masking some of
(00:52):
the other issues in the economy. Today. On the front Page,
Herald Business Editor at Large Liam Dan joins us to
discuss the stats. You need to know, Liam, what's the
significance of this latest OCR cut? What does this actually
mean for the economy?
Speaker 2 (01:12):
Well, really, the cut just means cost of borrowing goes down,
which means people who are paying who have debt will
be paying less money out to service that debt, so
they'll have more money to spend. So it's a way
of putting cash back into the economy which had been
removed by the Central Bank, by the Reserve Bank in
order to get on top of inflation, because they put
(01:34):
lots of money into the economy to cope with.
Speaker 1 (01:36):
COVID, and in terms of inflation, that number is looking
a lot friendlier. Now.
Speaker 2 (01:40):
Hey, yeah, Well, the official rate is three point three percent,
which is still outside the mandated target ban, but that's old.
That's for the second quarter of the year. We don't
get the official number for the third quarter until next week,
which is a bit inconvenient. But the Reserve Bank is
very confident that it is under control, and it has
said that the statement this week that basically they see
(02:02):
it below three already. They've looked at I guess, second
tier stuff like what businesses are saying about their own
pricing and all that sort of stuff. And also, you know,
when you look at the way the data flows through
the way the statistics work, the third quarter last year
had very high inflation numbers. We're in the near the
peak of that inflation. They'll drop out, so we know
(02:23):
that they'll come out of the average. So for the
average annual rate over the last year, it is looking
likely that it'll be below three percent. So that I
guess means we can say, in terms of high inflation,
it's over. We've won the war against inflation. Doesn't mean
prices won't go up necessarily, but we shouldn't be seeing
those big spikes. And some things might go down, some
(02:43):
might go up, but the average rate's going to be
between one and three, which is where economists and central
banks like to keep it.
Speaker 1 (02:49):
And do we look at that rate when we kind
of determine whether we're in a recession or a recessionary period.
Speaker 2 (02:56):
It has an impact, but the recession is usually judged
on in the output of the economy. If the output's
falling massively and we're in a deep recession, then often
pricing will fall as well. And that well, that has happened.
That's why they talk about the reserve bank engineering a recession.
I mean, they don't really want a recession necessarily, but
(03:16):
they have to reduce the amount of activity in the
economy just to get that inflationary effect out.
Speaker 1 (03:22):
And how are we looking at the moment in terms
of the recession.
Speaker 2 (03:25):
Well, we're either still in recession or just popping out
of a recession as we've sort of moved into the
fourth quarter. But we don't get the GDP data till
much later. But we know that the Reserve Bank in
August forecast at the third quarter would be negative as well.
We went backwards, so that would be recession. People talk
a lot about per capita recession with the immigration numbers
(03:47):
over the past couple of years. We've been in per
capita recession for two years, so you know, depending on
how much weight you put on that per person in
this country, the size of the economy has been shrinking
for some time.
Speaker 1 (03:59):
Most commons are predicting further cuts to the OCR in
the coming months.
Speaker 3 (04:05):
In August it dropped to the lowest it's been in
four years, and there could be more drops up left,
with some people saying that it could drop to his
lowest three point five percent by the end of twenty
twenty five.
Speaker 4 (04:15):
Now another drop is predicted at the end of November
when we'll see them meet again, and all predictions are
now that by the end of next year the reserve
banks of the OCR will be back within what they
call the neutral range of two and a half to
three percent.
Speaker 1 (04:31):
Why doesn't the Reserve Bank just do them all in
one big go, That's.
Speaker 2 (04:35):
A good question. It would be very dramatic to do
like some people have said, look, maybe a seventy five
basis point cut after something like christ Church earthquake or
when the global financial crisis hit. Sometimes I think we
might have gone to a full one percent cut, trying
to remember straight after COVID, at the worst of that
COVID as well. That's very dramatic though, And you know,
(04:57):
we talk about monetary policy being a blunt and if
you do that, it affects the balance of the cost
of borrowing a lot, and it's hard to undo fast,
you know. So if it was bumping around by a
four percent from quarter to quarter or between rate calls,
that would be very hard to plan forward plan as
a business or even as a consumer or you know,
(05:19):
when you're looking at buying a house. So really what
you want with monetary policy and central bank action is slow,
stable change. You want it to be sitting somewhere really
predictable for quite a long time. So even the cuts
we're seeing now are probably you know, it's good to
see it come down, but it's a shame that we're
having to cut so hard because it's so dramatic, and
(05:41):
you know, ideally it would be a smoother path, so
you'd have a series of twenty five basis point cut.
Central banks don't like to cut in big numbers unless
there's really dramatic reason to do it, and that's why
I've been saying that, you know, if we do have
another fifty basis point cut and then some economists are
even picking another one in February, that's three fifty basis
point cuts. That is quite radical, and it's not the
(06:04):
sort of thing a central bank would do unless the
economy was really in a lot of trouble. So I'm
hoping that even though I've got a mortgage and I
want rates to come down to sort of three percent
or something, if we had to get there in the
early next year, that would really be an indication that
something was not right with the economy.
Speaker 1 (06:21):
And we've already seen some activity from our major banks. Haleium,
what's the latest on those.
Speaker 2 (06:26):
Yeah, a lot of marketing stuff. I would say Initially
we saw some banks move ahead of the ocr and
there's a lot of competition and positioning. But more or
less the fifty basis points has been passed through. I
don't know if we'll see much more from here. Sometimes
the bank rates are also affected by what's happening overseas
and things, but it's been passed through pretty well, and
(06:47):
now it's just a matter of when people refix. Businesses
are more likely to be floating or on very short
term rates, and they pay higher rates and they'll feel
some benefits straight away, and then businesses will get some
indirect benefit as consumers have more money in their pockets.
And it's not insubstantial. You know, it's bigger, probably for
most mortgage holders than what the government's tax cut was.
(07:10):
I think if you're talking about fifty basis points or
half a percent, or say a five hundred thousand dollars mortgage,
that's two five hundred dollars a year, fifty bucks a week,
almost fifty dollars a week, and a lot of people
have bigger mortgages than that. And if you're not refixing
next week, maybe it's a month or so, but you're
still seeing, oh, that's going to be money that's coming
(07:30):
back into my pocket. Or you know, if you're lucky
enough to be in a position to not adjust your payments,
just leave it there and let the lower interest rates
mean that you're paying off your mortgage faster. Then you'll
be better off.
Speaker 1 (07:42):
In the long run, Retail and Z is hoping the
recent cut will bring some extra Christmas chair. What's the
likelihood of better bending this silly season.
Speaker 2 (08:01):
Well, I think there will be, particularly if we get
another one or another fifty basis points in November, that
will feel quite a substantial boost. It's not quite clear
how much confidence is going to be boosted by this.
It seems very upbeat at the moment, but then we
have to remember the Reserve Bank was warning that it's
doing this. It's comfortable doing this because inflation is falling
(08:22):
and they know that the economy is in a slow patch.
They can see business stress rising, they can see unemployment rising,
and they see that continuing well into next year. So
if you're worried about losing your job, you're probably less
likely to spend. And it's not necessarily a super quick
turnaround for some of these businesses that have been under
awful stress for a long time.
Speaker 1 (08:43):
Does the OCR cauts and all this talk about interest rates,
does this mean anything for those of us who don't
actually have a home or a mortgage, Well, I guess.
Speaker 2 (08:51):
For younger people, probably the bigger issue right now is
unemployment and rising unemployment and the risk of losing your job.
So as businesses feel like they're more confident consume, the
confidence grows, then hopefully we'll start to see the employment
situation turn around. I mean that to me is the
biggest issue. I think, you know, in a way, during
the COVID stimulus, there was a labor shortage. There was
(09:12):
actually a lot of opportunity for younger people in the
job market, and that's obviously dried up, and that's making
it a bit tougher to get a pay rise or
to move around jobs and get pay rises in that
we know, you know, wage inflation is part of the
inflation that's falling away, which is not so good.
Speaker 1 (09:30):
Well, that's kind of the process by which inflation comes down.
Speaker 2 (09:33):
It's the overall weakning of demand and that comes through
in terms of weaker inflation and unfortunately in terms of
job losses and business closures. Maybe if you're saving a
way and looking to buy our first home, then lower
mortgage rates are going to make it a bit easier.
Hopefully it doesn't just spark another housing boom. And most
(09:53):
commentators seem to think that even with lower mortgage rates,
there isn't really enough pent up demand and to suddenly
see house prices start spiking like they did a couple
of years ago.
Speaker 4 (10:04):
Well. L J.
Speaker 1 (10:05):
Hooker has actually noted the reduction in interest rates is
already impacting the property market. They say, we're seeing a
significant uplift in buyer activity and confidence. More people are
attending open homes, more people have been attending auctions around
the country. So I guess people are getting a little
bit more optimistic about their chances of entering the housing market. Yeah.
Speaker 2 (10:27):
I mean that's from a real estate agent, right, yeah, Okay, Well,
I mean and it came out the day of but look, yeah,
there's going to be more confidence and optimism seeping in,
and there will be people on the sidelines who are
actually cashed up properly, investors who were thinking, oh, the
numbers don't add up, don't add up, and then suddenly
(10:47):
the numbers do add up now, or they can see
that they're going to add up in terms of mortgages
and the rent you can charge and all that sort
of stuff. So I would say some investors will be
coming back. And it does tend to pick up and
spring as well, So I don't know if that's a
seasonally a press release, but there's a few factors that
are just you'd call headwinds to that. I mean, we're
not seeing immigration rise now. The immigration rate is falling,
(11:10):
so you know, we're not seeing masses of new people
arriving into the country, and we are seeing a lot
of new Zealanders leave, So just the sheer population effect
there won't be that kind of pressure. There could be
further changes the government regulations, you know, if they were
to open up to foreign investment in the residential market
something like that could be a further boost. But yeah,
(11:31):
I think we will see it start to improve. But
I just don't think it's going to suddenly turn into
one of these housing bubble price spikes.
Speaker 4 (11:39):
Double whammy, double heavy. It's a sign that we've got
inflation coming under control, which is what we need to
get a lit on the cost of loving crisis.
Speaker 1 (11:50):
Nikola Willis said we're seeing green shoots after this announcement.
What does she mean by.
Speaker 2 (11:56):
That, Well, green shoots is a kind of colloquial economy
term for the return of growth after a period of recession.
Remember it being very popular after the GFC and often
gets used too early. I think it's how hard you
look for the green shoots. She's right that the conditions
are coming right for growth, you know, for people to
(12:17):
start investing in She's obviously she's got an interest in
encouraging that. And I don't want to sound too gloomy,
but you sort of have to ask where does the
growth come from other than just a bit more cash
in the economy, a bit more consumer spending, and a
bit more maybe life in their housing market. Those are
the sort of the frothy, lighter ends of the economy.
What the economy needs is I don't think I don't
think Nicola Willis or Christoph Luxe would argue with this,
(12:39):
because they're out there saying that they're trying to affect
this change as well. But what the economy needs is
growth coming from the actual engine room, which is the
productive end, manufacturing and agriculture and investment in those areas
to boost our economic output, our export earnings, those kind
of things, rather than just money going round again. You know,
(12:59):
you can pour money into an economy, as we've just
seen through COVID. You can pour money into an economy
and GEDDP can look very good for a while, but
it starts to cause inflation unless you've got real wealth creation,
you know, goods that we're selling and earning money from, etc.
Speaker 1 (13:13):
So, Liam, is the economy actually really in a good place?
Reading a lot of these press releases, like we've said
a post announcement, it felt like Santad come early. And
I know you like being cautiously optimistic.
Speaker 2 (13:25):
Yeah, it isn't in a good place right now. But
sometimes you'll see business confidence surveys and they'll be very
They'll be like a decade high. The confidence is at
the highest it's been in a decade. I think that
was the A and Z Business Outlook. That's asking people
what they think the economic conditions will be like in
a year. So things are so bad they can only
be better. So most people in that survey are now saying, yep,
(13:47):
they'll be better in a year. So you get a
really strong result. But really there are still a lot
of businesses doing it really tough, especially in retailing. You know,
I've done some work with retail in Z the Association.
You know, they talk about a lot of businesses still
really really struggling. And of course there's businesses that are
dealing with a whole bunch of structural change as well.
(14:07):
So you know, retailers are competing with online stuff out
of China, Temu and all the rest of it. People,
even though they're going to have a bit more money
in their pocket, may be a bit shell shocked from
the whole experience of the last two years or so,
so they may be inclined to save a bit put
a bit aside, which is a good thing, but doesn't
translate to immediate stimulus. So I guess it's just not
(14:28):
quite clear yet how quickly this will turn around. There's
a lot of external factors too, so New Zealand is
very reliant on the strength of the global economy. American
economy is going quite well, Chinese economy not so well,
but it's had some stimulus, so we have to wait
and see really how strong demand out of China will
be and what that does to our export prices, that
(14:49):
kind of thing.
Speaker 1 (14:50):
Thanks for joining us, Liam, that said for this episode
of The Front Page. Read more about today's stories and
extensive news coverage at enzidherld dot co dot nz. The
Front Page is produced by Ethan Sills and sound engineer
Patti Fox. I'm Chelsea Daniels. Subscribe to The Front Page
(15:14):
on iHeartRadio or wherever you get your podcasts, and tune
in on Monday for another look behind the headlines.
Kiodra. I'm Chelsea Daniels and this is the Front Page,
a daily podcast presented by the New Zealand Herald. The
official cash rate has been cut to four point seventy
five percent, which is being touted as welcome news for
households all over New Zealand. It's the lowest the OSA
(00:29):
has been in eighteen months. The Monetary Policy Committee said
that annual consumer price inflation was within its one to
three percent inflation target range and converging on the two
percent midpoint. While plenty of people are popping the champagne
over this announcement is the latest cut, masking some of
(00:52):
the other issues in the economy. Today. On the front Page,
Herald Business Editor at Large Liam Dan joins us to
discuss the stats. You need to know, Liam, what's the
significance of this latest OCR cut? What does this actually
mean for the economy?
Speaker 2 (01:12):
Well, really, the cut just means cost of borrowing goes down,
which means people who are paying who have debt will
be paying less money out to service that debt, so
they'll have more money to spend. So it's a way
of putting cash back into the economy which had been
removed by the Central Bank, by the Reserve Bank in
order to get on top of inflation, because they put
(01:34):
lots of money into the economy to cope with.
Speaker 1 (01:36):
COVID, and in terms of inflation, that number is looking
a lot friendlier. Now.
Speaker 2 (01:40):
Hey, yeah, Well, the official rate is three point three percent,
which is still outside the mandated target ban, but that's old.
That's for the second quarter of the year. We don't
get the official number for the third quarter until next week,
which is a bit inconvenient. But the Reserve Bank is
very confident that it is under control, and it has
said that the statement this week that basically they see
(02:02):
it below three already. They've looked at I guess, second
tier stuff like what businesses are saying about their own
pricing and all that sort of stuff. And also, you know,
when you look at the way the data flows through
the way the statistics work, the third quarter last year
had very high inflation numbers. We're in the near the
peak of that inflation. They'll drop out, so we know
(02:23):
that they'll come out of the average. So for the
average annual rate over the last year, it is looking
likely that it'll be below three percent. So that I
guess means we can say, in terms of high inflation,
it's over. We've won the war against inflation. Doesn't mean
prices won't go up necessarily, but we shouldn't be seeing
those big spikes. And some things might go down, some
(02:43):
might go up, but the average rate's going to be
between one and three, which is where economists and central
banks like to keep it.
Speaker 1 (02:49):
And do we look at that rate when we kind
of determine whether we're in a recession or a recessionary period.
Speaker 2 (02:56):
It has an impact, but the recession is usually judged
on in the output of the economy. If the output's
falling massively and we're in a deep recession, then often
pricing will fall as well. And that well, that has happened.
That's why they talk about the reserve bank engineering a recession.
I mean, they don't really want a recession necessarily, but
(03:16):
they have to reduce the amount of activity in the
economy just to get that inflationary effect out.
Speaker 1 (03:22):
And how are we looking at the moment in terms
of the recession.
Speaker 2 (03:25):
Well, we're either still in recession or just popping out
of a recession as we've sort of moved into the
fourth quarter. But we don't get the GDP data till
much later. But we know that the Reserve Bank in
August forecast at the third quarter would be negative as well.
We went backwards, so that would be recession. People talk
a lot about per capita recession with the immigration numbers
(03:47):
over the past couple of years. We've been in per
capita recession for two years, so you know, depending on
how much weight you put on that per person in
this country, the size of the economy has been shrinking
for some time.
Speaker 1 (03:59):
Most commons are predicting further cuts to the OCR in
the coming months.
Speaker 3 (04:05):
In August it dropped to the lowest it's been in
four years, and there could be more drops up left,
with some people saying that it could drop to his
lowest three point five percent by the end of twenty
twenty five.
Speaker 4 (04:15):
Now another drop is predicted at the end of November
when we'll see them meet again, and all predictions are
now that by the end of next year the reserve
banks of the OCR will be back within what they
call the neutral range of two and a half to
three percent.
Speaker 1 (04:31):
Why doesn't the Reserve Bank just do them all in
one big go, That's.
Speaker 2 (04:35):
A good question. It would be very dramatic to do
like some people have said, look, maybe a seventy five
basis point cut after something like christ Church earthquake or
when the global financial crisis hit. Sometimes I think we
might have gone to a full one percent cut, trying
to remember straight after COVID, at the worst of that
COVID as well. That's very dramatic though, And you know,
(04:57):
we talk about monetary policy being a blunt and if
you do that, it affects the balance of the cost
of borrowing a lot, and it's hard to undo fast,
you know. So if it was bumping around by a
four percent from quarter to quarter or between rate calls,
that would be very hard to plan forward plan as
a business or even as a consumer or you know,
(05:19):
when you're looking at buying a house. So really what
you want with monetary policy and central bank action is slow,
stable change. You want it to be sitting somewhere really
predictable for quite a long time. So even the cuts
we're seeing now are probably you know, it's good to
see it come down, but it's a shame that we're
having to cut so hard because it's so dramatic, and
(05:41):
you know, ideally it would be a smoother path, so
you'd have a series of twenty five basis point cut.
Central banks don't like to cut in big numbers unless
there's really dramatic reason to do it, and that's why
I've been saying that, you know, if we do have
another fifty basis point cut and then some economists are
even picking another one in February, that's three fifty basis
point cuts. That is quite radical, and it's not the
(06:04):
sort of thing a central bank would do unless the
economy was really in a lot of trouble. So I'm
hoping that even though I've got a mortgage and I
want rates to come down to sort of three percent
or something, if we had to get there in the
early next year, that would really be an indication that
something was not right with the economy.
Speaker 1 (06:21):
And we've already seen some activity from our major banks. Haleium,
what's the latest on those.
Speaker 2 (06:26):
Yeah, a lot of marketing stuff. I would say Initially
we saw some banks move ahead of the ocr and
there's a lot of competition and positioning. But more or
less the fifty basis points has been passed through. I
don't know if we'll see much more from here. Sometimes
the bank rates are also affected by what's happening overseas
and things, but it's been passed through pretty well, and
(06:47):
now it's just a matter of when people refix. Businesses
are more likely to be floating or on very short
term rates, and they pay higher rates and they'll feel
some benefits straight away, and then businesses will get some
indirect benefit as consumers have more money in their pockets.
And it's not insubstantial. You know, it's bigger, probably for
most mortgage holders than what the government's tax cut was.
(07:10):
I think if you're talking about fifty basis points or
half a percent, or say a five hundred thousand dollars mortgage,
that's two five hundred dollars a year, fifty bucks a week,
almost fifty dollars a week, and a lot of people
have bigger mortgages than that. And if you're not refixing
next week, maybe it's a month or so, but you're
still seeing, oh, that's going to be money that's coming
(07:30):
back into my pocket. Or you know, if you're lucky
enough to be in a position to not adjust your payments,
just leave it there and let the lower interest rates
mean that you're paying off your mortgage faster. Then you'll
be better off.
Speaker 1 (07:42):
In the long run, Retail and Z is hoping the
recent cut will bring some extra Christmas chair. What's the
likelihood of better bending this silly season.
Speaker 2 (08:01):
Well, I think there will be, particularly if we get
another one or another fifty basis points in November, that
will feel quite a substantial boost. It's not quite clear
how much confidence is going to be boosted by this.
It seems very upbeat at the moment, but then we
have to remember the Reserve Bank was warning that it's
doing this. It's comfortable doing this because inflation is falling
(08:22):
and they know that the economy is in a slow patch.
They can see business stress rising, they can see unemployment rising,
and they see that continuing well into next year. So
if you're worried about losing your job, you're probably less
likely to spend. And it's not necessarily a super quick
turnaround for some of these businesses that have been under
awful stress for a long time.
Speaker 1 (08:43):
Does the OCR cauts and all this talk about interest rates,
does this mean anything for those of us who don't
actually have a home or a mortgage, Well, I guess.
Speaker 2 (08:51):
For younger people, probably the bigger issue right now is
unemployment and rising unemployment and the risk of losing your job.
So as businesses feel like they're more confident consume, the
confidence grows, then hopefully we'll start to see the employment
situation turn around. I mean that to me is the
biggest issue. I think, you know, in a way, during
the COVID stimulus, there was a labor shortage. There was
(09:12):
actually a lot of opportunity for younger people in the
job market, and that's obviously dried up, and that's making
it a bit tougher to get a pay rise or
to move around jobs and get pay rises in that
we know, you know, wage inflation is part of the
inflation that's falling away, which is not so good.
Speaker 1 (09:30):
Well, that's kind of the process by which inflation comes down.
Speaker 2 (09:33):
It's the overall weakning of demand and that comes through
in terms of weaker inflation and unfortunately in terms of
job losses and business closures. Maybe if you're saving a
way and looking to buy our first home, then lower
mortgage rates are going to make it a bit easier.
Hopefully it doesn't just spark another housing boom. And most
(09:53):
commentators seem to think that even with lower mortgage rates,
there isn't really enough pent up demand and to suddenly
see house prices start spiking like they did a couple
of years ago.
Speaker 4 (10:04):
Well. L J.
Speaker 1 (10:05):
Hooker has actually noted the reduction in interest rates is
already impacting the property market. They say, we're seeing a
significant uplift in buyer activity and confidence. More people are
attending open homes, more people have been attending auctions around
the country. So I guess people are getting a little
bit more optimistic about their chances of entering the housing market. Yeah.
Speaker 2 (10:27):
I mean that's from a real estate agent, right, yeah, Okay, Well,
I mean and it came out the day of but look, yeah,
there's going to be more confidence and optimism seeping in,
and there will be people on the sidelines who are
actually cashed up properly, investors who were thinking, oh, the
numbers don't add up, don't add up, and then suddenly
(10:47):
the numbers do add up now, or they can see
that they're going to add up in terms of mortgages
and the rent you can charge and all that sort
of stuff. So I would say some investors will be
coming back. And it does tend to pick up and
spring as well, So I don't know if that's a
seasonally a press release, but there's a few factors that
are just you'd call headwinds to that. I mean, we're
not seeing immigration rise now. The immigration rate is falling,
(11:10):
so you know, we're not seeing masses of new people
arriving into the country, and we are seeing a lot
of new Zealanders leave, So just the sheer population effect
there won't be that kind of pressure. There could be
further changes the government regulations, you know, if they were
to open up to foreign investment in the residential market
something like that could be a further boost. But yeah,
(11:31):
I think we will see it start to improve. But
I just don't think it's going to suddenly turn into
one of these housing bubble price spikes.
Speaker 4 (11:39):
Double whammy, double heavy. It's a sign that we've got
inflation coming under control, which is what we need to
get a lit on the cost of loving crisis.
Speaker 1 (11:50):
Nikola Willis said we're seeing green shoots after this announcement.
What does she mean by.
Speaker 2 (11:56):
That, Well, green shoots is a kind of colloquial economy
term for the return of growth after a period of recession.
Remember it being very popular after the GFC and often
gets used too early. I think it's how hard you
look for the green shoots. She's right that the conditions
are coming right for growth, you know, for people to
(12:17):
start investing in She's obviously she's got an interest in
encouraging that. And I don't want to sound too gloomy,
but you sort of have to ask where does the
growth come from other than just a bit more cash
in the economy, a bit more consumer spending, and a
bit more maybe life in their housing market. Those are
the sort of the frothy, lighter ends of the economy.
What the economy needs is I don't think I don't
think Nicola Willis or Christoph Luxe would argue with this,
(12:39):
because they're out there saying that they're trying to affect
this change as well. But what the economy needs is
growth coming from the actual engine room, which is the
productive end, manufacturing and agriculture and investment in those areas
to boost our economic output, our export earnings, those kind
of things, rather than just money going round again. You know,
(12:59):
you can pour money into an economy, as we've just
seen through COVID. You can pour money into an economy
and GEDDP can look very good for a while, but
it starts to cause inflation unless you've got real wealth creation,
you know, goods that we're selling and earning money from, etc.
Speaker 1 (13:13):
So, Liam, is the economy actually really in a good place?
Reading a lot of these press releases, like we've said
a post announcement, it felt like Santad come early. And
I know you like being cautiously optimistic.
Speaker 2 (13:25):
Yeah, it isn't in a good place right now. But
sometimes you'll see business confidence surveys and they'll be very
They'll be like a decade high. The confidence is at
the highest it's been in a decade. I think that
was the A and Z Business Outlook. That's asking people
what they think the economic conditions will be like in
a year. So things are so bad they can only
be better. So most people in that survey are now saying, yep,
(13:47):
they'll be better in a year. So you get a
really strong result. But really there are still a lot
of businesses doing it really tough, especially in retailing. You know,
I've done some work with retail in Z the Association.
You know, they talk about a lot of businesses still
really really struggling. And of course there's businesses that are
dealing with a whole bunch of structural change as well.
(14:07):
So you know, retailers are competing with online stuff out
of China, Temu and all the rest of it. People,
even though they're going to have a bit more money
in their pocket, may be a bit shell shocked from
the whole experience of the last two years or so,
so they may be inclined to save a bit put
a bit aside, which is a good thing, but doesn't
translate to immediate stimulus. So I guess it's just not
(14:28):
quite clear yet how quickly this will turn around. There's
a lot of external factors too, so New Zealand is
very reliant on the strength of the global economy. American
economy is going quite well, Chinese economy not so well,
but it's had some stimulus, so we have to wait
and see really how strong demand out of China will
be and what that does to our export prices, that
(14:49):
kind of thing.
Speaker 1 (14:50):
Thanks for joining us, Liam, that said for this episode
of The Front Page. Read more about today's stories and
extensive news coverage at enzidherld dot co dot nz. The
Front Page is produced by Ethan Sills and sound engineer
Patti Fox. I'm Chelsea Daniels. Subscribe to The Front Page
(15:14):
on iHeartRadio or wherever you get your podcasts, and tune
in on Monday for another look behind the headlines.
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