August 15, 2024 • 16 mins
This week the Reserve Bank cut the Official Cash Rate, now it's down to 5.25 percent.
This is the first time it has been cut in four years – since March 2020, when the country first went into lockdown to combat the Covid pandemic.
Politicians have celebrated the news, and banks have started cutting interest rates already.
But in amongst all that joy – there's also a grim warning for the state of the country’s economy.
Today on The Front Page, we’re joined by NZ Herald business editor at large Liam Dann to explain what this news means for all of us.
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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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Gielda. I'm Chelsea Daniels and this is the Front Page,
a daily podcast presented by the New Zealand Herald. This week,
the Reserve Bank cut the official cash rate. Now it's
down to five point two five percent. This is the
first time it's been cut in four years, since March
(00:28):
twenty twenty, when the country first went into lockdown to
combat the COVID pandemic. Politicians have celebrated the news, and
banks have started cutting interest rates already, but in amongst
all that joy, there's also a grim warning for the
state of the country's economy.
Speaker 2 (00:46):
Today.
Speaker 1 (00:46):
On the front Page, we're joined by ensat Herald Business
Editor at large, Liam Dan to explain what this news means.
Speaker 3 (00:53):
For all of us.
Speaker 1 (00:57):
Liam, the reduction to five point two five percent unexpected
move or long time in the making? Do you think?
Speaker 3 (01:05):
Well, it was certainly well discussed beforehand. In fact, markets
had got to the point where they at one point
had it priced in at one hundred percent. They were
sure it was going to happen. Then the unemployment number
wasn't quite so strong. So but even then by Friday
before the decision, so last Friday we were looking at
an eighty percent odds on a cut, So a bit
difficult to call it a surprise on that basis, But
(01:27):
I was still expecting them to hold, like a lot
of economists, because it sort of looked like a fifty
to fifty call. And I'm just a little bit more
cautious about inflation. But then I don't have all the
insight and data that the Reserve Bank has. You know,
we have to wait for inflation numbers. They take a
long time to come through, quite historic. But the Reserve
Bank was looking at sort of measures like you know,
(01:50):
inflation expectations and confidence surveys and all that sort of stuff,
and it's all added up to a pretty grim outlook
for the economy and they think bad enough to cut.
Speaker 1 (01:59):
So what's contributed to this cut coming out now after
four years?
Speaker 3 (02:03):
Well, yeah, the short version is that the economy has
really just slowed down enough to allow it. So we've
had long recessionary period. We've been in and out of recession,
and the Reserve Bank forecast suggests that we're probably in
what would be the third recession that we've been through
since the tail end of the COVID period. So even
just you know, in the last couple of years. We've
(02:24):
been in and out three times. To a lot of people,
it probably feels like one long recessionary period. I mean,
I don't know that the average person's picking up the
macro thing that much. They just know that the economy
has been slowing. It feels tough. Interest rates have been
adding pressure. We've had the inflation as well, so people
aren't spending. That's the main one. Really, people aren't spending,
(02:45):
and also the government isn't spending. So the Reserve Bank
did note that the fiscal impulse, the amount that the
government spends is coming off, and that's also taking demand
and out of the economy. With the caveat that, you know,
there's a little bit going back for tax cuts, but
it looks like it balances out and overall, you know,
they're taking demand out of the economy in.
Speaker 1 (03:06):
The immediate What does this cut mean for the average keiw.
Speaker 3 (03:10):
Well, if you're about to fix your mortgage, it probably
means you'll get a better rate. Banks have moved very
quickly to you know, adddedly, they probably had their press release,
two press releases pre written, and there's a lot of
marketing advantage in being a first mover. But we'd see
mortgage rates come off a bit already, just in anticipation.
Because the markets had already priced in lower interest rates,
(03:30):
they were able to start moving. And then we saw
a few banks move immediately after the OCR call and
cut another few basis points off those sort of one
year and two year fixed rates. So that's good news
for people. Other than that, I guess it does represent
sort of the beginning of the end of this sort
(03:51):
of tough cycle. I hope we're not through all the
tough stuff yet, but it is okay to sort of go, well,
you know, this is something symbolic here. This means that
the Reserve Bank feeling a lot more confident about the
way their economy is tracking. And so if it is
really tough, at least you can see maybe some light
at the end of the tunnel. I mean, we know
that unemployment is going to keep rising from here, so
(04:12):
it's a bit hard if everyone's celebrating lower interest rates
and you get laid off today.
Speaker 4 (04:19):
Well, this is great news for many people in New Zealand.
Homeowners with a mortgage can now look forward to lower
interest rates, those with credit card debt or loans, and
businesses who are thinking about should I expand should I
hire more people? And the number one thing that businesses
say to me at the moment is we've got to
see interest rates coming down. So we're on track.
Speaker 1 (04:44):
So for me as a renter, is there going to
be much change at all?
Speaker 3 (04:47):
Well, I don't know how much interest rates will flow through,
but I mean landlords. The equations for landlords should start
to look a lot better over the next few months
because they'll be paying lower interest. Now I'm no expert
in this. They do they ever put rents down?
Speaker 1 (05:02):
You know, it's not in my lifetime.
Speaker 3 (05:05):
No, I'll tell you what happens. This is the complex
way that they measure it. But there's these measures called
stock and flow. And so when STATSNZ measures rental prices,
they measure the rental prices for all of the rental
that everyone pays, and that's the stock measure, and that
doesn't move around as much. But they also measure new tenancies.
And so when we look at the new tenancies, which
(05:26):
is the flow measure, we see that in the last
month or two the price for new tenancies for rentals
as going into new tenancies actually come down. It's a fraction,
so it's probably not going to come down a lot,
but it's more likely that we'll see rents track sideways
and not go up so much. So if your landlord
suddenly putting rent up, maybe you know, have a bit
of a debate with them about that. I know there's
(05:49):
also council rates and energy prices and all that sort
of stuff, but.
Speaker 1 (05:53):
Hey, I'll be getting you involved.
Speaker 4 (05:55):
Yeah.
Speaker 3 (05:56):
Yeah.
Speaker 1 (05:56):
Prime Minister Christopher Luxen and Finance Minister Nikola Willison they've
really taken credit for this news, citing the efforts of
the government to ease spending. Do they deserve that credit?
Speaker 3 (06:07):
Do you think, Umm, well, look some credit. They've they've
done the right things more or less. I mean, you
could make the case of, you know, if they hadn't
done the tax cut, all the tax cuts haven't flowed
through yet, and we've got there without the tax cut.
So let's put that to one side and just say, Yep,
they've done the right thing. They've cut spending, they've helped
reduce demand. I mean, they've helped the Reserve Bank. I
(06:27):
think really this is a monetary policy story, and to
a large extent, what we're seeing, give or take a
month or two, either side probably would have happened regardless
of who was in power, I mean not notwithstanding that
some people think labor government would have kept going and
spending like crazy. They said they weren't going to. They
said they were also going to reduce the fiscal impulse.
(06:47):
So whether or not you believe that, but if we
take them at their word either way, the Reserve Bank
was going to be putting up interest rates until they
achieved this result. And they've achieved the results, I think
good on the government. They've done the wrong things into
this storm. I guess they've been on the same page
as the Reserve Bank and that helps. But it is
a monetary policy story and it is some sort of
(07:09):
victory for the Reserve Bank.
Speaker 1 (07:20):
So while there's some good news here, there was also
a warning in Adrianaw's address, wasn't there.
Speaker 3 (07:26):
Their forecasts show that we're in this third round of recession.
So they see that the next set of GDP data
we get will be negative, and that the quarter we're
in now, which is in GDP data we don't get
for a long time, will be negative, and they see
that unemployment will keep rising. So you have to be
a bit cautious with sounding celebratory about all that, you know,
(07:47):
it's the beginning of the process of things actually starting
to get better. But I think Adrian or used the
phrase its darkest before the dawn. He thinks we're right
at that point, right before dawn. Right now, here's the
dawn breaking through. So it's still pretty dark out there,
but at least we can see that the direction we
are moving in is the right one.
Speaker 5 (08:07):
And talking to this out look, economic growth remains below trend,
and inflation is declining across our economies. Yes, services inflation
remains elevated, but this is also expected to de climb.
Speaker 2 (08:23):
Well.
Speaker 1 (08:24):
With that warning in mind, I understand that there's some
concern about the bank making these cuts now, given they
released hawkish statements earlier this year. What did they say
back in May? That's sparking some backlash now.
Speaker 3 (08:36):
Yeah, a lot of debate and controversy within especially within
sort of economic circles about this. So in May they
took a hawkish turn. That means that they were considerably
more worried about inflation, and they suggested that their forecast
rate track suggested that we might not see a rate
cut until August next year, and of course that didn't happen.
(08:58):
So some economists brad Old some for examples, called it
a U turn and a flip flop. Others have said, well, look,
it might have been a misstep, but they've landed in
the right place now, And Adrian or in the Reserve
Bank have said, well, those were the facts at the time,
as far as they can see. When the facts change,
they change, and that's as far as I can see,
the right approach. Whether they should be admitting that they
(09:19):
made a mistake, they certainly aren't admitting that, but some
people feel that they should admit that they made a
mistake around those forecasts, and may I don't know. The
thing to me is that it's all sort of off
the ball play. It's not the actual results on the board.
So to me, if you're saying it's a U turn,
that's what happens when a reserve bank actually puts the
rate up and then has to put it down again
(09:40):
because they got it wrong, or they put the rate
down as they have now, if they had to put
it back up again because inflation bounced, that would be
a U turn. This is all happening sort of off
the ball. Those forecasts did seem really hawkish. I don't
think anybody really quite took them seriously, and market certainly didn't,
so mark have sort of stuck to their guns the
(10:02):
whole way through and have thought that these rate cats
would be coming around now because usually it's the case market.
So just you know, the investors are far too enthusiastic
and optimistic, but they've got it about right.
Speaker 1 (10:14):
The ocr is only one measure of how the economy
is going. Hey, earlier this week there were also some
new stats around migration. How many people have left New
Zealand this time around.
Speaker 3 (10:25):
Yeah, well, I mean, on balance, we should remember that
we've still got a net migration gain of seventy three thousand,
so that would have been really high level a few
years ago, but it is down from record levels like
one hundred and thirty six thousand that we had in
the October twenty twenty three year, so that's falling. The
population gain we're getting is falling. We're still seeing a
(10:45):
very high number of New Zealand citizens departing, not quite
at record levels, but we saw fifty five thousand New
Zealand citizens depart in the June year, so just down
from in the year to May that was about sixty
thousand so is certainly the case that a lot of
Kiwis are leaving the country mostly or about half, probably
(11:06):
over half are leaving for Australia. But we're still getting
in a net gain. So generally a net gain and
migration would add economic activity and potentially add to inflation
all that sort of stuff. But those numbers are coming off,
so I think the reserve banks anticipating that they'll keep
coming off for a while. I hope we see that
number of Kiwis departing continue to decline as well. But
(11:27):
overall we're not going to get as many net migrants
in to boost the economy. So that's another reason that
they may be are fairly confident that they'll they'll get
some more slowing in the economy.
Speaker 1 (11:37):
And you mentioned briefly unemployment, but how is it looking,
particularly when it comes to youth.
Speaker 3 (11:42):
Yeah, I've done some work looking at youth add mule
re unemployment. I mean, look, the unemployment rate has risen
to four point six percent, and that doesn't sound that bad.
It's still historically a lot lower than the average. You know,
anything below five is considered pretty good.
Speaker 2 (11:59):
Now that four point six percent is actually slightly lower
than forecast than many expected, but it is going to
keep going up. It's going to go above five percent
in the next few months, and that is thousands more
people out of work and a number more business is closing.
We're already seeing those liquidations piling up.
Speaker 3 (12:17):
The thing is when we look at the number of
those freshly unemployed people, that's thirty three thousand more jobless
people in the past year. In the fifteen to nineteen
age group, the unemployment rate is now twenty percent, up
from fifteen percent. That's pretty high, and if you look
at MARI unemployment it's even worse. It's about thirty percent
(12:37):
for the fifteen to nineteen year old age group. These
are people who are not in other training as well.
They have to tick the box to be qualified as unemployed.
But overall, you can see that unemployment really hits certain groups,
like we know MARI are overrepresented, and it hits young
people hard. So I guess my concern is that we
want to get through this quickly and we want to
stop at peaking at a high level, because if it
(12:58):
stays high for a long period of time, you sort
of create a culture of unemployment, which I think we
still suffer from in this country, and I think we
suffer from it from the various points in time when
we've pushed unemployment really high to beat inflation, going right
back to say, the early eighties, and then again in
the early nineties, and then with the GFC, we've seen
high unemployment rates and much higher unemployment rates for Maori
(13:21):
and for youth unemployment.
Speaker 1 (13:23):
And what about electronic transaction data that's out as well. Hey,
what are the headline points there?
Speaker 3 (13:28):
Yeah, we got some fresh data today on electronic card transactions,
which is just spending. It like, how much is getting
spent with cash these days? Not much, so really that's down,
So retail spending is down. That will reassure the Reserve
Bank after making this move. We also saw some food
price data and some sort of general pricing data around
petrol and rents, and that was up slightly for the year,
(13:51):
not much, but it was largely driven by a bit
of a spike in the cost of eating out, which
suggests that the hospitality people are passing those costs through.
But reassuringly, you know, fruit, veggies, meat still coming down.
Those prices are still falling, so that's positive sort of
coming back to earth cause I guess you know, when
it comes down to it, it is very tough in
(14:11):
that hospitality sector because people have got a choice, They
don't have a choice about eating, and so the basic
items are coming back down. Inevitably, the ability of those
fast food places restaurants to pass on costs will hit
a wall, and I expect we'll see that fall too.
Speaker 1 (14:25):
So with all that in mind, are things looking good?
You wrote in a piece about the OCA that people
were celebrating like it was ve Day. Are those celebrations
deserved or should we actually be heating or was warning?
Speaker 3 (14:38):
Yeah? I think the warning and the reality of the
economy will sink back in. I mean, you know, we
had the press conference from the Prime Minister and the
Finance minister. We had the retail banks moving the mortgage
rates and a lot of commentary that was very excited
about that cut. And that's okay, I think, I mean,
I think we should celebrate the fact that we've kind
of got through this cycle. I mean, it's been a horrible,
horrible time and it's taken a long time, and it's
(14:59):
all all to do with it all goes right back
to COVID, the pandemic. You know, what was done to
try and stop the economy collapsing. Then we look with
hindsight and say, look, maybe too much was done whatever,
but its spiked inflation around the world. New Zealand doesn't
have that much capacity for stimulus in its economy unfortunately,
(15:20):
so we copped a bad lot of inflation. And the
fact that it's all coming back to earth it's a
victory for monetary policy generally, whether you think the Reserve
Bank's got it exactly right or not, these tools we use,
blunt as they are, have pulled inflation back into line.
It's worked. I feel very happy about that. I know
we've got a long way to go, and I think
the reality of the economy will sink back in, but
(15:43):
you know, there's still battles to be fought, and there
always will be in economics. But really, unless there's a
major reversal of the trend or oil prices spiked badly
or something like that, it looks like it is kind
of the wind that we were looking for in the
war on inflation.
Speaker 1 (15:57):
Thanks for joining us, Liam. That's it for this episode
of the Front Page. You can read more about today's
stories and extensive news coverage at enziherld 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
(16:21):
Page on iHeartRadio or wherever you get your podcasts, and
tune in on Monday for another look behind the headlines.
Gielda. I'm Chelsea Daniels and this is the Front Page,
a daily podcast presented by the New Zealand Herald. This week,
the Reserve Bank cut the official cash rate. Now it's
down to five point two five percent. This is the
first time it's been cut in four years, since March
(00:28):
twenty twenty, when the country first went into lockdown to
combat the COVID pandemic. Politicians have celebrated the news, and
banks have started cutting interest rates already, but in amongst
all that joy, there's also a grim warning for the
state of the country's economy.
Speaker 2 (00:46):
Today.
Speaker 1 (00:46):
On the front Page, we're joined by ensat Herald Business
Editor at large, Liam Dan to explain what this news means.
Speaker 3 (00:53):
For all of us.
Speaker 1 (00:57):
Liam, the reduction to five point two five percent unexpected
move or long time in the making? Do you think?
Speaker 3 (01:05):
Well, it was certainly well discussed beforehand. In fact, markets
had got to the point where they at one point
had it priced in at one hundred percent. They were
sure it was going to happen. Then the unemployment number
wasn't quite so strong. So but even then by Friday
before the decision, so last Friday we were looking at
an eighty percent odds on a cut, So a bit
difficult to call it a surprise on that basis, But
(01:27):
I was still expecting them to hold, like a lot
of economists, because it sort of looked like a fifty
to fifty call. And I'm just a little bit more
cautious about inflation. But then I don't have all the
insight and data that the Reserve Bank has. You know,
we have to wait for inflation numbers. They take a
long time to come through, quite historic. But the Reserve
Bank was looking at sort of measures like you know,
(01:50):
inflation expectations and confidence surveys and all that sort of stuff,
and it's all added up to a pretty grim outlook
for the economy and they think bad enough to cut.
Speaker 1 (01:59):
So what's contributed to this cut coming out now after
four years?
Speaker 3 (02:03):
Well, yeah, the short version is that the economy has
really just slowed down enough to allow it. So we've
had long recessionary period. We've been in and out of recession,
and the Reserve Bank forecast suggests that we're probably in
what would be the third recession that we've been through
since the tail end of the COVID period. So even
just you know, in the last couple of years. We've
(02:24):
been in and out three times. To a lot of people,
it probably feels like one long recessionary period. I mean,
I don't know that the average person's picking up the
macro thing that much. They just know that the economy
has been slowing. It feels tough. Interest rates have been
adding pressure. We've had the inflation as well, so people
aren't spending. That's the main one. Really, people aren't spending,
(02:45):
and also the government isn't spending. So the Reserve Bank
did note that the fiscal impulse, the amount that the
government spends is coming off, and that's also taking demand
and out of the economy. With the caveat that, you know,
there's a little bit going back for tax cuts, but
it looks like it balances out and overall, you know,
they're taking demand out of the economy in.
Speaker 1 (03:06):
The immediate What does this cut mean for the average keiw.
Speaker 3 (03:10):
Well, if you're about to fix your mortgage, it probably
means you'll get a better rate. Banks have moved very
quickly to you know, adddedly, they probably had their press release,
two press releases pre written, and there's a lot of
marketing advantage in being a first mover. But we'd see
mortgage rates come off a bit already, just in anticipation.
Because the markets had already priced in lower interest rates,
(03:30):
they were able to start moving. And then we saw
a few banks move immediately after the OCR call and
cut another few basis points off those sort of one
year and two year fixed rates. So that's good news
for people. Other than that, I guess it does represent
sort of the beginning of the end of this sort
(03:51):
of tough cycle. I hope we're not through all the
tough stuff yet, but it is okay to sort of go, well,
you know, this is something symbolic here. This means that
the Reserve Bank feeling a lot more confident about the
way their economy is tracking. And so if it is
really tough, at least you can see maybe some light
at the end of the tunnel. I mean, we know
that unemployment is going to keep rising from here, so
(04:12):
it's a bit hard if everyone's celebrating lower interest rates
and you get laid off today.
Speaker 4 (04:19):
Well, this is great news for many people in New Zealand.
Homeowners with a mortgage can now look forward to lower
interest rates, those with credit card debt or loans, and
businesses who are thinking about should I expand should I
hire more people? And the number one thing that businesses
say to me at the moment is we've got to
see interest rates coming down. So we're on track.
Speaker 1 (04:44):
So for me as a renter, is there going to
be much change at all?
Speaker 3 (04:47):
Well, I don't know how much interest rates will flow through,
but I mean landlords. The equations for landlords should start
to look a lot better over the next few months
because they'll be paying lower interest. Now I'm no expert
in this. They do they ever put rents down?
Speaker 1 (05:02):
You know, it's not in my lifetime.
Speaker 3 (05:05):
No, I'll tell you what happens. This is the complex
way that they measure it. But there's these measures called
stock and flow. And so when STATSNZ measures rental prices,
they measure the rental prices for all of the rental
that everyone pays, and that's the stock measure, and that
doesn't move around as much. But they also measure new tenancies.
And so when we look at the new tenancies, which
(05:26):
is the flow measure, we see that in the last
month or two the price for new tenancies for rentals
as going into new tenancies actually come down. It's a fraction,
so it's probably not going to come down a lot,
but it's more likely that we'll see rents track sideways
and not go up so much. So if your landlord
suddenly putting rent up, maybe you know, have a bit
of a debate with them about that. I know there's
(05:49):
also council rates and energy prices and all that sort
of stuff, but.
Speaker 1 (05:53):
Hey, I'll be getting you involved.
Speaker 4 (05:55):
Yeah.
Speaker 3 (05:56):
Yeah.
Speaker 1 (05:56):
Prime Minister Christopher Luxen and Finance Minister Nikola Willison they've
really taken credit for this news, citing the efforts of
the government to ease spending. Do they deserve that credit?
Speaker 3 (06:07):
Do you think, Umm, well, look some credit. They've they've
done the right things more or less. I mean, you
could make the case of, you know, if they hadn't
done the tax cut, all the tax cuts haven't flowed
through yet, and we've got there without the tax cut.
So let's put that to one side and just say, Yep,
they've done the right thing. They've cut spending, they've helped
reduce demand. I mean, they've helped the Reserve Bank. I
(06:27):
think really this is a monetary policy story, and to
a large extent, what we're seeing, give or take a
month or two, either side probably would have happened regardless
of who was in power, I mean not notwithstanding that
some people think labor government would have kept going and
spending like crazy. They said they weren't going to. They
said they were also going to reduce the fiscal impulse.
(06:47):
So whether or not you believe that, but if we
take them at their word either way, the Reserve Bank
was going to be putting up interest rates until they
achieved this result. And they've achieved the results, I think
good on the government. They've done the wrong things into
this storm. I guess they've been on the same page
as the Reserve Bank and that helps. But it is
a monetary policy story and it is some sort of
(07:09):
victory for the Reserve Bank.
Speaker 1 (07:20):
So while there's some good news here, there was also
a warning in Adrianaw's address, wasn't there.
Speaker 3 (07:26):
Their forecasts show that we're in this third round of recession.
So they see that the next set of GDP data
we get will be negative, and that the quarter we're
in now, which is in GDP data we don't get
for a long time, will be negative, and they see
that unemployment will keep rising. So you have to be
a bit cautious with sounding celebratory about all that, you know,
(07:47):
it's the beginning of the process of things actually starting
to get better. But I think Adrian or used the
phrase its darkest before the dawn. He thinks we're right
at that point, right before dawn. Right now, here's the
dawn breaking through. So it's still pretty dark out there,
but at least we can see that the direction we
are moving in is the right one.
Speaker 5 (08:07):
And talking to this out look, economic growth remains below trend,
and inflation is declining across our economies. Yes, services inflation
remains elevated, but this is also expected to de climb.
Speaker 2 (08:23):
Well.
Speaker 1 (08:24):
With that warning in mind, I understand that there's some
concern about the bank making these cuts now, given they
released hawkish statements earlier this year. What did they say
back in May? That's sparking some backlash now.
Speaker 3 (08:36):
Yeah, a lot of debate and controversy within especially within
sort of economic circles about this. So in May they
took a hawkish turn. That means that they were considerably
more worried about inflation, and they suggested that their forecast
rate track suggested that we might not see a rate
cut until August next year, and of course that didn't happen.
(08:58):
So some economists brad Old some for examples, called it
a U turn and a flip flop. Others have said, well, look,
it might have been a misstep, but they've landed in
the right place now, And Adrian or in the Reserve
Bank have said, well, those were the facts at the time,
as far as they can see. When the facts change,
they change, and that's as far as I can see,
the right approach. Whether they should be admitting that they
(09:19):
made a mistake, they certainly aren't admitting that, but some
people feel that they should admit that they made a
mistake around those forecasts, and may I don't know. The
thing to me is that it's all sort of off
the ball play. It's not the actual results on the board.
So to me, if you're saying it's a U turn,
that's what happens when a reserve bank actually puts the
rate up and then has to put it down again
(09:40):
because they got it wrong, or they put the rate
down as they have now, if they had to put
it back up again because inflation bounced, that would be
a U turn. This is all happening sort of off
the ball. Those forecasts did seem really hawkish. I don't
think anybody really quite took them seriously, and market certainly didn't,
so mark have sort of stuck to their guns the
(10:02):
whole way through and have thought that these rate cats
would be coming around now because usually it's the case market.
So just you know, the investors are far too enthusiastic
and optimistic, but they've got it about right.
Speaker 1 (10:14):
The ocr is only one measure of how the economy
is going. Hey, earlier this week there were also some
new stats around migration. How many people have left New
Zealand this time around.
Speaker 3 (10:25):
Yeah, well, I mean, on balance, we should remember that
we've still got a net migration gain of seventy three thousand,
so that would have been really high level a few
years ago, but it is down from record levels like
one hundred and thirty six thousand that we had in
the October twenty twenty three year, so that's falling. The
population gain we're getting is falling. We're still seeing a
(10:45):
very high number of New Zealand citizens departing, not quite
at record levels, but we saw fifty five thousand New
Zealand citizens depart in the June year, so just down
from in the year to May that was about sixty
thousand so is certainly the case that a lot of
Kiwis are leaving the country mostly or about half, probably
(11:06):
over half are leaving for Australia. But we're still getting
in a net gain. So generally a net gain and
migration would add economic activity and potentially add to inflation
all that sort of stuff. But those numbers are coming off,
so I think the reserve banks anticipating that they'll keep
coming off for a while. I hope we see that
number of Kiwis departing continue to decline as well. But
(11:27):
overall we're not going to get as many net migrants
in to boost the economy. So that's another reason that
they may be are fairly confident that they'll they'll get
some more slowing in the economy.
Speaker 1 (11:37):
And you mentioned briefly unemployment, but how is it looking,
particularly when it comes to youth.
Speaker 3 (11:42):
Yeah, I've done some work looking at youth add mule
re unemployment. I mean, look, the unemployment rate has risen
to four point six percent, and that doesn't sound that bad.
It's still historically a lot lower than the average. You know,
anything below five is considered pretty good.
Speaker 2 (11:59):
Now that four point six percent is actually slightly lower
than forecast than many expected, but it is going to
keep going up. It's going to go above five percent
in the next few months, and that is thousands more
people out of work and a number more business is closing.
We're already seeing those liquidations piling up.
Speaker 3 (12:17):
The thing is when we look at the number of
those freshly unemployed people, that's thirty three thousand more jobless
people in the past year. In the fifteen to nineteen
age group, the unemployment rate is now twenty percent, up
from fifteen percent. That's pretty high, and if you look
at MARI unemployment it's even worse. It's about thirty percent
(12:37):
for the fifteen to nineteen year old age group. These
are people who are not in other training as well.
They have to tick the box to be qualified as unemployed.
But overall, you can see that unemployment really hits certain groups,
like we know MARI are overrepresented, and it hits young
people hard. So I guess my concern is that we
want to get through this quickly and we want to
stop at peaking at a high level, because if it
(12:58):
stays high for a long period of time, you sort
of create a culture of unemployment, which I think we
still suffer from in this country, and I think we
suffer from it from the various points in time when
we've pushed unemployment really high to beat inflation, going right
back to say, the early eighties, and then again in
the early nineties, and then with the GFC, we've seen
high unemployment rates and much higher unemployment rates for Maori
(13:21):
and for youth unemployment.
Speaker 1 (13:23):
And what about electronic transaction data that's out as well. Hey,
what are the headline points there?
Speaker 3 (13:28):
Yeah, we got some fresh data today on electronic card transactions,
which is just spending. It like, how much is getting
spent with cash these days? Not much, so really that's down,
So retail spending is down. That will reassure the Reserve
Bank after making this move. We also saw some food
price data and some sort of general pricing data around
petrol and rents, and that was up slightly for the year,
(13:51):
not much, but it was largely driven by a bit
of a spike in the cost of eating out, which
suggests that the hospitality people are passing those costs through.
But reassuringly, you know, fruit, veggies, meat still coming down.
Those prices are still falling, so that's positive sort of
coming back to earth cause I guess you know, when
it comes down to it, it is very tough in
(14:11):
that hospitality sector because people have got a choice, They
don't have a choice about eating, and so the basic
items are coming back down. Inevitably, the ability of those
fast food places restaurants to pass on costs will hit
a wall, and I expect we'll see that fall too.
Speaker 1 (14:25):
So with all that in mind, are things looking good?
You wrote in a piece about the OCA that people
were celebrating like it was ve Day. Are those celebrations
deserved or should we actually be heating or was warning?
Speaker 3 (14:38):
Yeah? I think the warning and the reality of the
economy will sink back in. I mean, you know, we
had the press conference from the Prime Minister and the
Finance minister. We had the retail banks moving the mortgage
rates and a lot of commentary that was very excited
about that cut. And that's okay, I think, I mean,
I think we should celebrate the fact that we've kind
of got through this cycle. I mean, it's been a horrible,
horrible time and it's taken a long time, and it's
(14:59):
all all to do with it all goes right back
to COVID, the pandemic. You know, what was done to
try and stop the economy collapsing. Then we look with
hindsight and say, look, maybe too much was done whatever,
but its spiked inflation around the world. New Zealand doesn't
have that much capacity for stimulus in its economy unfortunately,
(15:20):
so we copped a bad lot of inflation. And the
fact that it's all coming back to earth it's a
victory for monetary policy generally, whether you think the Reserve
Bank's got it exactly right or not, these tools we use,
blunt as they are, have pulled inflation back into line.
It's worked. I feel very happy about that. I know
we've got a long way to go, and I think
the reality of the economy will sink back in, but
(15:43):
you know, there's still battles to be fought, and there
always will be in economics. But really, unless there's a
major reversal of the trend or oil prices spiked badly
or something like that, it looks like it is kind
of the wind that we were looking for in the
war on inflation.
Speaker 1 (15:57):
Thanks for joining us, Liam. That's it for this episode
of the Front Page. You can read more about today's
stories and extensive news coverage at enziherld 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
(16:21):
Page on iHeartRadio or wherever you get your podcasts, and
tune in on Monday for another look behind the headlines.
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