John MacDonald: Spend more money? Tell him he's dreaming

How do you feel about being told you need to spend more money?

That’s what the Reserve Bank’s chief economist wants you to do.

As expected, the bank’s governor announced yesterday that there would be no change in the official cash rate because the bank doesn’t want to do anything that could put the brakes on the economic recovery.

Which some people are feeling the benefits of, while others aren’t. Which the Reserve Bank describes as an uneven recovery. Meaning we’re still in for a bit of a haul before we all feel some sort of benefit.

Tell that, though, to the bank’s chief economist Paul Conway who is giving us all a bit of a hurry along, saying people need to stop being so cautious with their money and get out and spend  more.

How realistic is that, do you think?

If you’re not having a “tell him he’s dreaming moment”, then you must be one of the people who are already feeling the benefit of an economic recovery.

But, generally, what planet is Paul Conway on, telling us to spend more?

Because we’re doing that already. Not out of choice. Not because we’re feeling particularly flush. But we’re spending more just to get by.

Two days ago, new numbers came out showing that grocery prices are still going up.

White bread prices up 57.9 percent in the past year.

Chocolate up 20 percent.

Not to mention mince. That’s pink gold these days. 

Which is why I think this statement by the Reserve Bank’s chief economist that we need to stop being so tight and start spending more is just ridiculous.

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Canterbury Mornings podcast with John McDonald
from news Talks AB.

Speaker 2 (00:13):
How do you feel is a question for you? How
do you feel about being told you need to spend
more money? How do you hear about that spend more?
That's what you're being told to do today? Well, it
was yesterday actually, after the Reserve Bank announced that it
wasn't making any changes to the official cash rate for

(00:33):
the time being, which of course is the Central Bank
interest rate that influences what the banks do. The retail
banks do with their interest rates, although in recent times
I don't think the banks have been as in sync
with the official cash rate as they used to be.
Is that you're reading of it. Nevertheless, the official cash

(00:55):
rate or the OCR it's a big deal because it
affects all of us in some way, shape or form.
You own a house, it can mean the difference between
you paying a high or a lower interest rate if
your rent, again, any increase tends to get passed on
by the landlord. I don't think the reverse tends to happen, though,
does it interest rates down? Ah, your rent goes down?

(01:17):
I haven't heard of that happening, So you know, we're
all in this official cash rate game in some way
shape will form. And yesterday, as expected, the Reserve Bank
governor announced that there would be no change. Why because
the bank doesn't want to do anything that could put
the branks on the economic recovery. Did you just say

(01:42):
what economic recovery? Did you say that? Because for a
lot of people, you're quite justified if you did, Because
for a lot of people it doesn't feel like it
does it. Some people are feeling the benefits, some aren't,
And that is why the Reserve Bank says at this
point the recovery has been quote uneven, meaning we're still

(02:05):
in for a bit of a hall before we all
feel some sort of benefit. Tell that, though, this is
the bit I want to get your reaction to. Tell
that to the Reserve Bank's chief economist. Now his name
Paul Conway. And when he was speaking to media after
the Casherat announcement yesterday, what did he do? He gave

(02:27):
us all a bit of a hurry along. He was
talking to you and he was talking to me when
he said that people need to stop being so cautious
with their money and get out and spend more. They
stop being so bloom and tight. He said, what's needed
for us to see and across the board economic recovery

(02:50):
is we all need to spend more. Now, how realistic
is that, do you think? Well, let me put it
this way. If you're not having a if you're not
having a Talomy's dreaming moment, then you must be one
of the people who are already feeling the benefit of
the so called economic recovery. If you're not having a
Talomy's dreaming moment, you must be in the rural sector,

(03:13):
or you might be an exporter. As for the rest
of us, Tellumy's dreaming there is what planet is the
Reserve Bank economist on telling us to get out there
and spend more, because we are doing that already, not
out of choice, not because we're feeling particularly flush, but

(03:37):
we're spending more just to get by, aren't we. Just
two days ago, those new numbers came out showing that
grocery prices still going up or was it white bread
prices up fifty seven point nine percent in the past year,
steak up twenty two percent. Nice for some chocolate up
twenty percent. Not to mention mints, I mean, mince is

(04:01):
pink gold these days isn't it. It is pink gold used
to be basic when I was a kid. Now they're
a bit of a treat, aren't They. Maybe not in
the Reserve Bank Chief economists household, but they are for
most people. Which is why I think the statement of
his yesterday that we need to be you know, that
we need to stop being so tight and we need

(04:23):
to start spending more money, I think it is just ridiculous.

Speaker 1 (04:28):
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