Nicola Willis: Finance Minister on the cut to the Official Cash Rate, the economy

The Finance Minister believes the country is in a position to grow.  

The Reserve Bank believes the economy has now turned a corner after last month's 50-basis-point cut to the OCR. 

It's cut the cash rate a further 25-basis-points to 2.25%, but is signalling further cuts are unlikely. 

Nicola Willis told Ryan Bridge that while the data lags make things difficult, there is enough other information to give them a sense of where the economy is at.  

She says it’s allowed the Reserve Bank to be confident in their forecast that the economy is growing and that growth will strengthen next year, and inflation will come down.  

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Episode Transcript

Speaker 1 (00:00):
So the Reserve Bank cut the ocr for the final
time this year twenty five basis points two point two
five percent. We were expecting that. It says there was
a bit of regal room in the economy. Obviously, inflation
now projected to fall to around two percent by mid
twenty twenty sixth. Nikola Willis is the Finance Minister with
US Live this morning. Good morning minister, Good morning man.
Did the economy grow this year?

Speaker 2 (00:22):
Well, in this first quarter of the year it grew
very strongly at about zero point nine percent. We had
a downturn in the second quarter. The Reserve Bank the
State of yesterday that they think that was statistically understated
and will be a readjusted at a further update. They
think that the economy is currently growing and that that
growth will strengthen into next year.

Speaker 1 (00:44):
So how much do you think we grew this calendar year?

Speaker 2 (00:48):
Well, it's too early to say that. We will get
the data for the third quarter in a couple of weeks,
and we'll get their data for the December quarter early
next year.

Speaker 1 (00:58):
Is it annoying that data is so wrong?

Speaker 2 (01:02):
Look, it is difficult that the data lags, and it
is the case that's in their data has had to
be updated fairly frequently and adjusted and look, that's the
reality of the sets process. We can't do much about it,
but we do get enough other information that we get
a sense of where the economy is, and that's allowed

(01:22):
the Reserve Bank to be very confident in their forecasts
that we're currently growing, that that growthal strength next year,
and that inflation will be coming down next year.

Speaker 1 (01:32):
Which is good and that sounds great, but we have
heard this story before. Our big problems productivity, isn't it
That is going to be constraining whatever growth we might
be getting, and also we don't have immigration to prop
it up.

Speaker 2 (01:44):
Well, Productivity is an issue, but fundamentally, if you haven't
got your inflation down in an economy, and you haven't
got your interest rates are coming down, then those fundamentals
mean that you won't get productivity growth. What we've now
got in the New Zealand economy is a situation where
inflation is back in target is set to come back

(02:05):
down to the middle of the band. That's great for growth.
We've got interest rates at a low rate, which means
that you do have more cash pumping through the economy.
That's great for growth and now we are in a
position to be building that future productivity growth and that's
where things like replacing the Resource Management Act, getting rid
of red tape in the Regional Council structures, ensuring that

(02:27):
we're delivering infrastructure faster, lifiting education standards. All of those
are about future productivity and that's why our government is
driving those reforms.

Speaker 1 (02:36):
They said the Reserve Bank margins for the bank's a
healthy room to bring the rates down further. I'm speaking
to Antonio Watson later this morning. What's your message to her.

Speaker 2 (02:45):
Well, my message to her would be pass it all on.
You are a member of the New Zealand economy and
the actions you take have a significant impact on how
New Zealanders are able to invest and growth.

Speaker 1 (02:56):
Your comments on the Regulatory Standards Bill, was that just
on the fly or are you seriously thinking you might
campaign on repealing.

Speaker 2 (03:04):
Well, it's just just to be clear that National has
its own positions on legislation. We don't just adopt act
positions as a coalition government. Yes, we do support the
commitments we've made which meant that we pass that legislation.
There's still a year at least until the next election
and so as good citizens, we need to monitor how

(03:27):
that legislation operates in practice, whether we think on balance
that the pros outweigh the cons and then the National
Party Caucus will take a position on whether we support
it going into the next election.

Speaker 1 (03:39):
What's your personal view.

Speaker 2 (03:42):
We'll look my personal viewers that we do need to
monitor it to see whether it adds process or whether
in fact it's advantageous. And I've got an open mind.

Speaker 1 (03:54):
It looks like just another layer of bureaucracy and it
doesn't actually do any nothing meaningful.

Speaker 2 (04:00):
The government decided to progress it because fundamentally we do
want good regulation and that's what the intent of the
legislation is. We've now got an opportunity of these next
few months to see what it adds in practice. We'll
be watching it here Flee and then the National Party
Caucus will discuss that will take a position going into
next year's.

Speaker 1 (04:17):
Campaign making the Willis Finance Minister.

Speaker 2 (04:20):
For more from Early Edition with Ryan Bridge.

Speaker 1 (04:22):
Listen live to News Talks it be from five am weekdays,
or follow the podcast on iHeartRadio.