The Reserve Bank's outgoing Governor says New Zealand's economy may be doing better than we realise.
The central bank has cut the OCR 25 basis points today - to 2.25 percent.
Christian Hawkesby says the economy already appears to be recovering from this year's downturn.
He says what's unclear - is its pace.
"The recovery could be faster and stronger than we expect, because we have cut interest rates a long way and it could really start coming through quite quickly."
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Episode Transcript
The only drive show you can try. Truck to ask
the question question again, the answers find a fag sack
and give the analysis. Here the duplicy Eland Drive with
one New Zealand and the power of satellite mobile newsags Envy.
Speaker 2 (00:17):
Good afternoon.
Speaker 3 (00:18):
The Reserve Bank has cut the official cash rate today
by a quarter of a percent. It is now sitting
at two point twenty five percent, the lowest in three years.
Speaker 2 (00:25):
It reckons, this is the Reserve Bank. It reckons. Inflation
is not a problem.
Speaker 3 (00:28):
The economy is already growing in the labor market is stabilizing.
Christian Hawksby is the outgoing governor high Christian gooday is
that at one and done, no more cuts.
Speaker 4 (00:38):
We've put out an OCR projection which would have the
OCR will be consistent with the oceach bench unchanged over
two thousand in twenty six And we think that's a
good position to be in, having done a lot of
work over the course of this year a loosen policy
and starting to see it having in its effect.
Speaker 3 (00:58):
And one of the things that you're taking into account
possible possibly is the fact that Kiwi's like, even this
cut may not be enough to get kiwis going ah.
Speaker 4 (01:06):
That's the doubt, you know. The downside risk is that
households and businesses feel but battered and bruised still from
this year and are a bit cautious. Our fifty point
cut in October was you know, sort of designed to
a bit of a shot in the arm to address that.
So there is that risk still there. On the other side,
the recovery could be faster and stronger than we expect
(01:30):
because we have cut interest rates a long way and
it could really start coming through quite quickly.
Speaker 2 (01:35):
I can't call it. What's your gut telling you.
Speaker 4 (01:39):
I think we've we have done a lot of work.
I'm a true believer that monetary policy works. People have
their doubts, but it just does work its way through
all the different channels.
Speaker 3 (01:50):
Can I put something to you. It's worked historically, right,
But the problem that's happened now is that you might
have cut the ocr and I've come off my rate
and I've refixed at a lower rate, but by the
same exactly the same time, my counsel is chucking up
my rates. So any free cash has been sucked up
in that again, isn't it.
Speaker 4 (02:07):
There's lots of different channels through rich monetary policy works
you wealth channel, cash flow channel, the exchange rate channel.
You know, we're seeing we're so we're seeing it working.
The exchange rate one is one that people don't talk
so much about at the moment, but the key we
has weakend that's listing, you know, explore earning.
Speaker 2 (02:29):
We want to put to you.
Speaker 3 (02:30):
Is it possible that we are actually poorer than you
guys might anticipate, and that even the money that you
free up as being sucked up by bills, Like we
just don't have as much disposable cash as you might
think we do.
Speaker 4 (02:42):
We we do have a lower potential growth rate of
the economy. Is what we've noticed that the productivity growth
is pretty weak, population growth is pretty weak, so we
kind of need to be realistic about how fast the
economy can grow in the future. But what we're seeing
as a lot of spare capacity, and that's what's motivating
(03:04):
us to go, Okay, we can have low interest rates
because we can have an economy that's running hotter for
a while to close that gap.
Speaker 3 (03:12):
Okay, So I mean you talk to the business leaders,
they say they're seeing green shoots. When do you think
we start really feeling it properly?
Speaker 4 (03:19):
Well, we've got a positive Q three and Q four,
and you know, once you get into you know, further
on beyond that, you're looking at about kind of a
three percent per annum type run rate as the effect
of lower interest rates kick in. So the answer is,
the recovery is happening right now. It's just that we
(03:41):
won't see the official Do.
Speaker 2 (03:42):
You think they're feeling it yet.
Speaker 3 (03:43):
About Christian.
Speaker 4 (03:46):
It's early days in terms of it. You know, it's
a positive quarter Q three. We look at high frequency data.
We've got a key wee GDP indicator that we update
all the time each time a new bit of data
comes out. You know, that's starting to show it. So
it's it's not about waiting for something to happen. It's
happening at the moment. It'll pick up through the next while, hope.
Speaker 2 (04:10):
So okay, listen, have you met the new governor?
Speaker 3 (04:12):
Yes, what do you reckon?
Speaker 2 (04:13):
What's your take on her?
Speaker 4 (04:16):
I think she will do a wonderful job. We've met
six times now. A big focus for me has been
supporting her induction and getting ready for the role. So
we've had a lot of discussions and you know, everything
and anything a new governor.
Speaker 2 (04:33):
Might want to ask she asked you about Adrian.
Speaker 4 (04:38):
Forward bucking. You know what's going a matter when you're
sitting in the seat.
Speaker 3 (04:42):
First, I would like if you and I ever see
each other for a beer, I'm going to be like, right,
tell me everything.
Speaker 2 (04:47):
This is the most fascinating thing. What do you off
to do?
Speaker 4 (04:49):
By the way, I'm going to have a long break
over the summer. I've had a big job of being
focused on the finish line. Next next job is to
have a really good break and not turn my mind
to the future for as long as I can.
Speaker 2 (05:05):
All Right, well, good luck with that, Christian hawksby outgoing
Reserve Bank Governor.
Speaker 1 (05:10):
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