August 5, 2025 • 5 mins
The latest unemployment statistics for New Zealand are due out tomorrow, and experts are divided ahead of the announcement.
Many are projecting the market will have deteriorated further, but some are hoping things would have picked up.
HSBC chief economist Paul Bloxham explains further.
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Episode Transcript
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Speaker 1 (00:00):
Paul Blocks of ahspc's chief economist, is with us evening.
Paul good A, what are you picking for our unemployment
number tomorrow?
Speaker 2 (00:10):
Well, our forecast is a little bit more optimistic than
the market, where forecasting that it might track sideways and
sort of stay roughly the same level that it was
at the last print, so just over five percent five
point one. We've got in mind that you might see
a little bit of positive employment growth and we'll just
see what the print manages to deliver.
Speaker 1 (00:30):
Why why are you more positive than others? Do you
think there's laborhooding going on? Or are you accounting for
the fact that a lot of people are just when
they lose their jobs here heading off to Australia.
Speaker 2 (00:40):
I think that actually the economy is in a modest
up swing. We saw it in the first quarter GDP print,
we saw it in the fourth quarter print from last year.
I think there are some forces at work that are
supporting the economy. You know, dairy prices have risen to
very high levels. You've got interest rates that have come down.
It's not coming through all of the act the time
activity indicators as yet, but we're of the view that
(01:03):
it will and the labor market tends to lag everything.
I mean, that's the thing to really keep in mind
that the labor market's one of the last things to
actually see any of that sort of momentum. So you
see an improvement and a sentiment to a degree, and
then it feeds through to a bit more activity and
then the hiring starts. So we're not looking for a
strong result, but we're looking for some sense that the
labor market's starting to find some stability.
Speaker 1 (01:26):
There is a bit of chat, renewed chat at the
moment about how the economy is faring, and people are
getting pretty grouchy with the government because we're eighteen months
into our electoral term and we thought things would be
a little bit better. How do you see things kind
of playing out this time next year when we're at
election time.
Speaker 2 (01:43):
As I said, and we've talked about this before on
this program, that you know, we sit and look at
the big picture factors and say, actually, there are some
things out there, some big forces at work that should
be lifting the New Zealand economy. And the primary ones
are that commodity prices are high levels, dairy prices or
a higher levels. That's a really positive terms of trade
(02:04):
shock that's been delivered to New Zealand that you've got
a trade surplus at the moment. The agricultural sector is
doing quite well. Is really the short of it. That
tends to eventually feed through to activity in the cities
as well in terms of a bit more spending. It
just takes a bit of time for it to feed through.
And then the other big force that's going to be
helpful is that interest rates have already come down by
two hundred and twenty five basis points, and I think
as people start to realize that there's not that perhaps
(02:26):
not that much more easy to come through, they'll start
to roll off fixed their five year fixed rate mortgages
and then start to choose to do a bit more spending.
And so we've got both those forces sort of in
mind when we're thinking that growth is actually going to
have a bit of positive momentum running into the second
half and into next year. Yeah.
Speaker 1 (02:43):
So at the moment, obviously the consumers are not feeling great.
There are worries about inflation expectations. You know, the expectation
is it will take up again. Do you think that
will just dissipate as we start to feel a bit
better about things.
Speaker 2 (02:55):
I think the primary driver of the lift in inflation
has been things that are sort of short term. Fact.
Food prices have risen a bit, and I think you've
seen that come through as you're describing into inflation expectation surveys.
But I think the other force at work on the
inflation front is going to be a trade diversion. So
you know, the global trade developments are going to lead
(03:16):
we think at least to China leading needing to export
a lot more of its manufactured goods to other markets
that aren't the US. And one of the one of
the features is going to be that we're going to
see more manufactured goods showing up in Australia and New Zealand.
And we think that's going to be something that puts
downward pressure on inflation in the coming quarters, so over
(03:36):
the coming period and so that should sort of start
to dissipate some of the inflation pressures a bit and
give people a bit more spending power.
Speaker 1 (03:43):
So do you think come this time next year we
are feeling better off, like materially better off enough to
want to re elect the slot.
Speaker 2 (03:52):
We should be The New Zealand economy should be in
an upswing. That's what we think, and I think you know,
the other way to square it away would be if
you don't get quite as much of an upswing and
the inflation numbers do start to come down, well, then
the ARBENZ may very well have more scope to lower
interest rates for them. I mean, we've only got one
more cut in for the RBNZ in our central case,
(04:13):
but if it turns out the economy is weaker, they've
got more scope to lower to lower things, to lower rates.
I think you know that's going to be Those are
going to be the two forces at least we've got
that we've got in mind, will lift the economy running
into next year.
Speaker 1 (04:26):
Yeah, were you surprised to see the fifteen percent tariff
slept on New Zealand.
Speaker 2 (04:31):
I think we were all watching and waiting to see
what the Trump administration was going to deliver. It's very
difficult to pick what the numbers are going to be
out of the administration, but I guess it is quite
interesting that fifteen percent. New Zealand got a fifteen percent,
Australia ended up with a ten percent, and so that's
that's been an interesting feature. But it was very difficult
to predict what those numbers were going to be. Like,
(04:52):
I mean, the key feature we're pointing out is both
countries have actually got you know, comparatively low tariffs went
into the US, and both countries have a fairly limited
exposure in terms of their direct sales into the US
market anyway. So we are countries that are mostly tied
to the growth story in Asia, and what happens in
(05:12):
China matters more than you know, what happens in the
US in terms of the growth story for Australia and
for New Zealand, and China's got more scope to pull
leavers and they are delivering more incremental support for their growth.
So that should mean that, you know, I think the
biggest effect on Australia and New Zealand is actually going
to be the disinflationary impulse, the inflation coming down because
(05:32):
we get lots of cheap manufactured goods showing up in
our markets over the coming period.
Speaker 1 (05:37):
Not half bad, hey, Paul, as always really appreciate talking
to you. Thank you, Paul Bloxham, Agspecies chief Economist. For
more from Hither Duplessy Allen Drive, listen live to news talks.
It'd be from four pm weekdays, or follow the podcast
on iHeartRadio
Paul Blocks of ahspc's chief economist, is with us evening.
Paul good A, what are you picking for our unemployment
number tomorrow?
Speaker 2 (00:10):
Well, our forecast is a little bit more optimistic than
the market, where forecasting that it might track sideways and
sort of stay roughly the same level that it was
at the last print, so just over five percent five
point one. We've got in mind that you might see
a little bit of positive employment growth and we'll just
see what the print manages to deliver.
Speaker 1 (00:30):
Why why are you more positive than others? Do you
think there's laborhooding going on? Or are you accounting for
the fact that a lot of people are just when
they lose their jobs here heading off to Australia.
Speaker 2 (00:40):
I think that actually the economy is in a modest
up swing. We saw it in the first quarter GDP print,
we saw it in the fourth quarter print from last year.
I think there are some forces at work that are
supporting the economy. You know, dairy prices have risen to
very high levels. You've got interest rates that have come down.
It's not coming through all of the act the time
activity indicators as yet, but we're of the view that
(01:03):
it will and the labor market tends to lag everything.
I mean, that's the thing to really keep in mind
that the labor market's one of the last things to
actually see any of that sort of momentum. So you
see an improvement and a sentiment to a degree, and
then it feeds through to a bit more activity and
then the hiring starts. So we're not looking for a
strong result, but we're looking for some sense that the
labor market's starting to find some stability.
Speaker 1 (01:26):
There is a bit of chat, renewed chat at the
moment about how the economy is faring, and people are
getting pretty grouchy with the government because we're eighteen months
into our electoral term and we thought things would be
a little bit better. How do you see things kind
of playing out this time next year when we're at
election time.
Speaker 2 (01:43):
As I said, and we've talked about this before on
this program, that you know, we sit and look at
the big picture factors and say, actually, there are some
things out there, some big forces at work that should
be lifting the New Zealand economy. And the primary ones
are that commodity prices are high levels, dairy prices or
a higher levels. That's a really positive terms of trade
(02:04):
shock that's been delivered to New Zealand that you've got
a trade surplus at the moment. The agricultural sector is
doing quite well. Is really the short of it. That
tends to eventually feed through to activity in the cities
as well in terms of a bit more spending. It
just takes a bit of time for it to feed through.
And then the other big force that's going to be
helpful is that interest rates have already come down by
two hundred and twenty five basis points, and I think
as people start to realize that there's not that perhaps
(02:26):
not that much more easy to come through, they'll start
to roll off fixed their five year fixed rate mortgages
and then start to choose to do a bit more spending.
And so we've got both those forces sort of in
mind when we're thinking that growth is actually going to
have a bit of positive momentum running into the second
half and into next year. Yeah.
Speaker 1 (02:43):
So at the moment, obviously the consumers are not feeling great.
There are worries about inflation expectations. You know, the expectation
is it will take up again. Do you think that
will just dissipate as we start to feel a bit
better about things.
Speaker 2 (02:55):
I think the primary driver of the lift in inflation
has been things that are sort of short term. Fact.
Food prices have risen a bit, and I think you've
seen that come through as you're describing into inflation expectation surveys.
But I think the other force at work on the
inflation front is going to be a trade diversion. So
you know, the global trade developments are going to lead
(03:16):
we think at least to China leading needing to export
a lot more of its manufactured goods to other markets
that aren't the US. And one of the one of
the features is going to be that we're going to
see more manufactured goods showing up in Australia and New Zealand.
And we think that's going to be something that puts
downward pressure on inflation in the coming quarters, so over
(03:36):
the coming period and so that should sort of start
to dissipate some of the inflation pressures a bit and
give people a bit more spending power.
Speaker 1 (03:43):
So do you think come this time next year we
are feeling better off, like materially better off enough to
want to re elect the slot.
Speaker 2 (03:52):
We should be The New Zealand economy should be in
an upswing. That's what we think, and I think you know,
the other way to square it away would be if
you don't get quite as much of an upswing and
the inflation numbers do start to come down, well, then
the ARBENZ may very well have more scope to lower
interest rates for them. I mean, we've only got one
more cut in for the RBNZ in our central case,
(04:13):
but if it turns out the economy is weaker, they've
got more scope to lower to lower things, to lower rates.
I think you know that's going to be Those are
going to be the two forces at least we've got
that we've got in mind, will lift the economy running
into next year.
Speaker 1 (04:26):
Yeah, were you surprised to see the fifteen percent tariff
slept on New Zealand.
Speaker 2 (04:31):
I think we were all watching and waiting to see
what the Trump administration was going to deliver. It's very
difficult to pick what the numbers are going to be
out of the administration, but I guess it is quite
interesting that fifteen percent. New Zealand got a fifteen percent,
Australia ended up with a ten percent, and so that's
that's been an interesting feature. But it was very difficult
to predict what those numbers were going to be. Like,
(04:52):
I mean, the key feature we're pointing out is both
countries have actually got you know, comparatively low tariffs went
into the US, and both countries have a fairly limited
exposure in terms of their direct sales into the US
market anyway. So we are countries that are mostly tied
to the growth story in Asia, and what happens in
(05:12):
China matters more than you know, what happens in the
US in terms of the growth story for Australia and
for New Zealand, and China's got more scope to pull
leavers and they are delivering more incremental support for their growth.
So that should mean that, you know, I think the
biggest effect on Australia and New Zealand is actually going
to be the disinflationary impulse, the inflation coming down because
(05:32):
we get lots of cheap manufactured goods showing up in
our markets over the coming period.
Speaker 1 (05:37):
Not half bad, hey, Paul, as always really appreciate talking
to you. Thank you, Paul Bloxham, Agspecies chief Economist. For
more from Hither Duplessy Allen Drive, listen live to news talks.
It'd be from four pm weekdays, or follow the podcast
on iHeartRadio
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