Paul Bloxham: HSBC chief economist on trade figures showing economic growth

Stats NZ came out with the latest trade data for New Zealand - and the results show good news for exporters.

Exports were up 9.9 percent in the year to June and imports were up 3.2 percent.

HSBC chief economist Paul Bloxham explained further.

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Now we've got some good news for the economy today.
Stat's New Zealand has come out with its latest trade
data for New Zealand, and our exporters have been going gangbusters.
Exports were up nine point nine percent in the year
to June, imports up three point two percent. Paul Blocksham
as ahspci's chief economist and with us A Paul god A,
how good is that?

Speaker 2 (00:17):
It is good? It is a good story, and this
is one we've you know, we've known about, but I
think the numbers today were even stronger than was expected
in terms of the rise in dairy prices and the
boost that that's giving to incomes. Also not just the
price rises, but also that the volumes were reasonably solid.
So this is one of the two elements of why

(00:37):
we have thought that the New Zealand economy is going
to be in an upswing. One is the dairy price
is a high and that's giving you a lift in
the economy. And the second is that interest rates have
come down a long way. It's not yet quite fed
through to a recovery in consumption that's been really strong,
but we think it's coming. And so this is one
element and the other one is as interest rates have
come down a long way.

Speaker 1 (00:58):
So can we say that the terms of have beat expectations.

Speaker 2 (01:02):
Yes, I think that's fair and I certainly on today's
print it was stronger than the market had expected. And
so I think the terms of trade is a very
positive story for New Zealand. You've had a consistent boost
to incomes in the agricultural sector from the fact that
deairry prices are and meat prices actually are high, and

(01:22):
volumes have been fairly solid as well. And I think that's,
as I say, driving that sector. Now, it's only one
sector and it hasn't really flowed over to the rest
of the economy as yet, but I think most of
that it's a lag story. It takes time for it
to flow through, but I think it will get there.

Speaker 1 (01:36):
I mean, it's three days ago we had more consumer
confidence numbers out that were down to a ten month low.
How long before consumers actually start to read this stuff,
feel good about it and feel confident again.

Speaker 2 (01:46):
Well, we also had the week before retail figures that
actually were a bit on the stronger side than the
market had expected. So I mean, I'm always a little
bit cautious about reading too much into sentiment indicators. You know,
you're effectively asking consumers how they feel. I tend to
put a bit more weight on actual spending indicators. And
the spending indicators have actually they have been they have

(02:08):
been okay, they have been solid. So I think that's
part of it. I think the other part of it
is that it's taking time. You know, this is the thing.
It takes monetary policy. Interest rates act with a lag
on the economy. It takes time for it to start
to feed through and support the economy. And I think
it's perhaps the lags are a little bit longer this
time around, but I think it's still likely to flow
through to an upswing over time.

Speaker 1 (02:30):
What are you expecting from Australian GDP tomorrow?

Speaker 2 (02:34):
We think GDP growth will print in the quarter at
a point six so point six quarter on quarter. That
would be a one point seven percent growth rate over
the year. And that's a pick up in pace from
the past couple of quarters. So last year, the economy
in twenty four grew by about one percent, and now
we're growing we think at something like one point seven.
So that's an upswing, but only really a modest one.

(02:56):
And I think the main thing we're pointing out is
that really because productivity is so weak in Australia at
the moment, and the supply side there of the economy
is therefore so constrained. This is more, this is the
new normal, that we can't really grow a whole lot
faster than this rate of growth unless we see a
pickup in productivity. The economy is already operating at its
full capacity. We're fully employed, and inflation is coming down,

(03:19):
but it's not quite at the midpoint of the RBA's
target band, and we're in a modest upswing. This is
perhaps as good as it gets.

Speaker 1 (03:25):
Yeah. Interesting, Hey, Paul, thank you very much. And it's
interesting that everything that you've told us and predicted is
bearing out. So there we go. We should listen to
you more often. That's Paul Bloxam, HSBC's 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.