The Reserve Bank Governor says the conflict in Iran has materially altered New Zealand's outlook, even if yesterday's ceasefire deal leads to a de-escalation.
The central bank's kept the Official Cash Rate on hold at 2.25%.
It's forecasting inflation will hit 4.2% this quarter and says it's prepared to hike the cash rate if inflation becomes embedded.
Governor Anna Breman told Mike Hosking even after the Strait of Hormuz reopens, economic disruptions will linger for some time.
She says we're facing a severe supply chain disruption, affecting not just oil, but also the shipping of other goods.
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Episode Transcript
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Speaker 1 (00:00):
The Reserve Bank and their task of working out what
sort of shape the joint is in and where we're
heading in these choppy, turbulent times. So cash rate on hold,
that wasn't really the news. Of course, inflation and the
June courter looks to be peaking at four point two
and that dense growth. Reserve Bank Governor Doctor Anna Breman
is with us, A very good morning to you.
Speaker 2 (00:17):
Good morning.
Speaker 1 (00:18):
Now, can I congratulate you first of all on what
you did yesterday the press conference? You guys don't normally
front on this review via statement. Did you drive that?
Is that part of your I need to be more
open and public?
Speaker 2 (00:32):
Yes, but everyone agreed on it. So the whole Monetary
Policy Committee was fine with having a press conference, and
we're going to do that at every meeting now, not
just when we have a monetary policy's statement, but also
when we do the monetary policy reviews.
Speaker 1 (00:45):
Good Is that normal internationally? From your experience, it's just
I've always thought it was weird that we didn't.
Speaker 2 (00:52):
Ah, So a lot of countries do that, but not
all countries, so we differ a little bit.
Speaker 1 (00:58):
Okay, some of the journal so I thought, interestingly didn't
seem to understand what a review was versus a statement,
which does lead, I thought to the broader question because
some of the things in what you did yesterday aren't
contained in terms of forecasts. Could you should you be
doing more to keep us more informed with more information.
Speaker 2 (01:19):
Well, it is what we try to do. Even when
we have what we call the reviews, we don't have
a full forecast because we have less data to go on,
but we do try to describe the developments and point
to recent data and what that means. So we did
that yesterday and did add some numbers and on inflation,
because so much is happening in that area. So we
(01:40):
did do a preliminary forecast, and then the next time
we'll do the full forecast because then we have much
more information to go on.
Speaker 1 (01:48):
If this ceasefire is contained, if we take the optimistic view,
and ultimately this turned out to be a six week
ish thing for the world, how different do you think
the world looks my Phoenix meeting.
Speaker 2 (02:02):
I still think the world looks different. I mean, this
is a severe supply disruption. It's not just oil, it's shipping.
You know, New Zealand gets know the exports need the
shipping coming to be able to get their goods out.
We need it for the imports, of course, so we
will see some disruption lingering even if this hopefully is
resolved in the near term. But it does mean that,
(02:25):
you know, the effects on inflation would be less severe
if it gets resolved now, and that would be very
welcome of course, of course.
Speaker 1 (02:32):
And give them that answer. How much hard data do
you actually have as a central bank on what's been damaged,
what doesn't move quite as freely as it used to,
how slow things will be versus how much is just perception?
Speaker 2 (02:47):
Well, I think, you know, I've been traveling to meet
businesses around the country and so does my staff, and
we talk to other people and we've looked at all
the most recent surveys. I think that there is a
certed effort now in New Zealand to understand this because
we know how important it is to us. But then
we have to collect it and you know, it's not perfect,
(03:09):
but we are getting information and people are really you know,
they're really trying to share because they also understand that
it's important for everyone to have good data.
Speaker 1 (03:18):
Right now, what's your read on the psychology of the country,
the business consumer confidence. There was some consumer confidence data
as well. Basically, it fell off, a cliff war started.
We freaked out. Can it potentially well, I mean, can
it potentially bounce back as quickly or not?
Speaker 2 (03:35):
Well? I understand the psychology of this. You know, we
had three years so pretty weak gross, some corporate had
done well, some had really been struggling, and you get
hit by this. So of course people feel really bad
because it's a severe shock. So I do understand that.
I do think we can bounce back pretty quickly if
we see that there's this result and you see shipping
(03:56):
coming working better again, and the supply changed to work.
But I do think people will also be a bit
cautious in terms of exactly how the plan going forward.
You might want a bit more resilient in terms of
your supply change, etc. Because unfortunately it's a big hit.
Speaker 1 (04:13):
It is the inflation spike that you see coming. If
once again this model works and things are broadly speaking
getting back to normal, does it disappear as quickly.
Speaker 2 (04:24):
Well, I think that we will see some effects staying
on for a while, just because it's not only oil,
it's some of the supply change. They get hurt by this,
but I do think we can see a nice spike
and then inflation falling again. But we will have to
follow all the data and then continuously update those kinds
of forecasts. But I do think that we can see
(04:47):
a nice fall down in inflation if we see that
the sees fire homes, and as you know, it's a
very complex world right now. Right now.
Speaker 1 (04:54):
What fascinates me about the surveys you do in the
businesses you talk to and you talk to this a
little bit yesterday, This price stuff. You know, who's going
to pass it on, who can't pass it on? Do
you believe them because people, we'll say a lot of
stuff that they don't do.
Speaker 2 (05:09):
Yeah. Yeah, it's an extremely good question, actually, something that
you have to consider it all times, because you know,
of course, some people will say, oh, we'll hike prices,
and then they realize we can't because our customers just
won't buy anything. And others will say, oh, no, we're
being cautious, and then we will still try to high
prices depending on you know, their situations and the customers,
(05:30):
et cetera. So I think it's important to not only
look at survey data. You have to see, you know,
the hard data as well as we call it. So
we'll be looking at the CPI numbers very carefully, and
we get some partial CPAN numbers when we get not
all the consumption basket as we call it, we get
half of it every month, and we look very carefully
at those numbers.
Speaker 1 (05:50):
What I've got from the retail banks so far, roughly
you didn't come out with us yesterday Q two. They
see a drop in GDP, it goes backwards for a while,
but they still come out with something like one point
four for the year. Does that feel about right to you.
Speaker 2 (06:07):
I'm going to be a little bit cautious given that
we haven't done a full forecast for the full year yet,
but I do expect to see grows this year still,
because what we saw in January and February was actually
the growth was picking up in the high frequency data,
so it was looking pretty good. And then, as you say, March,
people starting being worried, but it was a little bit
(06:27):
business as usual. I think April is going to look
a bit worse because then you stop some of the
activities you were planning. But again, if we see the
sea ceas fire holding, if we see the fuel prices
coming down. I think businesses will pick up and we
can see some good numbers this year. Good. Do you
know the replanure? Yeah.
Speaker 1 (06:48):
Do you have a view on the government's role in spending.
I mean they've been extreme compared to many governments around
the world, they've been extremely limited in what the largest
of you like. Does that eventually play well for us?
Speaker 2 (07:01):
Well, you know, what we've seen after COVID is that
the recommendations have been to do timely and targeted measures
and focus on the most vulnerable parts of the population.
That's what we've seen now and from our perspective, we
don't expect that to add to inflation in this environment.
Then what happens later on, that's the decision for them.
(07:23):
Of course.
Speaker 1 (07:24):
Nice to talk to you as always, doctor Enner Bryman,
who is the Brazume Bank government this morning.
Speaker 2 (07:28):
For more from the Mic Asking Breakfast, listen live to
news Talks it'd be from six am weekdays, or follow
the podcast on iHeartRadio.
The Reserve Bank and their task of working out what
sort of shape the joint is in and where we're
heading in these choppy, turbulent times. So cash rate on hold,
that wasn't really the news. Of course, inflation and the
June courter looks to be peaking at four point two
and that dense growth. Reserve Bank Governor Doctor Anna Breman
is with us, A very good morning to you.
Speaker 2 (00:17):
Good morning.
Speaker 1 (00:18):
Now, can I congratulate you first of all on what
you did yesterday the press conference? You guys don't normally
front on this review via statement. Did you drive that?
Is that part of your I need to be more
open and public?
Speaker 2 (00:32):
Yes, but everyone agreed on it. So the whole Monetary
Policy Committee was fine with having a press conference, and
we're going to do that at every meeting now, not
just when we have a monetary policy's statement, but also
when we do the monetary policy reviews.
Speaker 1 (00:45):
Good Is that normal internationally? From your experience, it's just
I've always thought it was weird that we didn't.
Speaker 2 (00:52):
Ah, So a lot of countries do that, but not
all countries, so we differ a little bit.
Speaker 1 (00:58):
Okay, some of the journal so I thought, interestingly didn't
seem to understand what a review was versus a statement,
which does lead, I thought to the broader question because
some of the things in what you did yesterday aren't
contained in terms of forecasts. Could you should you be
doing more to keep us more informed with more information.
Speaker 2 (01:19):
Well, it is what we try to do. Even when
we have what we call the reviews, we don't have
a full forecast because we have less data to go on,
but we do try to describe the developments and point
to recent data and what that means. So we did
that yesterday and did add some numbers and on inflation,
because so much is happening in that area. So we
(01:40):
did do a preliminary forecast, and then the next time
we'll do the full forecast because then we have much
more information to go on.
Speaker 1 (01:48):
If this ceasefire is contained, if we take the optimistic view,
and ultimately this turned out to be a six week
ish thing for the world, how different do you think
the world looks my Phoenix meeting.
Speaker 2 (02:02):
I still think the world looks different. I mean, this
is a severe supply disruption. It's not just oil, it's shipping.
You know, New Zealand gets know the exports need the
shipping coming to be able to get their goods out.
We need it for the imports, of course, so we
will see some disruption lingering even if this hopefully is
resolved in the near term. But it does mean that,
(02:25):
you know, the effects on inflation would be less severe
if it gets resolved now, and that would be very
welcome of course, of course.
Speaker 1 (02:32):
And give them that answer. How much hard data do
you actually have as a central bank on what's been damaged,
what doesn't move quite as freely as it used to,
how slow things will be versus how much is just perception?
Speaker 2 (02:47):
Well, I think, you know, I've been traveling to meet
businesses around the country and so does my staff, and
we talk to other people and we've looked at all
the most recent surveys. I think that there is a
certed effort now in New Zealand to understand this because
we know how important it is to us. But then
we have to collect it and you know, it's not perfect,
(03:09):
but we are getting information and people are really you know,
they're really trying to share because they also understand that
it's important for everyone to have good data.
Speaker 1 (03:18):
Right now, what's your read on the psychology of the country,
the business consumer confidence. There was some consumer confidence data
as well. Basically, it fell off, a cliff war started.
We freaked out. Can it potentially well, I mean, can
it potentially bounce back as quickly or not?
Speaker 2 (03:35):
Well? I understand the psychology of this. You know, we
had three years so pretty weak gross, some corporate had
done well, some had really been struggling, and you get
hit by this. So of course people feel really bad
because it's a severe shock. So I do understand that.
I do think we can bounce back pretty quickly if
we see that there's this result and you see shipping
(03:56):
coming working better again, and the supply changed to work.
But I do think people will also be a bit
cautious in terms of exactly how the plan going forward.
You might want a bit more resilient in terms of
your supply change, etc. Because unfortunately it's a big hit.
Speaker 1 (04:13):
It is the inflation spike that you see coming. If
once again this model works and things are broadly speaking
getting back to normal, does it disappear as quickly.
Speaker 2 (04:24):
Well, I think that we will see some effects staying
on for a while, just because it's not only oil,
it's some of the supply change. They get hurt by this,
but I do think we can see a nice spike
and then inflation falling again. But we will have to
follow all the data and then continuously update those kinds
of forecasts. But I do think that we can see
(04:47):
a nice fall down in inflation if we see that
the sees fire homes, and as you know, it's a
very complex world right now. Right now.
Speaker 1 (04:54):
What fascinates me about the surveys you do in the
businesses you talk to and you talk to this a
little bit yesterday, This price stuff. You know, who's going
to pass it on, who can't pass it on? Do
you believe them because people, we'll say a lot of
stuff that they don't do.
Speaker 2 (05:09):
Yeah. Yeah, it's an extremely good question, actually, something that
you have to consider it all times, because you know,
of course, some people will say, oh, we'll hike prices,
and then they realize we can't because our customers just
won't buy anything. And others will say, oh, no, we're
being cautious, and then we will still try to high
prices depending on you know, their situations and the customers,
(05:30):
et cetera. So I think it's important to not only
look at survey data. You have to see, you know,
the hard data as well as we call it. So
we'll be looking at the CPI numbers very carefully, and
we get some partial CPAN numbers when we get not
all the consumption basket as we call it, we get
half of it every month, and we look very carefully
at those numbers.
Speaker 1 (05:50):
What I've got from the retail banks so far, roughly
you didn't come out with us yesterday Q two. They
see a drop in GDP, it goes backwards for a while,
but they still come out with something like one point
four for the year. Does that feel about right to you.
Speaker 2 (06:07):
I'm going to be a little bit cautious given that
we haven't done a full forecast for the full year yet,
but I do expect to see grows this year still,
because what we saw in January and February was actually
the growth was picking up in the high frequency data,
so it was looking pretty good. And then, as you say, March,
people starting being worried, but it was a little bit
(06:27):
business as usual. I think April is going to look
a bit worse because then you stop some of the
activities you were planning. But again, if we see the
sea ceas fire holding, if we see the fuel prices
coming down. I think businesses will pick up and we
can see some good numbers this year. Good. Do you
know the replanure? Yeah.
Speaker 1 (06:48):
Do you have a view on the government's role in spending.
I mean they've been extreme compared to many governments around
the world, they've been extremely limited in what the largest
of you like. Does that eventually play well for us?
Speaker 2 (07:01):
Well, you know, what we've seen after COVID is that
the recommendations have been to do timely and targeted measures
and focus on the most vulnerable parts of the population.
That's what we've seen now and from our perspective, we
don't expect that to add to inflation in this environment.
Then what happens later on, that's the decision for them.
(07:23):
Of course.
Speaker 1 (07:24):
Nice to talk to you as always, doctor Enner Bryman,
who is the Brazume Bank government this morning.
Speaker 2 (07:28):
For more from the Mic Asking Breakfast, listen live to
news Talks it'd be from six am weekdays, or follow
the podcast on iHeartRadio.
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