The Reserve Bank Governor doesn't want to hinder New Zealand's economic recovery any more than she needs to.
Anna Breman has confirmed the first OCR hike in more than three years – lifting it from 2.25% to 2.5%.
Former Governor Adrian Orr was open about trying to "engineer" a recession during the last cycle of OCR hikes.
Breman told Mike Hosking that's not what she's trying to do.
She says they try not to create unnecessary volatility, which means not hurting economic growth unless they absolutely need to.
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Speaker 1 (00:00):
Back to the Reserve Bank. In their view of New Zealand,
the ink cashreak cashwreaiight hike is required. They argue inflations
and issue growth is here. There could also be an
issue of the prices get passed on too much, so
maybe one, possibly two more before the years out. Governor
Doctor Arna Brayman is with us.
Speaker 2 (00:14):
Good morning, Good morning.
Speaker 1 (00:15):
The consensus decision yesterday interested me because the market wasn't consensus,
it was heavily divided. How much division was there in
that room and did anyone come close to going let's hold?
Speaker 2 (00:29):
I think the important thing is that we always have
good discussions. You know, we do have diversity of thought,
but it was the consensus and we reach consensus rather quickly.
Speaker 1 (00:39):
So where where we're and I was one of them
thinking a hold, where were the hold people wrong?
Speaker 2 (00:47):
Well? I think that the key thing right now is that,
you know, we do see well we've seen overnight the
old prices going up again, but we do expect inflation
to fall. But we're concerned that there would be some
lingering effects of this terrible CONFI in the Middle East
and how that is affecting New Zealand households and firms,
So we really wanted to ensure to bring inflation back,
and we've also seen good science that the economy is recovering.
(01:10):
So for us, the balance was really making sure inflation
goes back, making sure households get their purchasing power back,
while still supporting the economy, and we thought that the
twenty five business point hike was striking that balance between
those two.
Speaker 1 (01:24):
On that three strained answer, the third one being and
you mentioned that yesterday in your press conference, that's the
good news part the recovery. Of the three things you
were looking at, how much of a waiting are you
placing on actual growth?
Speaker 2 (01:38):
Well, growth, I mean, of course it's important because also
affects inflation, if affects employment and inflex wage growth. So
you know, we have a very clear mandate to bring
inflation back to the midpoint of the target range around
two percent, because that's how we get the purchasing power
back for households. But we also do take the consideration
(02:01):
not causing anyone it says unnecessary volatility, and what it
means is trying to make sure that we don't hurt
growth unless it's really really needed to bring inflection back.
Speaker 1 (02:12):
The pricing intentions fascinate mate, your suggestion being we're constrained.
You can't just go around passing prices on, but you
know it's happening. It's out there in the real world.
It is happening. Could you be reading this wrong?
Speaker 2 (02:27):
Well, I think that, you know, looking at all the
pricing intentions are important, and we do have some good information.
The firms are saying that, you know, they do expect
to hike prices, but not by a lot, and that's
what we're looking for, you know, inflation. Do you believe that?
Do you believe that?
Speaker 1 (02:45):
Well?
Speaker 2 (02:46):
I think it's differences across many businesses and firms, and
I think that people will make different decisions because cost
pressures are also very different across different firms. You know,
some are really affected by higher transport costs, but others
don't have much higher transfer costs. Some people are really
investing in things that increase productivity, and that means that
(03:07):
they can get more output without needing to high prices.
So there is differences, and what we're looking for is
on average, it should not be too high and weight
growth is still pretty sidue as tough for households, but
that's also why we need to get inflation down, but
some are effected by high cost precious some are less
(03:27):
and for us, it's striking that balance to get towards
that two percent. It's not exactly two percent, but it's
going in that direction and staying at the low and
stable level because we know it's also good for growth.
Low and stable inflation makes it easier for household and
firms to plan to invest, means purchasing power is better
and the sectors in New Zealand that's been hurting for
(03:49):
a while now. The exporters are doing rather well quite broadly,
but some of those smaller, medium firm sized firms that
are really dependent on the domestic demand, they are the
ones who've had a hard time and they are also
having a hard time because households have a hard time.
So getting inflation down will help with that purchasing power
and that demand towards those small and medium sized firms.
(04:12):
And that's what we're seeing is some parts of the
economy are performing really quite well and we want to
see that grows broaden. We're bringing inflation down will help
with seeing that broadening of growth in the New Zealand economy.
Speaker 1 (04:25):
A lot of feedback and it's not just this time around,
but this whole You guys are in Wellington. You're not
in touch with the real world. You would counter where, Ay,
we get out and visit businesses and we talk to businesses.
How many businesses do you actually talk to?
Speaker 2 (04:38):
Literally, that's a good question. I'm going to have to,
you know, actually calculate, because when I go out and
meet businesses around the country, sometimes I go and visit
one firm and look at their plant and and sometimes
I do a lunch and then there could be maybe
thirty forty businesses at the same time. So I don't
have the exact number for you, but we do go
(04:59):
and meet quite a few businesses. And it's also my colleagues,
so now you know, some of both the internal and
external embass members will join on some of the business
visits and do their own business visits. And then our
staff also do regular calls and business with businesses. So
next time around, I hope I can give you more
(05:19):
of a precise number, but it's important to us, and
we do get good information from meeting with them, because,
like you say, they do face different realities and some
of them, especially those I mean, I am rather impressed
by the way that the exporting firms are managed because
the global environment is still as you know, it's complicated,
(05:40):
it's uncertain, and many are managing to find new customers
around the world, finding new markets. They're investing in new
technologies to increase their productivity. So we're seeing some good
signs or some very competitive firms in New Zealand, and
we want to see that broadening now to those who
have also been strugged.
Speaker 1 (06:00):
I'm glad you said that, because they're going to introduces
the emotion of the economy.
Speaker 2 (06:03):
So are you.
Speaker 1 (06:04):
I'm surprised given all that was seen for Q two
when the war broke out, price rises, all the products,
all the doom.
Speaker 2 (06:10):
Are you.
Speaker 1 (06:11):
I'm pleasantly surprised at the robustness of what appears to
be a recovery and a reasonably quick one, are you.
Speaker 2 (06:19):
Yes, I am, And I also agree that it's nice
to see that resilience and seeing these firms all around
New Zealand. They know it's a tough environment, but you're
forward looking. They're thinking like we're going to find our
way through this, and that seems to be paying off.
You know, I met some of the firms they're saying like, oh,
(06:39):
we decided a few years ago we need to look
at broader markets, where can we go and not be
so dependent on one supplier, not be so dependent on
one client, And then when the world is being difficult
that it is right now that strategy is paying off.
And I think that shows the strength of the country
(07:00):
that we have those firms and that's really helping the
economy right now because they are keeping up overall the
growth and it has been weak and what we want
to see now. But you know, our mandate is really
to bring inflation down. But I do want to stress
the bringing inflation down is will in the end help
households because how inflation it does hurt, it does hurt
(07:23):
the households and getting it down brings purchasing power back.
Yes it does.
Speaker 1 (07:27):
Listen, I appreciate you telling you. I have a good
weekend on a Breman. The Reserve Bank government with us
this morning, Mike. She needs to have a look at counsels.
They've got the greatest effect on household spends and the
way of life. Well no they don't, but I take
your point, and the government is on top of that
with rate caps. Of course. Good commentary as always from
Tony Alexander in one roof this morning. We can't rule
out a scenario have only one more rate rise this
(07:48):
year and then an extended pause, so maybe September, possibly December,
depending on what happens. Isn't Mike this lifting of the
ocr inflationry. It affects floating rates, so generally business costs well.
Yes and no. You've got to look at the size
of the economy or the part of the economy, or
the amount of money that's floating, and generally it's more
fixed than it is floating, but the floating part is affected.
Speaker 2 (08:10):
Yes.
Speaker 1 (08:11):
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.
Back to the Reserve Bank. In their view of New Zealand,
the ink cashreak cashwreaiight hike is required. They argue inflations
and issue growth is here. There could also be an
issue of the prices get passed on too much, so
maybe one, possibly two more before the years out. Governor
Doctor Arna Brayman is with us.
Speaker 2 (00:14):
Good morning, Good morning.
Speaker 1 (00:15):
The consensus decision yesterday interested me because the market wasn't consensus,
it was heavily divided. How much division was there in
that room and did anyone come close to going let's hold?
Speaker 2 (00:29):
I think the important thing is that we always have
good discussions. You know, we do have diversity of thought,
but it was the consensus and we reach consensus rather quickly.
Speaker 1 (00:39):
So where where we're and I was one of them
thinking a hold, where were the hold people wrong?
Speaker 2 (00:47):
Well? I think that the key thing right now is that,
you know, we do see well we've seen overnight the
old prices going up again, but we do expect inflation
to fall. But we're concerned that there would be some
lingering effects of this terrible CONFI in the Middle East
and how that is affecting New Zealand households and firms,
So we really wanted to ensure to bring inflation back,
and we've also seen good science that the economy is recovering.
(01:10):
So for us, the balance was really making sure inflation
goes back, making sure households get their purchasing power back,
while still supporting the economy, and we thought that the
twenty five business point hike was striking that balance between
those two.
Speaker 1 (01:24):
On that three strained answer, the third one being and
you mentioned that yesterday in your press conference, that's the
good news part the recovery. Of the three things you
were looking at, how much of a waiting are you
placing on actual growth?
Speaker 2 (01:38):
Well, growth, I mean, of course it's important because also
affects inflation, if affects employment and inflex wage growth. So
you know, we have a very clear mandate to bring
inflation back to the midpoint of the target range around
two percent, because that's how we get the purchasing power
back for households. But we also do take the consideration
(02:01):
not causing anyone it says unnecessary volatility, and what it
means is trying to make sure that we don't hurt
growth unless it's really really needed to bring inflection back.
Speaker 1 (02:12):
The pricing intentions fascinate mate, your suggestion being we're constrained.
You can't just go around passing prices on, but you
know it's happening. It's out there in the real world.
It is happening. Could you be reading this wrong?
Speaker 2 (02:27):
Well, I think that, you know, looking at all the
pricing intentions are important, and we do have some good information.
The firms are saying that, you know, they do expect
to hike prices, but not by a lot, and that's
what we're looking for, you know, inflation. Do you believe that?
Do you believe that?
Speaker 1 (02:45):
Well?
Speaker 2 (02:46):
I think it's differences across many businesses and firms, and
I think that people will make different decisions because cost
pressures are also very different across different firms. You know,
some are really affected by higher transport costs, but others
don't have much higher transfer costs. Some people are really
investing in things that increase productivity, and that means that
(03:07):
they can get more output without needing to high prices.
So there is differences, and what we're looking for is
on average, it should not be too high and weight
growth is still pretty sidue as tough for households, but
that's also why we need to get inflation down, but
some are effected by high cost precious some are less
(03:27):
and for us, it's striking that balance to get towards
that two percent. It's not exactly two percent, but it's
going in that direction and staying at the low and
stable level because we know it's also good for growth.
Low and stable inflation makes it easier for household and
firms to plan to invest, means purchasing power is better
and the sectors in New Zealand that's been hurting for
(03:49):
a while now. The exporters are doing rather well quite broadly,
but some of those smaller, medium firm sized firms that
are really dependent on the domestic demand, they are the
ones who've had a hard time and they are also
having a hard time because households have a hard time.
So getting inflation down will help with that purchasing power
and that demand towards those small and medium sized firms.
(04:12):
And that's what we're seeing is some parts of the
economy are performing really quite well and we want to
see that grows broaden. We're bringing inflation down will help
with seeing that broadening of growth in the New Zealand economy.
Speaker 1 (04:25):
A lot of feedback and it's not just this time around,
but this whole You guys are in Wellington. You're not
in touch with the real world. You would counter where, Ay,
we get out and visit businesses and we talk to businesses.
How many businesses do you actually talk to?
Speaker 2 (04:38):
Literally, that's a good question. I'm going to have to,
you know, actually calculate, because when I go out and
meet businesses around the country, sometimes I go and visit
one firm and look at their plant and and sometimes
I do a lunch and then there could be maybe
thirty forty businesses at the same time. So I don't
have the exact number for you, but we do go
(04:59):
and meet quite a few businesses. And it's also my colleagues,
so now you know, some of both the internal and
external embass members will join on some of the business
visits and do their own business visits. And then our
staff also do regular calls and business with businesses. So
next time around, I hope I can give you more
(05:19):
of a precise number, but it's important to us, and
we do get good information from meeting with them, because,
like you say, they do face different realities and some
of them, especially those I mean, I am rather impressed
by the way that the exporting firms are managed because
the global environment is still as you know, it's complicated,
(05:40):
it's uncertain, and many are managing to find new customers
around the world, finding new markets. They're investing in new
technologies to increase their productivity. So we're seeing some good
signs or some very competitive firms in New Zealand, and
we want to see that broadening now to those who
have also been strugged.
Speaker 1 (06:00):
I'm glad you said that, because they're going to introduces
the emotion of the economy.
Speaker 2 (06:03):
So are you.
Speaker 1 (06:04):
I'm surprised given all that was seen for Q two
when the war broke out, price rises, all the products,
all the doom.
Speaker 2 (06:10):
Are you.
Speaker 1 (06:11):
I'm pleasantly surprised at the robustness of what appears to
be a recovery and a reasonably quick one, are you.
Speaker 2 (06:19):
Yes, I am, And I also agree that it's nice
to see that resilience and seeing these firms all around
New Zealand. They know it's a tough environment, but you're
forward looking. They're thinking like we're going to find our
way through this, and that seems to be paying off.
You know, I met some of the firms they're saying like, oh,
(06:39):
we decided a few years ago we need to look
at broader markets, where can we go and not be
so dependent on one supplier, not be so dependent on
one client, And then when the world is being difficult
that it is right now that strategy is paying off.
And I think that shows the strength of the country
(07:00):
that we have those firms and that's really helping the
economy right now because they are keeping up overall the
growth and it has been weak and what we want
to see now. But you know, our mandate is really
to bring inflation down. But I do want to stress
the bringing inflation down is will in the end help
households because how inflation it does hurt, it does hurt
(07:23):
the households and getting it down brings purchasing power back.
Yes it does.
Speaker 1 (07:27):
Listen, I appreciate you telling you. I have a good
weekend on a Breman. The Reserve Bank government with us
this morning, Mike. She needs to have a look at counsels.
They've got the greatest effect on household spends and the
way of life. Well no they don't, but I take
your point, and the government is on top of that
with rate caps. Of course. Good commentary as always from
Tony Alexander in one roof this morning. We can't rule
out a scenario have only one more rate rise this
(07:48):
year and then an extended pause, so maybe September, possibly December,
depending on what happens. Isn't Mike this lifting of the
ocr inflationry. It affects floating rates, so generally business costs well.
Yes and no. You've got to look at the size
of the economy or the part of the economy, or
the amount of money that's floating, and generally it's more
fixed than it is floating, but the floating part is affected.
Speaker 2 (08:10):
Yes.
Speaker 1 (08:11):
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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