Nick Tuffley: ASB Chief Economist ahead of today's GDP announcement

The economy is expected to look better than earlier predictions. 

Figures —due out from Stats NZ this morning— are expected to show the country's GDP grew 0.7% for the first quarter of the year.  

It's slightly higher than 0.4%, predicted earlier this year. 

ASB chief economist Nick Tuffley told Mike Hosking things are expected to slow through the middle half of the year. 

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Episode Transcript

Speaker 1 (00:00):
So odd day economically today, because it's entirely possible we'll
get a GDP number that simply reminds us of the
good old days. The key one data will most likely
show growth many say about zero point seven. This is
for Gen Feb and March. Of course, it's what happened
after that that's the issue. Nick Toughley is asb's chief economist,
back with this, Nick, morning to you.

Speaker 2 (00:16):
Good morning.

Speaker 1 (00:17):
Are you on zero point seven?

Speaker 2 (00:19):
Yes, we are indeed so lining up before we were
what we saw last time, and that would be a
pretty good growth rate if we could actually continue that
sort of year and year out.

Speaker 1 (00:28):
Yeah, wouldn't it just But we're not going to And
that's the problem, isn't it.

Speaker 2 (00:32):
Yes, we do see things sort of slowing a bit
through the middle parts of the year after that, and
we've just got that general challenge of productivity growth. It's
still pretty slow, and population growth has slowed as well.

Speaker 1 (00:42):
And April, May and June, what do you reckon for
the second quarter? What's your vibe on what's just happened
to us?

Speaker 2 (00:48):
Yeah, we're down to about sort of point three point four.
So look the early parts of the year, in late
last year had good tailwinds out of basically that's key.
Export sectors were all sort of reallyiring, and that also
tap off a little bit. And what we are waiting
to see is it's us, our householders, getting our wallets
out and starting to spend money a bit more.

Speaker 1 (01:10):
Okay, are you still confident this is the RB line
that hang on and more money's coming and the interest
rates are dropping and this is going to happen. Do
you see that actually unfolding?

Speaker 2 (01:20):
Well, we do in the sense that there will be
a lot more people refixing their mortgage at a lower rate.
So one thing that I do have a bit of
a question mark about is the housing market is a
bit of a barometer of how low people think interest
rates are. And net market's still looking pretty soft, as
we saw in some figures out there. So that question
mark about how low do we need rates to go

(01:42):
to stimulate your economy versus the fact that in the
short term also facing inflation still remaining pressly.

Speaker 1 (01:47):
So it's a bit of buind That was my next question.
So the prices are going up, powers up, waters up,
rates are up, insurance is up. So yes, I've got
a cheaper mortgage, but guess where it's going.

Speaker 2 (01:56):
Yeah, there is an element of that, But what we've
got to remember is that a lot of the other
sort of more market driven domestic inflation is actually continuing
to slow. But we are getting some of those rebounds
and things, and one thing the Reserve Bank's going to
be mindful of. We could be hitting three percent inflation.
Some of that's being driven by just sort of hopefully
one of things, but food and fuel the things you

(02:16):
buy all the time, and you tend to remember the
prices of those.

Speaker 1 (02:20):
You're adjusting your view on neutral for the RB Well,
we still.

Speaker 2 (02:24):
Think somewhere around about that sort of three three and
a quarter percent, So it's sort of roughly where we
are now. It's just the question mark is do we
need to go below neutral given the headwinds that are
potentially coming globally And it's a case of the Reserve
Bank just having a bit of a white knuckle ride
in the short term over the spike in inflation and
will that have us going here we go again? Seven percent?

Speaker 1 (02:45):
Good stuff, Nick, Appreciate your company always, Nick Tuffley asb
Chief Economists. For more from the Mic Asking Breakfast, Listen
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