Nicola Willis: Finance Minister on the OCR, inflation, ongoing impacts of the conflict in the Middle East

Too many 'ifs' around the Iran war for our Finance Minister to guarantee all will be well down the track. 

There are differing reports as to whether the Strait of Hormuz is actually open following a ceasefire deal between the US and Iran.  

New Zealand has more than 60 days of petrol and 50 of diesel. 

Nicola Willis told Mike Hosking a sustained ceasefire and movement of ships paints a better inflation picture, but it all depends on if this happens.  

She's also conscious that even when the strait opens, major energy market disruption will persist. 

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Episode Transcript

Speaker 1 (00:00):
So big day form New Zealand in because the ceasefire
kicked in and the Reserve Bank gave their take on
where we're at. Oil's down. Of course, Cashwright unmoved the
rb DOC inflation now peaking at four point two for
Q two, but it was a review, not a statement,
so forecasts. Some forecasts were missing. Nicola Willis, Finance Minister,
back with us. Good morning, good morning. I tell you
what the sound of Breyman I like the cut of
a jib. What do you say?

Speaker 2 (00:20):
She's very good at her job. We've made a good
appointment there. She communicates clearly, succinctly. She knows what she's
talking about.

Speaker 1 (00:27):
She slightly hawkish. I thought yesterday she's prepared to see
through some stuff, and I think that's wise, isn't it.

Speaker 2 (00:34):
Well, Look, I think central banks around the world learned
some lessons during COVID, and many of them did look
through initial shocks, but then didn't respond fast enough when
inflation became more embedded into expectations and core inflation and
inflation hung around for a long time, and in New

(00:55):
Zealand's case, we were thirty three months outside our target band.
That's a long time. That creates the cost of living crisis,
so I wouldn't be surprised if the Central bank here
was reflecting on all of that.

Speaker 1 (01:06):
I'm optimistic about the ceasefire. I think it'll hold ish
and things will ish come right. Therefore, the secondary inflationary
issues that she may or may not be worried about
may not come to pass.

Speaker 2 (01:17):
What's your read, Well, my read is pretty much exactly
what you're saying, which is this all depends on what
happens in the Middle East. And if that conflict, that
ceasefire does get sustained, and the Strait of Horn moves
opens and ships are moving fast, then the inflation picture

(01:37):
looks a lot better. But there's a lot of ifs there.
And one of the things that I'm particularly conscious of
is even when the straight reopens, you've still had disruption
to the energy market in a big way. That's going
to take a little while to unwind. There's been destruction
of energy assets throughout the Middle East, and so there
will be some residual and lingering effects. But with the

(01:59):
straight open, everything is a heck of a lot better
than the opposite.

Speaker 1 (02:04):
So let's assume the positive, and this was a six
week less than blip and it will come right incoming.

Speaker 2 (02:10):
Right.

Speaker 1 (02:11):
Are you seeing yet worrying signs that people have flipped
on that cost to the consumer as fast as they
possibly could, and may may have been able to hold
their powder a little bit longer than they did have.
But we've got trouble here or not.

Speaker 2 (02:23):
Well, Look, it's a mixed picture. I'm hearing some different
things from businesses and consumers. On the one hand, you
are seeing that many firms have already put a fuel
adjustment factor on their goods or their services, and that
factor has been charged weekly, not monthly, so they've been
increasing that a lot. Some businesses have said to us, look,
we actually think some of the companies are taking the

(02:45):
mickey a bit. They've passed on so much so quickly.
Then on the other hand, I've heard from some businesses
who are saying, look, we just can't pass on the
cost because we cannot recover that from our customers or
they will stop being our customers. So it is a
mixed picture, and that's where you've just got to see
the data to know what's really going on.

Speaker 1 (03:04):
I know you're not going to bag Australia, but there
was a poll out yesterday. Eighty three percent of Australians
love taking that tax off the petrol, even though they're broke,
even though they've got a trillion dollars worth of debt,
even though it's economically irresponsible. When you do it, they
love it. The pressure must have been on you to
do something more than you've done.

Speaker 2 (03:21):
Tell you what they don't love, Mike, and that's when
you put it back on again. And that's why Anthony
Albineasi and Jim Chalmers will have to do. It's what
they've said they'll do, and that will both be unpopular.
At the time. Chris Hopkins went through it, I think
he's even reflected that, you know, the last government tried
to put it on for three months. It ended up
being fifteen months, I think, And I think he reflected

(03:44):
at the time that putting it back on was not
easy because of course it also hurts people, but it
also leads to a little blippin inflation as well. So
to me, it's yes, of course short term gain, but
you never avoid the longer term pain.

Speaker 1 (03:58):
No, you do not nice to talk with Nicola will Us,
the Finance Minister.

Speaker 2 (04:01):
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