Nicola Willis: Finance Minister on the OCR rise, petrol prices rising due to the US-Iran strikes resuming

The Finance Minister's again reiterating the volatility of oil prices as fighting resumes between the US and Iran. 

US President Donald Trump's declared the ceasefire is over as both sides accuse the other of breaching the terms of the ceasefire agreement.  

American forces have hit dozens of Iranian targets, while Iran's fired drones at US bases in response.  

Finance Minister Nicola Willis told Mike Hosking she'd just been celebrating falling petrol prices. 

She says in the past 24 hours, oil prices have jumped 5%. 

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Episode Transcript

Speaker 1 (00:00):
So twenty five points, maybe one or two before Christmas
still to come. The great cash rate debate rages, of course,
as the RB argues one, inflation still needs to be contained,
but two growth is real and they don't want those
pesky price rises to cause new trouble. It was consensus
as well, which I thought was interesting. The governor shortly
but the Finance Minister Nicola Willis first, good morning.

Speaker 2 (00:18):
Good morning man.

Speaker 1 (00:19):
So that consensus vote versus the market, which was heavily divided,
did that surprise you.

Speaker 2 (00:25):
Well, what the committee made clear in their statement of
meeting was that they thought that lifting now would prevent
them having to go harder and faster later, And so
I wasn't surprised because actually the markets had essentially already
priced in a hike. The question was around timing. But
you haven't seen a big leap in fixed rates overnight,

(00:46):
and I think that reflects the fact that the market
had already kind of affected this.

Speaker 1 (00:49):
In At what point would you be worried before the
end of the year if there was two more or
one more or no more.

Speaker 2 (00:55):
Well, as is always the case, it depends on economic events.
And while I've been selling as I'm sure many New
Zealanders have been the big fall and the petrol price
at the pump, and how exciting that is for reducing
prices across the economy. Of course, just in the past
twenty four hours we've seen the price of oil leap
up five percent as the skirmish in the Middle East continues.
So there's just a lot of unknown factors, and I

(01:18):
think it's very important the Reserve Bank respond to the
actual data and information they receive. We still don't have
the full information about what happened in that three months
when the crisis was peeking, how high actually did inflation go,
what did happen with growth? And until I've got that information,
it's pretty difficult to guess what the right response through
the ocers.

Speaker 1 (01:38):
I'm sure you're pleased, but are you at all surprised
that part of their equation yesterday was about growth? They
do see growth. It is real. You're seeing some amendment
in Q two. A lot of people said, now it's
going to be a disaster. No one says that now.
Could we sure it'll be flat, might even be slightly backwards,
but growth is real. It's back that's all good. But
does it surprise you well?

Speaker 2 (01:59):
That is this silver lining and yesterday's statement. I'm never
going to be out there cheerleading for interest rate rises,
but at the same time having the Reserve Bank confirm
and sober terms that the government's assessment that the economic
recovery is underway is good to see. Only we had
a good three month starting the year. We got put

(02:19):
off the pace by events in the Middle East, but
the consensus among economists is actually we're going to bounce
back strongly, and that's really positive because that's where income
growth will come from. That's where jobs will come from,
that's where opportunities for New Zealand businesses will come from.
And that's our government's plan. Get the conditions right so
the economy can grow and people can get ahead and
life in New Zealand can be more affordable.

Speaker 1 (02:41):
My concern with what they said yesterday is is this
idea that the economy is so constrained that you can't
pass price increases on. I don't see that. I see
the opposite in the real world. I worry at times
whether they're in the real world. I mean, prices are rising,
you can't deny that, and that's inflationary, which is part

(03:01):
of the problem. Isn't it.

Speaker 2 (03:03):
Yes, prices are rising, but if you look at recent
survey data, what businesses are saying is that their pricing
intentions i e. How much they intend to increase prices
has reduced somewhat. And I think that reflects the reality
that many businesses have kind of absorbed what happened during
the Middle East period and gone. Actually, we can't afford

(03:24):
to pass that on to too many of our consumers
too hard and fast, because actually they'll walk away, they'll
stop buying our products or services. And that's actually what
you want to see. You don't want to see pricing
spin out of control and firms to be taking complete
advantage of events internationally. That hurts all of us. You know. Ultimately,
inflation is the huge robber of people's back pockets, of

(03:46):
their savings, of their investments, and keeping inflation under control
is the biggest thing we can do to control the
cost of living. There is a bank, have that mandate,
they've got to deliver on it.

Speaker 1 (03:55):
Interesting thing will end up at neutral, at maybe three,
maybe a smitch high whatever. So I compare it Australia
well into the fours. They've got inflation problems, they've got
job problems. They've got growth problems. You saw that OECD
report this week, the Deloitte report this week. Do you
think as much as you made grin and go look
at Australia, they're all coming back home. Are we a
net loser or net gainer if Australia and the tide

(04:15):
turns and they turn out to be a loser in this,
do we win all lose out of that equation?

Speaker 2 (04:18):
Well? Well, the strength of the Australian economy matters to
us because we export so much there and we're essentially
a shed market. On the other hand, I'm competitive by nature, Mike,
and when our economy is doing better than Australia, I
feel good about that. I love welcoming Kiwi's home. I
love hearing Australian businesses saying, actually setting up shop in
New Zealand looks like a good idea right now. They're

(04:39):
not going to slam a capital gains tax on me.
I like hearing from young New Zealanders that actually they're
seeing good prospects in New Zealand. Those are all positive things.
And ultimately, if more firms want to locate in New
Zealand and more activities happening here. That's good. We're always
going to compete with our big cousin.

Speaker 1 (04:58):
Have you read Kate McNamara's piece on the Golden Visa
this morning?

Speaker 2 (05:01):
I have not read that book.

Speaker 1 (05:02):
It's worth it. So she reflects on a Minter Ellison
Rudd Watts report. So the money coming in is good,
it looks good, but it's shallow, shallow money. They're not
immersing themselves in New Zealand the way they should. Their
argument from this reporter is that they're being whacked with
tax So this is I mean, you'll be well aware
of it. That's offshore holdings and equities and all that
sort of stuff. New Zealand is returning. They've got international investments,

(05:25):
so they're whacked over there. They're whacked here and that's
holding them back. Do we need to do something tax
wise to warm them up?

Speaker 2 (05:33):
Well, we have taken measures in each of the last
two budgets to address those foreign Investment Fund rules, which
her Peace likely is referring to, because we recognize that
that is a challenge for people who are moving their
capital to New Zealand, is that the taxing of it
any holdings offshore. So we have made steps at the
margins to improve that position. We recognize it's important, but

(05:56):
there is a line we can't cross, which is creating
the opportunity for peace to exploit loopholes in our tax
system so that we lose our tax base. So that's
the balance that we're working to strike. What I hear
anecdotally from those of moved money here with a golden
visa is that it's not just the initial investment that counts.
It's the fact that they then go on to make
subsequent investments because they get to know our business community better,

(06:19):
they see more opportunities in New Zealand once they're on
the ground. So I'm really positive about the prospects for
that visa.

Speaker 1 (06:25):
Okay, have a good week in Nichola. Willis the Finance Minister,
and the aforementioned is in the Herald this morning. Tax
settings risk undermining government's Golden visa success. In essence, it's basically, sure,
we'll give you some money, but we'll park it in
a bank you and some interest. We don't love New Zealand.
We'd like to love New Zealand, but you're making it
a bit hard. That's the gist of it. But read
the whole thing is well worth it.

Speaker 2 (06:44):
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