Nicola Willis: Finance Minister on the inflation rate dropping to 2.2%, looking forward to the next Reserve Bank decision

The Finance Minister says there's more work to be done to get the economy growing. 

New Zealand's inflation rate is officially back on target at 2.2%, its lowest rate in more than three years. 

Nicola Willis told Mike Hosking she's already focused on looking ahead to the next Reserve Bank decision in November. 

She says they’ll be looking at how the economy is functioning and how monetary policy is transmitting through, and reducing interest rates further will be good for many businesses. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
So the theme of yesterday was with inflation at two
point two percent, it's over or is it? I mean,
questions remain around the non tradable figure, which is four
point nine and still an issue. I would have thought
then the question of what the Reserve Bank does next month.
Of course, Finance Minister Nikola willis with us.

Speaker 2 (00:12):
Good morning, Good morning mate.

Speaker 1 (00:14):
As you were celebrating yesterday as well you might because
you're the finance minister and a politician. Can I suggest
to you it never had to be this bad. We've
had three recessions, tens of thousands of people out of
work and a shed load of people bail on the country.
It could have been done better, couldn't it look look like?

Speaker 2 (00:28):
I'm absolutely with you. There is no question that the
last government fueled inflation. They are excessive spending meant that
inflation stayed higher for longer, which meant the Reserve Bank
then pranked interest rates higher than would otherwise have had
to have been the case, and we are feeling the
pain of that in our economy now. There was no
question about that. But I need to look forward because

(00:51):
my job is to set the conditions for future growth,
and I have said one of the consistent things growing
economies around the world have as they have low stifle inflation,
that allows for interest rates to be reasonable, That allows
businesses to borrow, that allows mortgages to have the people
with mortgages to have spare cash. So we have set

(01:11):
the conditions for growth. So it was a great day, right.

Speaker 1 (01:14):
What's neutral for a cash rate? Do you reckon?

Speaker 2 (01:18):
Look that that depends. There are lots of factors that
go into it. What people across the world are saying.

Speaker 1 (01:23):
Give me a number for numbers of New Zealand job.

Speaker 2 (01:27):
No, No, I'm not going to I'm not going to
do Adrian's job. You know, we've had this discussion before.
I don't do that job. He does his job.

Speaker 1 (01:34):
Well, that's part of the problem though, Hence my first
question is it does he do his job with three recessions?

Speaker 2 (01:40):
Look, there is no question as I said that New
Zealand has come through a very difficult time. We've had
highly restrictive monetary policy, but of course that followed a
period in which we had highly loose monetary policy, in
which we did huge amounts of money printing quantitative easing,
where late rates were kept low for a very long time.

(02:01):
And I've been openly critical in the past of the
Reserve Bank's decision making following COVID, where I think it
was very very loose in its monetary policy combined with
very loose fiscal policy from the government, and that did
lead to a situation which has taken a long time
to unwind. It's been free and a half years.

Speaker 1 (02:19):
Yes, I know, but the here and now, which is
where you are right now, fifty or seventy five, and
if it's seventy five, that's tantamount to admission of a mistake.
He's overcooked, it isn't it. I'm worried about the number.
The number was lower than what they expected, and I
just wonder if it's still going down too low, too slow.

Speaker 2 (02:33):
Well, look, here's the way I look at it. When
I look ahead to the next the next decision in November,
what is the Reserve Bank governor going to be looking at.
He's going to be looking at how the economy is
functioning and how monetary policy is transmitting through and if
he chooses to reduce interest rates further, that will be

(02:54):
good for many many businesses who will then think, yep,
I'm going to actually borrow and I'm going to expand
and I'm going to buy that new machinery and I'm
going to start that overseas market. So I need to
look forward, and I know that the conditions we need
for the growth that will lead to the hir incomes
the better choices that I want New Zealanders to have
is low, stable inflation, interest rates coming down.

Speaker 1 (03:15):
So mate, since we last talked, you open those books.
I can't remember your word, but it was sober or
depressing or miserable or something one sixty seven billion in
but you're spending one to eighty Why are you spending
so much money when you don't have it as a
conservative chancellor?

Speaker 2 (03:28):
Because we had one of the most extreme increases in
government spending that New Zealand has seen under the last government.
It went from under thirty percent or like twenty percent
of the gross domestic product up to as god as
high as thirty four percent. And we are now unwinding that.
And that is not something that we can do immediately
overnight without causing massive pain to New Zealanders. But we

(03:51):
have set out a plan that sees us unwinding that
over time real restraint with the smallest operating allowance. Since
Stephen Joe lower operating allowances in the future, that will
require us to keep making pretty difficult choices to put
the lid down. That's important that we do it for
New Zealand because actually having well managed finances that ensure

(04:14):
that we're not racking up huge amounts of debt is
important for the way we're viewed internationally. It's important for
the interest rates New Zealand is pay. It's important for
my kids so that they don't look at me in
the eye and say, Mum, you throw all the debt
at us. So we are working on that. We are
doing it gradually, we are doing it responsibly, We're doing
it the right way.

Speaker 1 (04:31):
Give it between in ten seconds. You worried about ACC.

Speaker 2 (04:35):
I do want to see ACC managing its costs much better.
ACC contributes to New Zealand's deficit considerably. But also when
ACC is not managing its costs well, every single worker
pays a higher levy and I don't like those costs
continuing to go up five percent every year or more

(04:55):
when it comes to some of the fees. So yeah,
we're taking a good hard look at ACC, make sure
that it is well run and that they are keeping
their costs down.

Speaker 1 (05:04):
As indeed will we because we've got the the head
of BASc on after seven thirty Appreciate time, Nikola will
the Swineance Ministers. 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