Steven Joyce: Former Finance Minister on the cuts to the OCR and the current state of the economy

It’s a tale of two economies, for now. 

The Reserve Bank is forecasting more OCR cuts next year, sooner than previously expected, after yesterday's 50-basis point cut to 4.25%. 

But Governor Adrian Orr says growth remains weak globally. 

Former Finance Minister Steven Joyce told Mike Hosking there are green shoots in the economy, but they're confined to specific sectors like commercial property, dairy, kiwifruit, and the tech sector. 

He says big-employing industries like service and retail have been flat as a pancake, alongside residential property and construction. 

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Episode Transcript

Speaker 1 (00:00):
So fifty points. It was another fifty likely in February.
The forecast for growth have been cut. More jobs still
to be lost and that's the final word from the
Reserve Bank for the year. Former Finance Minister Steven Joyce
with us very good.

Speaker 2 (00:09):
Morning morning, mikel.

Speaker 1 (00:11):
Those growth trimmed forecasts. Some some's not right here. There's
a lot of cuts, and we're supposed to be fizzing.
We're not fizzing.

Speaker 2 (00:17):
What's happening, thanks time. Unfortunately, you are seeing some green
shoots of growth from what I can see in areas
like commercial property not residential. You're seeing things. And obviously
the dairy industry is starting to go Kiwi fruit's been solid.

(00:38):
Tech sector is pretty solid. But you know, big, big
employing industries like services and retail of being flat as
a pancake, and of course residential property construction and so on,
and that's just going to take time. Unfortunately. You know,
we're dealing with a lot of hangover from our period

(01:00):
that goes right back to the beginnings of the pandemic.
And frankly, I would say a heavy footed governor who
went really hard early, then went really hard up and
is now coming out of the way and it's just,
you know, for a lot of balance sheets that's just
been too bloody heart.

Speaker 1 (01:16):
He admitted that to a degree yesterday, not as much
as he should have, but he got there. He got
there in the end as finance minister. If you were
finance minister, would you have you wanted to have seen
seventy five? And do you listen to him with confidence?

Speaker 2 (01:30):
Well, if I was finance minister, of course i'd listened
to him confidence. Who's a Reserve bank governor. But I'm
not the finance minister's I can listen to a certain
amount of skeptism. The look, I truly don't think yesterday
is is sort of much either way. It's point five now.
Point five in February could have been point seventy five.

(01:51):
But in some ways that might have spooked more people
that have actually helped, because they would have gone, oh,
you know, it's even worse than we thought. And the
real problem we've got right now, there's a whole lot
of people aren't spending because they're still not confident that
the pathway ahead for their businesses is solid enough. The
part of its confidence right now, if he really wanted

(02:13):
to know to sort of break them ald a little bit.
Then I would argue they should come should have come
back three weeks earlier at the end of January and
done something different there, just to show that they were
on the case. But I think it's probably not much
of a muchness in the overall scheme of things. It's
going to come right to some degree next year, but.

Speaker 1 (02:33):
Not not as right as they thought it was. And see,
here's my consumer with the politics of it all. So
they've Luxing and Co. Put out a press release two
and a half seconds after Adrian speaks, and it's almost
like they are now in cahoots, like they're desperately looking
for Adrian to be right for political purposes so they
can then go and sell this message to the public.
And it's just it isn't there.

Speaker 2 (02:54):
Well, we all want Adrian to be right in the
sense of helping get the economy game, but I think
probably for the government it's it's a case of having
to show even more urgency. And some of the things
that I've been working on, things like the electricity market,
which has a sting in the tail potentially next year
early next year, the banking sector, where probably the Reserve

(03:17):
Bank has got off pretty lightly so far in that context,
and the government has to form some strong views but
also attracting international investment. Quite a lot of talk so far,
not a lot of action. Those things are the sort
of things that need to move quickly to sort of
give more confidence, because it's confidence we're looking for in

(03:37):
the economy now. And as I say, there's some green
shroops appearing now, I don't want to be too doom
and gloom because there are you talk to some sectors
things are starting to move finally, but there's plenty of
sectors yet, and some of them have had structural changes
that are not going to go back. So retail's had
a structural change with all these international websites and so
and it's going to make life more difficult. But I

(03:59):
think the government's got to show probably going to take
five minutes off over Christmas and then show renewed their
urgency in the first half of next year. And frankly,
the governor should be reflecting on just how Hardy pushed
interest rates up, because these things have a lag and
he just went so hard for so long. In the

(04:20):
same way he went down so hard for so long
that actually, you know a lot of people's balance sheets
are really, really weak, and unfortunately that means the recovery
is slower and longer because they don't have the capacity
to invest.

Speaker 1 (04:32):
Very well said as always Stephen Joyce, former Finance Minister,
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