Mike's Minute: Here’s what the Reserve Bank have to do today

I would have thought the NZIER numbers yesterday sealed the deal for the Monetary Policy Committee and today's call.

The NZIER was the last substantive look at the economy, and what it shows is we have real trouble. Quite possibly recessionary trouble.

They think Q3 was certainly flat, if not in contraction. If it is contraction, you can add that to the Q2 contraction and that, once again, is a recession.

How many of these do we want? In the Reserve Bank's case how many do they want, given they can actually do something about it?

They are two particularly poor, if not concerning, parts of the data.

1) More jobs are being cut. So that’s your unemployment rate heading higher still, shattering the idea that we may have reached peak.

2) Inflation expectations are heading north of 3% – remember the band is 1-3%.

The trouble with that is the 3% isn't coming from growth, which is traditionally what you want.

The term for no growth but increasing inflation is stagflation.

We could re-litigate, again, how badly the bank have handled this, how they missed Q2 despite that being their job, how they kept telling us the stimulatory effects of lower interest rates were here, or just about here, or here any day now, and if in fact they were ever here they got swallowed by the councils, power companies and insurances giants.

Anyway, surely 50 basis points is a given.

It isn't of course. There remain those who argue 25 points should do it today and another 25 next month and we can all head off to Christmas, fingers crossed.

My argument today is about more than stats and numbers, it's about the psychology of an economy and a country.

The Government have tried, but largely failed, to jolly us along and to sell us the story of recovery. The Reserve Bank have spectacularly failed.

But they can help today with 50 basis because it says we got it wrong, we missed it, we need to fire this joint up and here is our shot. And it’s a big one.

Go on Christian – be bold. 

It's your second last time. Don't die wondering.

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Episode Transcript

Speaker 1 (00:00):
I would have thought the Nzier numbers yesterday sealed the

(00:02):
deal for the Monetary Policy Committee in today's call, the
inztier was the last substantive look at the economy, and
what it shows is we've got real trouble, quite possibly
in fact, recessionary trouble. The quarter IEQ three they think
was certainly flat, if not in contraction. If it's in contraction,
you can add that to the Q two contraction, and
that once again is a recession. How many of these

(00:23):
do we want, and in the Reserve Bank's case, how
many do they want given they can actually do something
about them. Two particularly poor, if not concerning parts of
the data show one more jobs being cut, So that's
your unemployment rate heading higher, shattering the idea that we
may have reached peak. And two inflation expectations are heading
north of three the band, remember is one to three.
Trouble with that is the three isn't coming from growth,

(00:44):
which is traditionally what you want. The term for no growth,
but increasing inflation is of course stagflation. We could relitigate
again how badly the bank have handled this, How they
missed Q two despite that being their job. How they
kept telling us these stimulatory effects of lower and tes
traits were here or just about here, or here any
day now. And if in fact they were here, they

(01:05):
got swallowed by the councils and the power companies and
the insurance giants. Anyway, surely fifty points as are given, well,
it isn't. Of course, there remain those who argue twenty
five should do it today, in another twenty five next month,
then we can all head off to Christmas fingers crossed. Ah.
My argument today, it's about more than stats and numbers.
It's about the psychology of an economy in a country.

(01:26):
The government of tribe but largely failed to jolly us along,
to sell us the story of recovery. The Reserve Bank
have spectacularly failed, but they can help today with fifty
because it says we got it wrong, we missed it.
We need to father this joint up and here is
our shot, and it's a big one. Go on, Christian
be bold, second to last time, don't die wondering. For

(01:49):
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