March 10, 2025 • 8 mins
New Zealand is hoping for an economic reprieve - but experts warn that's less likely to happen this year.
Donald Trump's ascension to the presidency has generated plenty of economic concern, with many worried it could contribute to the ongoing downturn.
HSBC chief economist Paul Bloxham explains further.
LISTEN ABOVE
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Right now though it is time for well, he's the
most famous economist on this program. I'll say that, for sure,
New Zealand is desperate for an economic recovery. But with
international market wobbles and fears of a Trump session, which
is a Trump induced recession, I'm told in the US,
how vulnerable are we and should we temper our expectations.
(00:21):
Paul Bloxham as HSBC's chief economists. He's in the country
from Sydney. It's great to have you in studio, Paul.
Good evening, great to be here. Do you how obsessed
are you with following what Trump is saying every day?
Speaker 2 (00:33):
It is my day job to keep up with what
is going on, and it is certainly fast paced, to
say the least. I get actually quite.
Speaker 1 (00:41):
A few clients.
Speaker 2 (00:41):
I do lots of presentations and I've been doing them
here this week as well. And they say, you know,
it must be tough to be an economist because there's
so many moving parts and so much happening. And I say,
because I'm a contrarian, of course, I say, no, it's
a great time to be an economist because there's such
a so much going on, and if anything, the economics
framework is surely like one of the ones that you've
got to use to fit the facts together to make
(01:02):
some sense of how it goes so and how and
what you should think about it.
Speaker 1 (01:05):
And so it's kept me busy, all right, Well synthesize
it for us, then is the answer here? Basically, there
is so much going on that it's it all equals uncertainty,
and uncertainty is bad.
Speaker 2 (01:18):
There's an element of that story. Certainly, when things chop
and change a lot, it's difficult for businesses to be
able to know which way to move are they going
to you know, where are they going to invest, where
are they going to hire? And I think you're starting
to see that in some of the business surveys, you know.
So that's one aspect of this story. But there's a
lot of elements to what's being delivered. There's a trade
policy element. That's the one that gets all the attention,
(01:39):
which is sort of trade tariffs and what's been happening
with those, But there's also others. There's the deregulation story
and tax cuts that they're proposing as well, So you
sort of have to balance out all of the bits
of the overall story. I think I think net we're
looking at you know, that there's upside risk to US inflation,
and that's something we need to think about in terms
(02:00):
of global interest rates and what it means, and the
US dolar which has remained strong. And I think there
is some risk to US growth from all of this,
But the major thing is it has a flow on
effect to the rest of the world. So the risk
overall to the global economy is probably tilted to the downside.
So those are the ways, at least some guideposts for
thinking about what's going on. I think, of course here
in New Zealand, you want to think about what it
(02:21):
means for New Zealand, Well, you know, I think the
direct impact is actually fairly small in the scheme of things,
the trading relationships fairly small. New Zealand sells a lot
more into the Asian markets and so on, and so
I think it's a fairly small effect overall, but it's
not insignificant. But I actually think New Zealand's in doing
a little bit better. I mean, I think this year
(02:42):
you're going to see an upswing in the New Zealand economy.
Speaker 1 (02:44):
I think, well, I think that's what everyone's worried about.
Is we all feel the same way, but we're worried
someone's going to come and eat our lunch. You know,
there's going to be a Donald Trump shaped bite out
of our sandwich that we were expecting to eat this yet.
Speaker 2 (02:58):
So I think you've got a couple of things going
for you. One of them is, of course, that inflations
come down enough now that the rbnz's cutting interest rates,
and not just by a little bit, they've cut interest
rates already by one hundred and seventy five basis points.
That's quite a lot of stimulus that's starting to pour
into the New Zealand economy. I think you're seeing that
showing up in surveys, consumer sentiment surveys, and so on.
So that's one tailwind. And the other tailwind you've got
(03:19):
is that well, dairy prices have risen, meat prices are elevated,
you've got more volumes, Your terms of trade is positive,
so you're going to get a national income tailwind from
that story. And both of those things we think will
lift growth. After a pretty tough year last year in
terms of the economy contracting, I think you're going to
get quite a decent bounce back through this year pretty
strong bounce back with if you look at it through
(03:42):
the year. And so those things are at work, and
as you say, I guess there's risks out there from
the global story. But one of the things to keep
in mind is you're tied to the China story a lot,
and China is not able. China story is pivoting more
towards the consumer. So instead of being as driven by
metals intensive activities like building factories and building property, they
(04:03):
can't do as much of that. They've already done a
lot of that, but they're pivoting their own stimulus measure
towards the consumer. If the Chinese consumer picks up, which
is part of what we think is likely, then that's
actually a positive for New Zealand. So there's a few
tailwinds here.
Speaker 1 (04:16):
You talk about the Reserve Bank, and you've been at
this conference in Wellington last week where all the nerds
from central banks around the world went and had a
little chat. What did you do? What survivee You picked
up there about Adrian or I mean, was this quite
a shock for people in the money economy world.
Speaker 2 (04:34):
I'd think that everyone was shocked by what happened. I
think that's a reasonable surmise. I think the conference was
very focused on a celebration in a way of the
fact that this is the central bank, the RBNZ, the
first central bank to have adopted inflation targeting. They did
that thirty five years ago. And I know your audience
will say, well, it's inflation targeting. How good's it been. Actually,
it's been a really robust system for being able to
(04:57):
manage cycles and economies. And not only has it well here,
but it's been in New Zealand led the way. The
RBNZ was the first central bank to do it, and
then the other central banks around the world have all
adopted the similar sorts of strategies, including the RBA and
the Federal Reserve and the Bank of England and so
you know, New Zealand was where where all this started.
It's it's actually it's the best, the best system available
(05:18):
for central banks to manage economies. It's not perfect, and
you can learn a lot still, but it's it's it's
the way that central banks go about it. So I
think that's a lot of what the conference was really about,
was sort of going and looking at how well it's
performed and how how central bankers can do it better
in the future.
Speaker 1 (05:34):
One of the things you're one of the biggest complaints
you get about this targeting of monetra the way monetary
policy operates is that you're taking money away. You're taking
money out of people's pockets to try and dampen down,
you know, demand and try and have an effect on inflation,
and that money just sort of disappears, you know, Like
there are people who say, oh, why don't we have
(05:56):
a different system where that money would be put into
some kind of saving sphere call or something rather than
just sort of arbitrarily disappearing into the ethos when the
reserve bankups the ocr.
Speaker 2 (06:08):
Well, there are a number of reasons. I mean, the
first one is you're absolutely right to describe it as
you're lifting and lowering. I might add there've been lowering
interest rates recently, so actually what they're doing is actually
allowing people more income to spend. They're trying to get
the economy to pick up because inflation has come down.
But you are setting a policy rate to try to
manage the cycles in demand. If demand's picking up too much,
you're slowing it down by lifting rates. And likewise, if
(06:30):
demand has slowed too much, you start to lower interest rates,
and you guide that by looking at the inflation rate,
which balances that out. You're right absolutely that this is
not the only way you could do things. You could
actually use your fiscal policy tools. You could set taxes
and spending by government and so on, and try and
complement what you do in terms of managing that cycle.
(06:50):
It doesn't have to just be that you'd use monetary policy.
But the way we've gravitated, we've gravitated to a system
whereby the central bank is independent and it sets policy
to try and manage that cycle. Because well, fiscal policy
doesn't always end up being set in a way that
manages the cycle as effectively. So that's the system we have,
and it works. It's not perfect, as I said, but
(07:10):
it works. It works fairly well. And this was the
first country to have adopted this system that every you know,
all the other countries around the world have effectively moved
towards over time.
Speaker 1 (07:20):
I'm not sure it's something we're ready to sing and
celebrate about just at the moment, only because we've been
recently scarred.
Speaker 2 (07:26):
That's true, I know. But it's worth keeping in mind
that interest rates are now coming down exactly, and they're
probably going to come down a bit further yet, and
that's going to start to stimulate. That is already starting
to stimulate the economy into an upswing, and that's a
that's a positive. Inflation was the major problem. Inflation's come
down now it's sitting around the midpoint of the rbnz's
target band, so they've been able to lower interest rates
(07:47):
and start to stimulate the economy.
Speaker 1 (07:49):
Paul, thank you very much for coming in. Great to
see you. Thank you. Paul Bloxam, Hsbcchip Economists with us
in studio. For more from Hither Duplessy Allen Drive, listen
live to news talks it'd be from four pm weekdays,
or follow the podcast on iHeartRadio
Right now though it is time for well, he's the
most famous economist on this program. I'll say that, for sure,
New Zealand is desperate for an economic recovery. But with
international market wobbles and fears of a Trump session, which
is a Trump induced recession, I'm told in the US,
how vulnerable are we and should we temper our expectations.
(00:21):
Paul Bloxham as HSBC's chief economists. He's in the country
from Sydney. It's great to have you in studio, Paul.
Good evening, great to be here. Do you how obsessed
are you with following what Trump is saying every day?
Speaker 2 (00:33):
It is my day job to keep up with what
is going on, and it is certainly fast paced, to
say the least. I get actually quite.
Speaker 1 (00:41):
A few clients.
Speaker 2 (00:41):
I do lots of presentations and I've been doing them
here this week as well. And they say, you know,
it must be tough to be an economist because there's
so many moving parts and so much happening. And I say,
because I'm a contrarian, of course, I say, no, it's
a great time to be an economist because there's such
a so much going on, and if anything, the economics
framework is surely like one of the ones that you've
got to use to fit the facts together to make
(01:02):
some sense of how it goes so and how and
what you should think about it.
Speaker 1 (01:05):
And so it's kept me busy, all right, Well synthesize
it for us, then is the answer here? Basically, there
is so much going on that it's it all equals uncertainty,
and uncertainty is bad.
Speaker 2 (01:18):
There's an element of that story. Certainly, when things chop
and change a lot, it's difficult for businesses to be
able to know which way to move are they going
to you know, where are they going to invest, where
are they going to hire? And I think you're starting
to see that in some of the business surveys, you know.
So that's one aspect of this story. But there's a
lot of elements to what's being delivered. There's a trade
policy element. That's the one that gets all the attention,
(01:39):
which is sort of trade tariffs and what's been happening
with those, But there's also others. There's the deregulation story
and tax cuts that they're proposing as well, So you
sort of have to balance out all of the bits
of the overall story. I think I think net we're
looking at you know, that there's upside risk to US inflation,
and that's something we need to think about in terms
(02:00):
of global interest rates and what it means, and the
US dolar which has remained strong. And I think there
is some risk to US growth from all of this,
But the major thing is it has a flow on
effect to the rest of the world. So the risk
overall to the global economy is probably tilted to the downside.
So those are the ways, at least some guideposts for
thinking about what's going on. I think, of course here
in New Zealand, you want to think about what it
(02:21):
means for New Zealand, Well, you know, I think the
direct impact is actually fairly small in the scheme of things,
the trading relationships fairly small. New Zealand sells a lot
more into the Asian markets and so on, and so
I think it's a fairly small effect overall, but it's
not insignificant. But I actually think New Zealand's in doing
a little bit better. I mean, I think this year
(02:42):
you're going to see an upswing in the New Zealand economy.
Speaker 1 (02:44):
I think, well, I think that's what everyone's worried about.
Is we all feel the same way, but we're worried
someone's going to come and eat our lunch. You know,
there's going to be a Donald Trump shaped bite out
of our sandwich that we were expecting to eat this yet.
Speaker 2 (02:58):
So I think you've got a couple of things going
for you. One of them is, of course, that inflations
come down enough now that the rbnz's cutting interest rates,
and not just by a little bit, they've cut interest
rates already by one hundred and seventy five basis points.
That's quite a lot of stimulus that's starting to pour
into the New Zealand economy. I think you're seeing that
showing up in surveys, consumer sentiment surveys, and so on.
So that's one tailwind. And the other tailwind you've got
(03:19):
is that well, dairy prices have risen, meat prices are elevated,
you've got more volumes, Your terms of trade is positive,
so you're going to get a national income tailwind from
that story. And both of those things we think will
lift growth. After a pretty tough year last year in
terms of the economy contracting, I think you're going to
get quite a decent bounce back through this year pretty
strong bounce back with if you look at it through
(03:42):
the year. And so those things are at work, and
as you say, I guess there's risks out there from
the global story. But one of the things to keep
in mind is you're tied to the China story a lot,
and China is not able. China story is pivoting more
towards the consumer. So instead of being as driven by
metals intensive activities like building factories and building property, they
(04:03):
can't do as much of that. They've already done a
lot of that, but they're pivoting their own stimulus measure
towards the consumer. If the Chinese consumer picks up, which
is part of what we think is likely, then that's
actually a positive for New Zealand. So there's a few
tailwinds here.
Speaker 1 (04:16):
You talk about the Reserve Bank, and you've been at
this conference in Wellington last week where all the nerds
from central banks around the world went and had a
little chat. What did you do? What survivee You picked
up there about Adrian or I mean, was this quite
a shock for people in the money economy world.
Speaker 2 (04:34):
I'd think that everyone was shocked by what happened. I
think that's a reasonable surmise. I think the conference was
very focused on a celebration in a way of the
fact that this is the central bank, the RBNZ, the
first central bank to have adopted inflation targeting. They did
that thirty five years ago. And I know your audience
will say, well, it's inflation targeting. How good's it been. Actually,
it's been a really robust system for being able to
(04:57):
manage cycles and economies. And not only has it well here,
but it's been in New Zealand led the way. The
RBNZ was the first central bank to do it, and
then the other central banks around the world have all
adopted the similar sorts of strategies, including the RBA and
the Federal Reserve and the Bank of England and so
you know, New Zealand was where where all this started.
It's it's actually it's the best, the best system available
(05:18):
for central banks to manage economies. It's not perfect, and
you can learn a lot still, but it's it's it's
the way that central banks go about it. So I
think that's a lot of what the conference was really about,
was sort of going and looking at how well it's
performed and how how central bankers can do it better
in the future.
Speaker 1 (05:34):
One of the things you're one of the biggest complaints
you get about this targeting of monetra the way monetary
policy operates is that you're taking money away. You're taking
money out of people's pockets to try and dampen down,
you know, demand and try and have an effect on inflation,
and that money just sort of disappears, you know, Like
there are people who say, oh, why don't we have
(05:56):
a different system where that money would be put into
some kind of saving sphere call or something rather than
just sort of arbitrarily disappearing into the ethos when the
reserve bankups the ocr.
Speaker 2 (06:08):
Well, there are a number of reasons. I mean, the
first one is you're absolutely right to describe it as
you're lifting and lowering. I might add there've been lowering
interest rates recently, so actually what they're doing is actually
allowing people more income to spend. They're trying to get
the economy to pick up because inflation has come down.
But you are setting a policy rate to try to
manage the cycles in demand. If demand's picking up too much,
you're slowing it down by lifting rates. And likewise, if
(06:30):
demand has slowed too much, you start to lower interest rates,
and you guide that by looking at the inflation rate,
which balances that out. You're right absolutely that this is
not the only way you could do things. You could
actually use your fiscal policy tools. You could set taxes
and spending by government and so on, and try and
complement what you do in terms of managing that cycle.
(06:50):
It doesn't have to just be that you'd use monetary policy.
But the way we've gravitated, we've gravitated to a system
whereby the central bank is independent and it sets policy
to try and manage that cycle. Because well, fiscal policy
doesn't always end up being set in a way that
manages the cycle as effectively. So that's the system we have,
and it works. It's not perfect, as I said, but
(07:10):
it works. It works fairly well. And this was the
first country to have adopted this system that every you know,
all the other countries around the world have effectively moved
towards over time.
Speaker 1 (07:20):
I'm not sure it's something we're ready to sing and
celebrate about just at the moment, only because we've been
recently scarred.
Speaker 2 (07:26):
That's true, I know. But it's worth keeping in mind
that interest rates are now coming down exactly, and they're
probably going to come down a bit further yet, and
that's going to start to stimulate. That is already starting
to stimulate the economy into an upswing, and that's a
that's a positive. Inflation was the major problem. Inflation's come
down now it's sitting around the midpoint of the rbnz's
target band, so they've been able to lower interest rates
(07:47):
and start to stimulate the economy.
Speaker 1 (07:49):
Paul, thank you very much for coming in. Great to
see you. Thank you. Paul Bloxam, Hsbcchip Economists with us
in studio. For more from Hither Duplessy Allen Drive, listen
live to news talks it'd be from four pm weekdays,
or follow the podcast on iHeartRadio
Popular Podcasts
Bookmarked by Reese's Book Club
Welcome to Bookmarked by Reese’s Book Club — the podcast where great stories, bold women, and irresistible conversations collide! Hosted by award-winning journalist Danielle Robay, each week new episodes balance thoughtful literary insight with the fervor of buzzy book trends, pop culture and more. Bookmarked brings together celebrities, tastemakers, influencers and authors from Reese's Book Club and beyond to share stories that transcend the page. Pull up a chair. You’re not just listening — you’re part of the conversation.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com