Reserve Bank economist Paul Conway believes there's one upside to the tariff turmoil for Kiwis.
Conway suspects the tariffs will likely lead to lower inflation in New Zealand, which will also lead to lower interest rates.
Infometrics Principal Economist Brad Olsen unpacked the announcement - and explained the ins and outs of the Reserve Bank's new Kiwi-GDP tool.
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Speaker 1 (00:00):
Now the Reserve Bank economists Paul Conway over here reckons
all those new trade tariffs from Donald Trump are going
to lead to lower inflation in New Zealand. Brad Olsen
as infametrics principle economists and with us, say Brad.
Speaker 2 (00:11):
Good evening, I would have thought, I mean, you know, when.
Speaker 1 (00:13):
You talk about tariff's, your first conclusion is actually that
is going to lead to higher inflation. Does it makes
sense to you the lower inflation forecast?
Speaker 2 (00:21):
It does? I mean, I think also Paul Conway has
highlighted here that the Reserve Bank still thinks that there's
a lot of water to go under the bridge and
they're still trying to figure out exactly what the impact
will be. But at the same time as yes, tariff's
raised prices in the US, and that's I think probably
where the reference comes from. Those higher price expectations that
we keep talking about with tariffs are concentrated a bit
(00:41):
more for the consumers that are paying the tariffs, and
those are Americans. For us at home. If we're seeing
less trade activity starting to come through, you know, businesses
that normally export from New Zealand don't have quite as
many as much demand they're not getting as much money
in the door, they're not able to spend out as
much on other New Zealand businesses, and if demand generally
in the economy comes down, there's probably not as much
(01:02):
ability to pass on some of those pricing pressures. And
so we do wonder if, like the Reserve Bank, if
some of this TERRFF activity might well see lower prices
than otherwise here at home.
Speaker 1 (01:13):
Okay, now what do you have. You had to look
at the KIWI GDP.
Speaker 2 (01:18):
I have the new sort of model coming out. I
mean it's a useful addition, I think to the conversation.
I think we've got to be clear that the Reserve
Bank is not saying this is their definite, actual only
GDP expectation, but I think it's useful to add into
the mix, particularly because we know that other central banks
around the world, particularly the US Federal Reserve over in
(01:39):
the States, has something similar where they do try to
at least outline a bit where they're thinking is and
probably more importantly how it evolves, because that's the thing
that we're noticing even in the data the last couple
of weeks, as there has been some ups, there has
been some downs yesterday we had new tourism data out
in New Zealand that showed slightly better numbers. At the
same time card spending showed spending activity was down to touch.
(02:02):
You know, the likes of the housing numbers out today
again just another figure into the mix. So I think
this model will give us a little bit more of
a clue potentially where GDP could land at the end
of it, and the Reserve Bank just wanting to put
a little bit more data out there so that we
can have a more informed conversation. But again I don't
think this will replace what they're doing in terms of
their estimates that they put out and similar, but it
(02:23):
adds just a little bit more transparency around some of
the areas that they look into.
Speaker 1 (02:28):
Is it very different to what Massi University is running.
Speaker 2 (02:32):
Slightly different in terms of where the data comes from
and probably the weights and similar that they put onto
it are the likes of GDP Live that Massi University
put out, some of that's got some quite big data
sets from you know, likes the Kiwi Rail, from food
stuffs and similar. This model that the Reserve Bank is
running with Kiwe GDP is much more based around official
(02:52):
statistics and when they come out over time, but generally
they seem to give you similarly informed results. When you
start to see some more challenging detail numbers coming through,
both of the models will pick that up, but in
slightly different ways. So again, I don't think we're going
to use this number and go that's definitely going to
be it. The numbers will keep being revised and they'll change,
but it does let us have a bit more of
(03:12):
a look under the hood of what things could be
driving the economy at any point in time.
Speaker 1 (03:16):
Yeah, good stuff, Hey, Brad, thanks very much appreciated. Brad Olson,
Infametrix Principal Economisty For more from Heather Duplessy Allen Drive,
listen live to news talks that'd be from four pm weekdays,
or follow the podcast on iHeartRadio
Now the Reserve Bank economists Paul Conway over here reckons
all those new trade tariffs from Donald Trump are going
to lead to lower inflation in New Zealand. Brad Olsen
as infametrics principle economists and with us, say Brad.
Speaker 2 (00:11):
Good evening, I would have thought, I mean, you know, when.
Speaker 1 (00:13):
You talk about tariff's, your first conclusion is actually that
is going to lead to higher inflation. Does it makes
sense to you the lower inflation forecast?
Speaker 2 (00:21):
It does? I mean, I think also Paul Conway has
highlighted here that the Reserve Bank still thinks that there's
a lot of water to go under the bridge and
they're still trying to figure out exactly what the impact
will be. But at the same time as yes, tariff's
raised prices in the US, and that's I think probably
where the reference comes from. Those higher price expectations that
we keep talking about with tariffs are concentrated a bit
(00:41):
more for the consumers that are paying the tariffs, and
those are Americans. For us at home. If we're seeing
less trade activity starting to come through, you know, businesses
that normally export from New Zealand don't have quite as
many as much demand they're not getting as much money
in the door, they're not able to spend out as
much on other New Zealand businesses, and if demand generally
in the economy comes down, there's probably not as much
(01:02):
ability to pass on some of those pricing pressures. And
so we do wonder if, like the Reserve Bank, if
some of this TERRFF activity might well see lower prices
than otherwise here at home.
Speaker 1 (01:13):
Okay, now what do you have. You had to look
at the KIWI GDP.
Speaker 2 (01:18):
I have the new sort of model coming out. I
mean it's a useful addition, I think to the conversation.
I think we've got to be clear that the Reserve
Bank is not saying this is their definite, actual only
GDP expectation, but I think it's useful to add into
the mix, particularly because we know that other central banks
around the world, particularly the US Federal Reserve over in
(01:39):
the States, has something similar where they do try to
at least outline a bit where they're thinking is and
probably more importantly how it evolves, because that's the thing
that we're noticing even in the data the last couple
of weeks, as there has been some ups, there has
been some downs yesterday we had new tourism data out
in New Zealand that showed slightly better numbers. At the
same time card spending showed spending activity was down to touch.
(02:02):
You know, the likes of the housing numbers out today
again just another figure into the mix. So I think
this model will give us a little bit more of
a clue potentially where GDP could land at the end
of it, and the Reserve Bank just wanting to put
a little bit more data out there so that we
can have a more informed conversation. But again I don't
think this will replace what they're doing in terms of
their estimates that they put out and similar, but it
(02:23):
adds just a little bit more transparency around some of
the areas that they look into.
Speaker 1 (02:28):
Is it very different to what Massi University is running.
Speaker 2 (02:32):
Slightly different in terms of where the data comes from
and probably the weights and similar that they put onto
it are the likes of GDP Live that Massi University
put out, some of that's got some quite big data
sets from you know, likes the Kiwi Rail, from food
stuffs and similar. This model that the Reserve Bank is
running with Kiwe GDP is much more based around official
(02:52):
statistics and when they come out over time, but generally
they seem to give you similarly informed results. When you
start to see some more challenging detail numbers coming through,
both of the models will pick that up, but in
slightly different ways. So again, I don't think we're going
to use this number and go that's definitely going to
be it. The numbers will keep being revised and they'll change,
but it does let us have a bit more of
(03:12):
a look under the hood of what things could be
driving the economy at any point in time.
Speaker 1 (03:16):
Yeah, good stuff, Hey, Brad, thanks very much appreciated. Brad Olson,
Infametrix Principal Economisty For more from Heather Duplessy Allen Drive,
listen live to news talks that'd be from four pm weekdays,
or follow the podcast on iHeartRadio
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