Brad Olsen: Infometrics Chief Executive says summer holidays aren't as bad for the economy as some think

The length of New Zealand's summer holiday - isn't as bad for the economy as some may think. 

Prime Minister Chris Luxon's weighed in on debate - saying after working overseas, he's used to returning to work about January 3  - which he'll probably do again this summer. 

Infometrics Chief Executive, Brad Olsen, says supermarkets and tourism boom over the period. 

He says the professional services industry shuts down longer, but that's not the entire economy. 

Olsen says March quarterly GDP relative to average quarterly GDP - and it's only two percent below the average for the rest of the financial year.

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Episode Transcript

Speaker 1 (00:00):
Debate over the length of these summer breaks been raging,
isn't it? For probably the best part of a week now.
So we've decided to settle this once and for raw
on Drive with the help of economist Brad Olson. He's
crunched the numbers. He's with me now, Hey.

Speaker 2 (00:11):
Brad, good evening.

Speaker 1 (00:12):
So settle this for us. Are the summer holidays bad
for the economy?

Speaker 2 (00:16):
Not nearly as bad as it's been made out to be. Look,
I get that everyone thinks that we take long holidays,
and yeah, everyone needs a break. But looking at the numbers.
You look at March quarter GDP relative to average quarterly GDP,
and it's only two percent below what the average would
be for the rest of the year. I mean, that's
very much within the error margin across the entire economy.

(00:39):
And I think actually where this debate comes forward a
lot more is in specific sectors. You look at the
likes of you know, supermarket activity or tourism and similar
over summer it's cranking. Those people are clearly not taking
a break. What is taking a break is the professional
services industry's office workers, which are important, but they're not
sort of the entire economy and so looking through that

(01:01):
economic activity in the professional services industry could sort of
fall by up to ten percent relative to more average
normal levels in the March quarter. So it's not the
entire economy. It's more specifically those of us who work
in offices. It's you and me, Ryan, Yeah, and that's
why the debate keeps going on. This is why I
haven't touched it. I told Laura, haven't touched it because

(01:21):
it's just it's the office workers having a winge about
their colleagues not coming back and paying attention in January
and February. But actually, in the real economy where people
get their hands dirty and do real work, everyone's still
going well. And you look at spending. That's the other
one that sort of gets me. We know that's a
big spend up in December. We all have to go
and get Christmas presents. Yes, but maybe there was some

(01:43):
truth to the idea that you know, spending was going
to fall in January. But even taking a look at
the numbers there, actually the last couple of years you've
seen spending in the January month that's been two percent
higher than average monthly spending throughout the calendar year. So
even then it's yes, we don't spend like it's Christmas
time in January, but we actually spend ever so slightly
above a normal month. So again there's still a lot

(02:05):
that has to happen. I think it's just that we're
spending in different ways, we're going to different places. I
also think people do need a break, not just offics,
because everyone else as well, and so doing that in
a sensible way when the weather's good, when would probably
be irritable in the office and out on the job anyway,
is not a bad time to take a holiday for
many people.

Speaker 1 (02:23):
Yeah, I don't think you get much argument, certainly nothing
out of fossignments on that. Now, wes Pac is actually
increasing it's two and five year mortgage interest rates only
slightly zero point three percent. What's going on, Well.

Speaker 2 (02:35):
They've talked a lot about how the wholesale rates have increased.
It's the last Reserve Bank announcement. So yes, you've had
the official cash rate cut, which means that Westpac's been
able to cut their six month rate. They've done nothing
to their sort of shorter stuff around the one year.
But like you say, two plus years has increased. It
does seem to highlight that look, the markets have probably
you know, before the Reserve Bank's announcement, we're really gung

(02:57):
ho on another cut. When the Reserve Bank came out
and said, look, we broadly think that we've sort of
done enough. Now the markets have almost reacted over reacted
in the other way and gone, you know what, we
need to do a little bit more now maybe things
are going to go up sooner. Realistically, small adjustments around
the margins, but does keep in that conversation of you know,
are people going to be fixing short or long? You know,

(03:17):
because there's a lot of variation now and offer and
I think people have sort of got to keep their
wits about you. Now's the time to go and get
some of that professional advice if your fix is coming
up soon.

Speaker 1 (03:25):
Yeah, I think a lot of people are going to
listen to this and see watch the rates and run
out there and fix. Thank you very much for that.
That's Brad Olson in for Metrics. For more from Heather
Duplessy Allen Drive, listen live to news Talks it'd be
from four pm weekdays, or follow the podcast on iHeartRadio.