Nicola Willis: Finance Minister on the Reserve Bank cutting the Official Cash Rate to 2.25%

Nicola Willis won't be drawn on the Reserve Bank's sudden change of tune on the Official Cash Rate. 

It's lowered the rate to 5.25% due to further signs of falling inflation. 

Economist Brad Olsen says the central bank needs to take accountability for radically changing its forecast without a radical change in circumstances. 

Nicola Willis told Ryan Bridge it isn't appropriate for her to get involved in the debate. 

She says the economy has slowed down and seeing interest rates come down is logical, but this is ultimately an independent decision for the Reserve Bank. 

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Episode Transcript

Speaker 1 (00:06):
Good morning New Zealand. It is the dawn of a
new day. We've begun our slide down the interest rate curve.
The Reserve Bank, with Adrian or at the helm, has
cut the OCR twenty five basis points to five point
twenty five percent, but economist Brad Olsen reckons we can't
trust them after they said just three months ago that
we weren't cutting until twenty twenty five and even discussed

(00:28):
an increase. Nikola Willis is the Finance minister. She joins
me this morning, Good morning minister, good morning line.

Speaker 2 (00:34):
You played my songs. It's dark as before the dawn,
Thank you for that.

Speaker 1 (00:39):
We're actually discussing is it darkest before the dawn? Isn't
it as dark at two am as it is it four?

Speaker 2 (00:45):
I think we all know that nighttime comes before morning,
and I think it is still cloudy out there, but
there are rays of light getting through. And we always
said with the economy, what we need to see happen
as inflation come under control, so interest rates can come
down and gross can recover. And what the Reserve Bank
emphatically said yesterday is that they think inflation is now

(01:09):
under control. They're forecasting it being back and target, and
that's given then the confidence they need to actually reduce
interest rates. So that's positive news for a lot of people.

Speaker 1 (01:19):
Isn't the problem that they emphatically said basically the opposite
three months ago? Do you trust them?

Speaker 2 (01:25):
Ah? Look, I do trust the Reserve Bank to do
their job, and it's important they let them do their
job independently. And when I look at the decision yesterday
and the data that backs it up, there are facts there.
You know, inflation has come down to three point three percent,
that is the lowest it has been in three years.
And all I need to do is go around New

(01:47):
Zealand at the moment to know the economy has slowed
down and so seeing interest rates come down to me
is logical. But ultimately, these are independent decisions for the
Reserve Bank.

Speaker 1 (01:59):
And you've got no issues with Adrian or has got
three more years on his term. You've also recently reappointed
the board chair. You've got no issues there.

Speaker 2 (02:09):
Well, he does his job. I do my job, and
it's really important that we let each other get on
and do their job because when the rest of the
world looks at New Zealand, one of the things they
like about us is that we have good monetary policy
independent institutions, and that we've had a long history of
Reserve bank governors doing their thing, finance ministers doing their thing,

(02:31):
and they're not trying to influence each other too much.

Speaker 1 (02:35):
Hey, just on the banks while we're there, the retail Variety.
That banking report from the Commerce Commissions do out this week,
I understand have you read that yet?

Speaker 2 (02:45):
I had seen an advanced copy. It's really important. I
don't comment on its contents obviously, it's for the Commerce
Commission to announce later this week, but the draft report
has been in seculation publicly. It's clear, according to the
Commis Commission, we have a two tier oligopoly of banks
in New Zealand, that there hasn't been enough competition, that

(03:07):
there have been sustained levels of high profitability for those
big banks. And we are very keen to hear the
recommendations of a Commerce Commission and where they make sense,
act on them because New Zealanders deserve fair, competitive banking services.

Speaker 1 (03:22):
Are you still considering partial privatization of Kevybank?

Speaker 2 (03:27):
Become really keen to see Kiwibank muscle up and grow
so it can take on those big Ossie banks, and
so we are exploring options for how we could help
Kiwibank get bigger. It's no secret time that we don't
have a big pile of cash sitting around at the moment,
So we are looking at how we can achieve that something.

Speaker 1 (03:50):
Would that include sorry Minster, would that include foreign investment?
Will any foreigner get their hands on Kwibank?

Speaker 2 (03:58):
Well, look at this stage, the people who are kind
of showing interest are New Zealand entities, and it is
really possible. I think that there would be New Zealanders
who would want to invest in making a new Zealand bank.
Figure And I say that because I look at the key.
We favor funds that have built up. I look at

(04:19):
the money and super funds that's built up. I look
at the money that ACC invests. And actually a lot
of the time when I talk to people in those funds,
they're looking for good New Zealand investments. So it's the
first port of call.

Speaker 1 (04:33):
Yeah, first port of call. But is there a second
portal call? Or would you rule out foreign investment in Queybank?

Speaker 2 (04:38):
Well, look, I'm taking advice on what is needed to
get investment into kwibank. And if I say I've said,
let's look at what the options are. I think we
will also be interested. By the way, I think there
could be institutional investors from New Zealand who are interested.
So what if that look like, what are the next
steps and then we'll take proposals out and we'll talk

(04:59):
with New Zealand about them.

Speaker 1 (05:01):
Minister, we are very short on time, but I just
want to quickly put to you that Health New Zealand
proposal to cut doctors and nurses. It sounds absolutely mad
and goes against everything that you guys said you wanted
when it came to cuts. Have you spoken to ministers
you're doing anything about this?

Speaker 2 (05:18):
Well, it did sound absolutely mad, so I was very
pleased to see the Commissioner, mister Levy rule it out
and in fact expresses frustrations that such numbers were ever
put out into the universe because they're so far away
from the direction the government has given Health New Zealand
and the expectations we've placed on that commissioner, which is

(05:40):
we want resources going to the front line. We want
our doctors and nurses in a better position to provide
care to New Zealanders. That's our focus, and so proposals
like that don't have truck with us.

Speaker 1 (05:53):
That is the Finance Minister, Nichola Willis Nicola, thank you
very much for your time this morning, and enjoy the dawn.
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