December 16, 2024 • 4 mins
Expectations are low as Treasury allows a peek into its books later today.
Economist Cameron Bagrie says in the 2024 update, various scenarios were presented for this year.
He told Andrew Dickens it seems we're on track with the downside prediction.
Bagrie says it forecast net debt climbing to 45% of GDP and the operating balance remaining in deficit.
Treasury will unveil its half yearly economic and fiscal update at 1pm.
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Episode Transcript
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Speaker 1 (00:00):
High few day today. That is the half year Economic
and Fiscal Update Treasury. We'll release it this afternoon and
we'll get new insight into how the economy is tracked
over the past six months and what Treasury is forecasting
as we go forward into twenty twenty five, the year
that we have to survive to. You may remember, it's
all coming with a warning from the Finance Minister who
yesterday said the government inherited difficult economic conditions. So Cameron
(00:23):
Bagri is the lead economist from Bagri Economics and Jointing.
Right now, how the Cameron? There we go, Sorry Cameron,
the mouse wasn't working.
Speaker 2 (00:31):
How the Cameron, Good morning.
Speaker 1 (00:33):
I like what West Pax senior economist Darren Gibbs said,
he expects a deeper shade of red. What are you expecting?
Speaker 2 (00:40):
Yeah, I guess. We go back and had a look
at the twenty twenty four budget. There was a downside
scenario in mate, and it looks like the economy has
been tracking more in line with the downside scenario. And
that downside scenario had a lot more red. It had
net debt getting up an excess of forty five percent
of GDP, that had the operating balance or what's called
(01:00):
the obi gaal not getting back into surplus over the
forecast period, and it looks like we're tracking more in
line with that scenario than the central scenario they presented
in the twenty twenty four budget.
Speaker 1 (01:11):
Would this be the lowest point as we look forward
to twenty twenty five or you know, could we go lower?
Speaker 2 (01:18):
No. I think the low point is going to be
this what's called fiscal year. The economy in a cyclical
sense has actually turned the corner and we're starting to
bounce back up. Monetary policy, the Reserve Bank is going
to work a little bit of magic over twenty and
twenty five that will help the fiscal forecasts out. But
the real big problem with the fiscal forecast is not
(01:42):
just where the the company does in the next sort
of twelve months. It's sort of average growth. And the
key variable here is what's called productivity growth. How smart
we are with resources in The Treasury's chief Economic advisor
the Reserve Bank have both been out warning about productivity growth.
That goes straight to the heart of average growth over
each year, and that goes straight to the heart of
(02:04):
your tax revenue numbers. And I think they're going to
find that the government's got a bit of a hole
in regard to tax revenue. And if you don't have
the tax reviguere coming in to the degree that you
were expecting, you're going to have a little lot more
problems getting back from deficit the surplus.
Speaker 1 (02:17):
Yeah, exactly on that tax revenue. It's a bit of
a vicious circle, isn't it. The more we cut government
spending to fit the revenue right, the more the economy retracts,
meaning the less revenue the government receives and tax. Therefore,
we can't really pay the debt. You know, it's we
sort of it's sort of creates itself. It spins on itself.
Speaker 2 (02:37):
Yeah, and the governments station some pretty complex trade offs. Obviously,
you need to be fiscally responsible. Now you've got to
try to go from deficit surflace. You need to read
what's called the fiscal buffers because New Zealand shakes a
lot of it, and you want to have a bit
of a water chest to deploy it to borrow if
something nasty happens, and odds are something nasty is going
(02:58):
to happen in the next sort of ten years, and
we need to be prepared for that. But the other
side is that governments need to invest in the economy.
You need to have a well functioned the education system,
you need to have a well functioning roading system, you
need to have a well functioning health system. And it's
a question again in that balance between being physically responsible
but also investing for bit of economic prospiity for the economy.
Speaker 1 (03:19):
So are they being physically responsible hurt The Finance Minister
yesterday said we've inherited difficult economic conditions, but that was
a year ago and they've made some quite big macro
moves and that's helping to exasperate exascerberate the economic conditions.
So are they managing.
Speaker 2 (03:33):
It well now? Look, my personal view is that the
debt targets that are on the table at the moment,
I don't think they're going to be hit. I think
we need to be builting a little bit more towards
the investing for for scurity, but investing with discipline. That's
the key here. What we saw out of the previous
(03:53):
government was there was a hell a lot of money
that was being thrown around, but it was ill disciplined
and it wasn't hitting the market regard to getting results.
I'd like to see this government loosen their debt targets
be probably a little bit more less esteb but you
have a bit of a tagline about investing for prosperity
and having a lot more discipline about where we're going
because we need to fix the health system, we need
(04:13):
to fix the education system, we need to fix their
browning system.
Speaker 1 (04:16):
All good, Cameron, thank you so much for your wisdom.
It is five point twenty investing for prosperity with discipline.
Speaker 2 (04:24):
For more from early edition with Ryan Bridge. Listen live
to news Talks it'd be from five am weekdays, or
follow the podcast on iHeartRadio.
High few day today. That is the half year Economic
and Fiscal Update Treasury. We'll release it this afternoon and
we'll get new insight into how the economy is tracked
over the past six months and what Treasury is forecasting
as we go forward into twenty twenty five, the year
that we have to survive to. You may remember, it's
all coming with a warning from the Finance Minister who
yesterday said the government inherited difficult economic conditions. So Cameron
(00:23):
Bagri is the lead economist from Bagri Economics and Jointing.
Right now, how the Cameron? There we go, Sorry Cameron,
the mouse wasn't working.
Speaker 2 (00:31):
How the Cameron, Good morning.
Speaker 1 (00:33):
I like what West Pax senior economist Darren Gibbs said,
he expects a deeper shade of red. What are you expecting?
Speaker 2 (00:40):
Yeah, I guess. We go back and had a look
at the twenty twenty four budget. There was a downside
scenario in mate, and it looks like the economy has
been tracking more in line with the downside scenario. And
that downside scenario had a lot more red. It had
net debt getting up an excess of forty five percent
of GDP, that had the operating balance or what's called
(01:00):
the obi gaal not getting back into surplus over the
forecast period, and it looks like we're tracking more in
line with that scenario than the central scenario they presented
in the twenty twenty four budget.
Speaker 1 (01:11):
Would this be the lowest point as we look forward
to twenty twenty five or you know, could we go lower?
Speaker 2 (01:18):
No. I think the low point is going to be
this what's called fiscal year. The economy in a cyclical
sense has actually turned the corner and we're starting to
bounce back up. Monetary policy, the Reserve Bank is going
to work a little bit of magic over twenty and
twenty five that will help the fiscal forecasts out. But
the real big problem with the fiscal forecast is not
(01:42):
just where the the company does in the next sort
of twelve months. It's sort of average growth. And the
key variable here is what's called productivity growth. How smart
we are with resources in The Treasury's chief Economic advisor
the Reserve Bank have both been out warning about productivity growth.
That goes straight to the heart of average growth over
each year, and that goes straight to the heart of
(02:04):
your tax revenue numbers. And I think they're going to
find that the government's got a bit of a hole
in regard to tax revenue. And if you don't have
the tax reviguere coming in to the degree that you
were expecting, you're going to have a little lot more
problems getting back from deficit the surplus.
Speaker 1 (02:17):
Yeah, exactly on that tax revenue. It's a bit of
a vicious circle, isn't it. The more we cut government
spending to fit the revenue right, the more the economy retracts,
meaning the less revenue the government receives and tax. Therefore,
we can't really pay the debt. You know, it's we
sort of it's sort of creates itself. It spins on itself.
Speaker 2 (02:37):
Yeah, and the governments station some pretty complex trade offs. Obviously,
you need to be fiscally responsible. Now you've got to
try to go from deficit surflace. You need to read
what's called the fiscal buffers because New Zealand shakes a
lot of it, and you want to have a bit
of a water chest to deploy it to borrow if
something nasty happens, and odds are something nasty is going
(02:58):
to happen in the next sort of ten years, and
we need to be prepared for that. But the other
side is that governments need to invest in the economy.
You need to have a well functioned the education system,
you need to have a well functioning roading system, you
need to have a well functioning health system. And it's
a question again in that balance between being physically responsible
but also investing for bit of economic prospiity for the economy.
Speaker 1 (03:19):
So are they being physically responsible hurt The Finance Minister
yesterday said we've inherited difficult economic conditions, but that was
a year ago and they've made some quite big macro
moves and that's helping to exasperate exascerberate the economic conditions.
So are they managing.
Speaker 2 (03:33):
It well now? Look, my personal view is that the
debt targets that are on the table at the moment,
I don't think they're going to be hit. I think
we need to be builting a little bit more towards
the investing for for scurity, but investing with discipline. That's
the key here. What we saw out of the previous
(03:53):
government was there was a hell a lot of money
that was being thrown around, but it was ill disciplined
and it wasn't hitting the market regard to getting results.
I'd like to see this government loosen their debt targets
be probably a little bit more less esteb but you
have a bit of a tagline about investing for prosperity
and having a lot more discipline about where we're going
because we need to fix the health system, we need
(04:13):
to fix the education system, we need to fix their
browning system.
Speaker 1 (04:16):
All good, Cameron, thank you so much for your wisdom.
It is five point twenty investing for prosperity with discipline.
Speaker 2 (04:24):
For more from early edition with Ryan Bridge. Listen live
to news Talks it'd be from five am weekdays, or
follow the podcast on iHeartRadio.
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