August 20, 2025 • 33 mins
Do we need to slash interest rates even further to get the economy going? Jarrod Kerr, Kiwibank Chief Economist, reckons the Reserve Bank needs to do more.
Hear Jarrod’s belief that politicians have skimped on infrastructure investment for 30 years, and why he’s not afraid of increasing the deficit.
What does the reality of US tariffs mean for Kiwi exporters and consumers? What makes the economy healthier in certain places—with Christchurch topping Wellington, and Australia topping Aotearoa? Do governing parties need more time between elections to get things done?
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Go to Koto.
Speaker 2 (00:05):
Welcome to Shared Lunch.
Speaker 1 (00:06):
I'm Garth Bray.
Speaker 2 (00:07):
Well, the Reserve Banks made another call on the official
cash rate and that has implications for our whole economy.
Will it provide the stimulus that we need. One of
the earliest voices calling for stimulus to get things running again?
Here we Banks chief economist Jared Kerr. He takes us
through why he sees the need for this right now.
(00:28):
But first, some important information you should always consider when investing.
Speaker 3 (00:32):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (00:46):
Here is a man who thinks that stimulus might just
be the answer. Would that be fair to say? Oh?
Speaker 1 (00:50):
Absolutely. I think it's pretty clear that the economy needs
a little bit of encouragement right now and we're just
not getting it. I think interest rates haven't reached that level. Well,
I know they haven't reached that level where you know,
investors and businesses feel like they want to take a
punt on something.
Speaker 2 (01:11):
We've launched straight into without even saying welcome to Charesis
and thanks for being that's all right, no mucking around,
and straight into it. So what is it that makes
you think that there needs to be a stimilatory track
to monetary policy? And for someone who just wants to
speak in single syllables, what does that even mean?
Speaker 1 (01:31):
It means that interst rates have not yet reached a
level that are exciting people or are that encouraging businesses.
So we have this theoretical rate called the neutral rate, right,
and we think it's around three. It's a Goldilocks rate.
It's not too hot, it's not too cold. Right. We
know that the cash rate at five and a half
percent last year was way way too restrictive, right, and
(01:54):
that drove the economy into a recession. They've cut the
cash rate from five and a half to three and
we haven't seen that, you know, inspire anyone. What it
has done is it's given relief to people, but it
hasn't really triggered them. We think it needs to go
down to at least two and a half and just
(02:17):
to give people that incentive.
Speaker 2 (02:19):
So much to unpacking there. I guess some would say
your head for the neutral rate will get you to
the place where it's up to you to make the
decisions to take the risks, all that sort of stuff.
Why are we relying on a central bank and a
monetary policy to try and fire things up if they
aren't already ready to go.
Speaker 1 (02:38):
Yeah, well, I mean that's their job, right, so they
let's go through it. They overstimulated during COVID. They you know,
they purchased a lot of government bonds, so they printed
a lot of cash. Central banks around the world printed
trillions of dollars, and we came out of it firing
on all cylinders right because governments were spending central banks
(02:58):
were printing cash. Next minute, we had an inflation rate
of over seven percent. Okay, they overdid it. They had
to get that back down to two. So they lifted
into shraps from their zero settings to quite aggressively high settings,
and that really hurt households and businesses, drove us back
(03:18):
into recession. And we haven't gotten out of that recession yet.
We're still like crawling out of this hole that the
central bank poured us into last year. And I think
you know, just using the car, you know, example, you've
had your foot on the heavy on the break, you've
taken it off, You've put the car in neutral. It's
(03:40):
just idling. We're saying, just put your foot on the accelerator,
not hard, just get the economy gone.
Speaker 2 (03:47):
Is that a consensus view? Are you guys? Are you
on the outer on that?
Speaker 1 (03:53):
We were? I mean we were calling this a year
and a half ago. We were well outside of the
consensus calling for a two and a half percent cash row.
Now there are a few more. Most economists are around
that sort of two seventy five three level, so we're
only arguing over fifty basis points.
Speaker 2 (04:12):
There was a sort of a split decision back in May,
although there was a consensus around holding steady in Wellington.
On the most recent one you had I think that
in the US the first time in about thirty something
years that two governors said we want to express our
descent with the rest of what you guys are coming
up with the Bank of England. I'm just telling this
(04:33):
for the people that haven't been paying attention, you know
this is it getting harder to work out what's going
on in that room, what they're deciding and how they'll pick.
Is this just part of the cycle.
Speaker 1 (04:44):
Yeah, I think it does get a little harder when
you're towards the end for starters. So from the Reserve
Bank of New Zealand's point of view, they've gone from
five and a half to three. You know, there's not
a lot left and they're just kind of feeling their
way down to the bottom, and the bottom's near right.
You can say the same thing for other central banks
around the world. But you know, let's not forget we've
(05:05):
had this tariff war of sorts over this year that's
really thrown a lot of things up in the year.
We know it's inflationary for the United States, so that's
why you're getting that sort of mixed feel from the
from the Fed governors, and we think it's deflationary for us,
(05:26):
but it's yet to feed through. So you know, there's
a lot of balls in the year. There's a lot
of volatility, there's a lot of question questions that need
to be answered.
Speaker 2 (05:34):
And we've got another complication because we've got an acting
governor at the moment and possibly a permanent replacement coming
through sometime soon. Does that mean that the Bank's going
to be saying, well, the Monetary Policy Committee are going
to be saying we will leave it to the new boss.
Speaker 1 (05:49):
No, I don't think so. I don't think so. They've
got a job to do. They know what the job is.
It is a it is a committee now rather than
a sole decision maker like it used to be. So
you've kind of you've spread that a little bit. And
Christian Christian knows what he's doing. Christian has been around
long time.
Speaker 2 (06:07):
This is Christian Hawksby.
Speaker 1 (06:08):
Christian Hawksby who's acting governor at the moment. He's been
at the Reserve Bank, I'm not sure about six or
seven years himself. He was working for Harbor Asset Management,
so he knows the markets very well. And he also
worked at the Bank of England prior to that. So
I'm going to talk about credentials. He knows what he's doing.
So there's no excuse, Oh, we better wait for the
(06:28):
next governor to come in. They just need to do
what they need to do.
Speaker 2 (06:34):
A lot of people are saying it's not so much
about whatever the decision has been, it's more about where
we're headed from here. Absolutely, what the shape of that
curve looks like when we're going to see rates start
to rise again, where that bottom is. Do you have
strong views there?
Speaker 1 (06:49):
Yeah, so our So, like I said, we're at two
and a half. Market's kind of around two seventy five ish,
So we're not arguing over a big difference. But from
our point of view, that extra twenty five is meaningful,
and it would just get mortgage rates, you know, that
little bit, that little bit lower than where they are today.
(07:10):
Whereas if we stop at two seventy five or three,
then mortgage rates that that's them done, that's that's the bottom.
And I just don't think that's stemmatry enough.
Speaker 2 (07:20):
All right, So we do get to two point seventy
five or even two point five, what does that mean
for a mortgage customer?
Speaker 1 (07:28):
So very simply, the cash rate is what the banks
deal with the central bank, right, the central bank is
the banker of the bank. So we're dealing at at
say three percent, but that's not where we've fund ourselves at.
Like we're all offer a term deposit rate. I think
we've got one out there at like four point one
at the moment, So that's quite a bit higher than
(07:49):
the cash right. That's because we're trying to get money,
you know, in the door, and then we lend it
out right, and then we're and then we're charging you know,
five percent on a on on a mortgage rate or above.
So you're all these rates, but the cash rate influences
everything above it. So you drop that cash rate from
(08:11):
five and a half to three, and what you've seen
is mortgage rates go from seven and a half to five.
So roughly lockstep doesn't happen precisely, but it has over
the over the year, we've seen that that whole lot
being being passed on. What does another fifty basis points mean?
(08:32):
Will those five percent rates or slightly above go into
the mid floors and you get that little bit of
extra a little bit of extra bang for buck and
delivering that that extra fifty basis points in the in
the cash rate term deposit rates four as well. So
there's a lot of savers out there that go, oh,
I didn't realize it so well. Actually, you know, we've
(08:54):
been talking about rate cuts for over a year. You
could have been preparing yourself on the way down. We
always talk about the household with debt, you know, your
mortgage rates falling. Actually, if you're if you're a retirement
you know, if you're in retirement and you're getting less
on you on your nest egg.
Speaker 2 (09:13):
And that fixed income suddenly isn't quite so attractive. You
need to look at diversification.
Speaker 1 (09:18):
Do you do this is precisely so. Putting the cash
rate at five and a half, you're trying to attract
savings right dropping it down, you're trying to get savings
to go out into more riskier assets. You want to
get them out into either simply buying shares or getting
businesses to put money out the door to buy you know,
(09:42):
investment like tractors and stuff.
Speaker 2 (09:44):
I mean, if we look around, there's been a lot
of worry about debt. I mean, there's been a lot
of talk about debt this week. I think one of
the major papers saying, look, we're on track to a
trillion dollars worth of combined public and brother big number.
Does a big number like that give you any pause,
any concern?
Speaker 1 (10:00):
Well, the big number, you know, shows a lot of
private debt, a lot of household debt right as a
percentage of income, it's gone sideways for a while, but
it's at a very high level, you know, comparatively speaking.
So we've got a lot of debt on the private side,
but we don't have a lot of public debt and
this is something that we need to smash, smash wide
(10:20):
open in the New Zealand public.
Speaker 2 (10:22):
Smashing it down, you look about smashing it up.
Speaker 1 (10:24):
I absolutely no smash the perception that we've got too
much debt as a government. I don't think we do.
I don't think we do it all. I think we
can take on a lot more debt to tackle the
infrastructure problems that we've got. That I would argue that
we have not only disappointed the New Zealand public, but
actually haven't fulfilled what we should have done as a
(10:45):
government over the last thirty years. We have not kept
up our infrastructure spending with our population. Right, that's just
a simple, simple message to everyone. You know, it takes
us forty minutes to drive tea case in Auckland.
Speaker 2 (11:02):
Right.
Speaker 1 (11:03):
Wellington looks more like Venice than it does anything else.
With all the water running down the streets. I mean,
you know, the burst pipes. There's so many examples, and
then the good examples christ Church. Look what happens when
you build back beautifully. It's a cool city. People are
a lot more upbeat down there, and it's because you know,
they've got the infrastructure, not.
Speaker 2 (11:25):
Just because the regional economy is strong and you've got
a lot of farming and something happening there and that's
supporting it, whereas other.
Speaker 1 (11:30):
Places Wykado and other areas not as upbeat as christ Church. Right,
they've got that farming base, you know, that's that external
sector that's doing well. You're getting high dairy price is
high meat prices, tourisms bouncing back. But the South Island
seems to be a lot more upbeat than the than
(11:51):
the North, and you know there's something going on there.
Speaker 2 (11:54):
If you look at farming and agriculture in general. I
think the total agricultural debt is down at the moment,
So at a time where those prices are great, where
farmers are making bank, they're choosing to retire that rather
than to invest. What does that say?
Speaker 1 (12:11):
Yeah, And I think they've been asked to do that too,
because they've taken on a little bit too much. So
I think the couple of the major banks have been asking,
you know, actually maybe you should repay a little bit,
which is prudent. But what we're seeing and is that
farmers are spending on the farm, so they may have
sort of run down their maintenance a bit. Now they're
(12:34):
back up to where it should be, spending more on
animal welfare, spending more on the farm, but not past
the farm gate. So they might be buying a tractor,
for example, but they're not buying a use. They might
be doing their fences, but they're not going on a holiday.
And I think that just shows you how cautious they are,
even though things are pretty good and they're getting a
(12:55):
very high payout, they're spending on the farm, they're not
spending outside of it.
Speaker 2 (13:00):
And then if we're looking at business, I think the
business landing as well. You know, business borrowing in the
UNA was sort of up just a fraction, not even
a full percentage point. Again, that's you say, because it's
not stimulatory enough or companies just don't see the reward
justifying the risk.
Speaker 1 (13:16):
Same same thing, even with the investment boosts.
Speaker 2 (13:19):
What happened to the investment boost so right off a
larger portion of a capital purchase, we're not seeing that
play through.
Speaker 1 (13:25):
No, no, we're not, And that that just proves the
fact that we're still in this recession, I believe. So
we recorded quite a sharp contraction last year and we're
going sideways, and it looks like in the current quarter
where and now we might we might record another contraction.
So it's pretty weak out there. Businesses aren't taking on
(13:47):
debt because they are cautious that they're worried about what
does all this tariffs mean for us? You know, the
New Zealand households not spending yet. You know, you're very
cautious as a business right now, and we're noticing that
in in our lending. That investment boost helps, but it's
not driving you to make the decision. And businesses aren't
(14:09):
making that decision at the moment. You ask them are
you investing? And you're getting quite a mixed response. Most
of them are saying no. And you ask them, are
you hiring people? Again, most of them will say I
actually go through a bit of a restructure still, So
until that turns and we see it going positive, and
(14:30):
there's signs that it is, such.
Speaker 2 (14:32):
As sidelined, but there's signs there isn't. I mean, the
Performance of Services index I think came out this week
and it was the twentieth month in a row.
Speaker 1 (14:40):
Less negative but negative.
Speaker 2 (14:42):
Yeah, but the employer right that's been in the dumpster
for twenty months now, twenty months, Yeah, that tells you,
I suppose that if you're a services business, which is
sort of what two thirds of the economy. Yeah, that's
a lot of businesses out there that are weary about hiring.
H landing. Who's getting hit by that?
Speaker 1 (15:01):
Oh well, you know, it depends what industry you're looking at.
Like I said, the agriculture side's doing well and they're
finding the workers that they need, so there's definitely not
a shortage of workers anymore that we had just a
couple of years ago. There's actually a bit of an oversupply.
And then you go across, like you say, most of
the services side, they're not hiring. I gave a few
(15:23):
presentations to quite large groups recently. One was in Wellington
and there were about two hundred people in the crowd
and I said, are you investing? Are you hiring? And
about eight people put their hands up. I counted them eight.
And then I went to christ Church and at least
a third, maybe forty percent put their hands up, So
(15:45):
still less than fifty, but Jesus a massive difference between
Wellington and christ Church and Auckland's kind of in the middle.
About twenty percent people put their hand up. So when
I do that and I sort of gauge a crowd.
I sort of walk out going okay, that's you know,
depending on where you are, it's worse. But overall it's
still quite weak, even in the hot spots like christ Church.
Speaker 2 (16:07):
But then as cutting if there's that much gloom, as
cutting interest rates really going to provide people with the
stimulus because they're still going to be nervous about taking action.
Speaker 1 (16:16):
Right, better than doing nothing, It's better than leaving the
cash rat restrictive or neutral, so you're effectively not not
doing anything.
Speaker 2 (16:25):
We talked about tariffs there, and I would just want
to ask you have we overbaked the concern around the
trade war and the tariffs and that kind of thing.
With US tariffs, I think US experts are about two
percent of our GDP. There's plenty of other places we're
doing business.
Speaker 1 (16:40):
Right, and talking to exporters, they'll say, you know, the
US is actually one of the most profitable markets that
we that we export into, so they can actually wear
a bit of that tariff themselves. Kiwi dollars come down
a little bit as well. I hope it goes a
little bit further, and again that helps, you know, it
helps from the the US side. There's fewer US dollars
(17:02):
they need to buy Kiwi. So you know, we definitely
got panicked at the start when Trump came out with
these massive numbers, but we all turned to each other
and said, that's a negotiating in tact. He's going to
water it down. He warded it down a lot more
than what we thought, and I think if we look
at the impact, most of it's going to be on
the US consumer. I would love New Zealand to get
(17:23):
a ten percent tariff rather than a fifteen percent, but
you know, it's not going to end the New Zealand story.
They are a very very big export destination for US,
but we export meat and they're not going to stop
eating burgers, and they'll wash it down with a Kiwi
wine as well, So I'm not too worried about that.
(17:47):
To be fair, we thought, what does it mean for
the rest of the world. It's a world that's slower
and trading less with each other, but not to the
extent we were worried about. In April. There's a slow
down there. China is already diverting some of their exports
into Europe and elsewhere. I think that's a bit deflationary,
(18:09):
you know, that slower growth, that diversion of trade. So
from our perspective, we actually think it's deflationary. It's going
to add to inflation dropping below two percent.
Speaker 2 (18:18):
Of these people will worry that, like you said, it
was going to be a widespread tip for tach kind
of reciprocally, people haven't sort of done the tack right.
Speaker 1 (18:26):
Typical analysts like ourselves, you know, you go down these
rabbit holes, you go, well, this is what we've seen.
It could spiral off over here, or it could calm
right down, and we were worried more about the spiraling
into uncharted territory, whereas it just at the end of
the day, the tariffs are a tax take. It's all
(18:48):
mostly what it is. It's let's just, you know, take
ten to fifteen percent, and when you model what the
impacts of tariffs are going to be ten to fifteen percent,
you actually generate quite a bit of revenue for the
government thirty forty fifty percent. Tariffs don't generate much revenue
because it smothers the trade exactly, people divert their trade elsewhere.
(19:11):
It actually changes behavior. If you're a government and you
want to take you want to generate revenue, you don't
want to change behavior, and that's where we've ended up
on most of these tariffs. So I'm looking at it
and going, Okay, he's done a whole lot of negotiating,
He's done a whole lot of things behind the scenes,
but he's kind of he's just wanted to generate some revenue.
I mean, he's got to pay for the tax cuts
that he brought in in his first term.
Speaker 2 (19:33):
Someone asked to I mean we worry about this, I
suppose as a nation, going back to what you said
about our debt levels and whether we've serviced the needs
of our society. Around economy, there's a lot of pressure
on governments to return to surplus quickly, and a lot
of scolding gets applied to whether it's national or labor holding.
(19:54):
The Treasury ventures about that return. I think at the moment,
even Fitch, one of the ratings agencies, when it reconfirmed
that New Zealand's got a I think.
Speaker 1 (20:04):
It's a double a plus under them.
Speaker 2 (20:06):
I think, great credit school to have to borrow, but
please don't do any borrowing instead of almost the thing.
It's nice, but don't take it for a drive because
they're saying you keep pushing down the road to the point
at which you're returning to surplus. And they're saying that
to worry. I mean, you've worked in international money markets
and you know you've got to heed those people, haven't you.
Speaker 1 (20:25):
Yeah, yeah, oh absolutely, it's a it's a big deal.
And New Zealand's got a triple A rating under under Movies, right,
that's as high as it gets. I kind of wish
we didn't have that, to be fair, and it was
double A and that was all we were all we
were going for. But yeah, no, there's there's a there's
an op x versus capex thing here. So there's running
(20:46):
a deficit because you're spending too much and you're not
collecting enough revenue and you need to think about your taxes.
You need to think about your spending, and you know
this government's doing doing that. But then there's the well,
if we went out to the market and issued an
infrastructure bond and said hey, we want fifty billion dollars
(21:07):
and we're going to issue that and it's going to
go towards infrastructure, then most people will turn around and
go okay, fine.
Speaker 2 (21:17):
New Zealand.
Speaker 1 (21:18):
Good risk would put how money there Singapore going into
building as sets people. There's going to be a return
on it, hopefully, you know, it might be a toll road,
it might be whatever. Get the private people involved, you know,
do what you need to do to build the infrastructure.
I don't think the rating agencies or investors would even blink.
(21:38):
It's like, yeah, okay, you're finally playing catch up for
thirty years of not doing enough, cutting taxes, spending more
on on on beneficiaries or whatever. That's what gets the
rating agent's more concerned building a bridge, building a road
or whatever. That that's not a that's building in the
(22:02):
productivity of your economy. And we sit here looking at
these really disappointing productivity numbers for New Zealand and elsewhere,
but for New Zealand in particular, and we just go,
you know what, A lot of that's just the lack
of infrastructure. We haven't invested in ourselves, and governments need
to realize that if you think about the long game,
(22:23):
and unfortunately they're only thinking about three year games, if
you think about the long game, spending more on infrastructure today,
we'll give you a harder, faster, stronger economy. Oh and
that's a larger tax base tomorrow. We don't seem to
be able to think in ten twenty fifty year chunks.
We're only thinking in three yearly chunks. Look at this
(22:44):
government now that they haven't been in there that long.
They're kind of halfway through and they're already looking to
next year, going jeez, we've got to deliver in order
to get voted back in. It's not enough time, not
enough time for either side of government.
Speaker 2 (22:58):
We might get to decide on a four year term
at the next selection.
Speaker 1 (23:01):
But it's like you want to give them a four
year term with the expectation to get in two almost
like the US, you kind of expect them to get
two terms and you've got them in there for a
chunk of time and you can kind of get stuff
done over that over that time frame. But three yearly
and then and then the complications of coalitions, it's just,
(23:23):
you know, it really inhibits their ability to get stuff done.
Speaker 2 (23:29):
Well. It provides ideas, yeah, possibly, but I mean you
get ideas. You get minority parties like Act with the
Greens that are living in sort of slightly saltier suggestions
like we should run hard on that deficit or we should,
you know, really pull the chucks out and go for
an extremely simultary position and that what what function does
(23:49):
that have?
Speaker 1 (23:50):
Well, I think you get you get these two centralist parties,
and then you get some on either side recommending the
more extreme, and a lot of odors will look at
the two central parties and go, you know what, they're
not really either size, not really giving me something. So
I'll go to the ones that are a bit more extreme,
and we and we see that. I just wish we
(24:11):
would have a better debate about the type of debt
that we could issue and what that money would be
used for. If we went out to the investment community
and said, give us fifty billion dollars we want to
do these projects over the next ten years, will you
fund us? Absolutely? They would absolutely. They are looking for
(24:33):
ten twenty thirty year debt. ACC is a great example.
Insurance companies. They want long term bonds to invest into,
so they would be you know, itching to buy twenty
thirty year bonds.
Speaker 2 (24:46):
Were the world champions of comparing ourselves straight to kicker,
who's doing it better than us? Right now?
Speaker 1 (24:53):
I think Australia is definitely uperforming us at the moment.
And that's because they are, and you know they're. Their
central bank didn't go as hard on the rate hikes,
so therefore the Ossie economy didn't slow down as much.
They didn't record a technical recession. They've got a recession
(25:13):
in per capita terms, but it's quite shallow compared to ours.
So we just look at the Aussie economy and go,
oh man, it's just growing nicer than ours. The labor
markets tighter, wage growth is more. They're just more buoyant
than we are at the moment, and that's why we've
seen a net forty three thousand kiwis leave in the
(25:33):
last year.
Speaker 2 (25:34):
People are heading there, mostly.
Speaker 1 (25:36):
Didn't going to Australia, so we've seen seventy odd thousand
kiwis leave and then some coming back, but that net
forty three is huge. That's a lot of kiwis leaving.
It goes in cycles, and we saw it in twenty
and twelve when the Aussie mining boom was really in
full flight and people were going over driving a truck
(25:59):
and per for like two hundred thousand dollars. Not so
much of that these days, not so much of that,
but definitely better prospects at the moment. Otherwise we wouldn't
be seeing the numbers of kiwi are leaving to Australia.
Speaker 2 (26:11):
How much of it is off savings and just a stronger,
you know, a better national superinnuation structure so that people
are putting more money aside.
Speaker 1 (26:20):
Oh, I mean that's been a strength of Australia for
a while. Now. They've got I think the fifth largest
sovereign wealth fund on the planets for an economy, which
is less than two percent of the global economy. To
have that sort of savings there, and do you know what,
they don't think they've got enough. They are still increasing
their compulsory I think it's gone up to twelve percent now.
(26:42):
It was nine percent when I was working there. I
tell you what, working thirteen and a half years in Australia,
I've actually got this nice little nest egg sitting there
that I wouldn't have had Otherwise. There's no way I
could afford to put nine percent away over that entire period.
But it's sitting there and it's great. We're doing it
here now. Should be compulsory should be a much higher rate.
(27:05):
But you know, some things Australians just do do better
than us. They dig holes better than us, I can
tell you that much. But we grow stuff on top
much better than them. One thing they are pretty good at,
and particularly at the state level, is the big infrastructure stuff.
You know, they just seem to get stuff done. And
(27:25):
I use Sydney as a classic example, where you've got
this bridge and it's got heaps lanes, it's got a
train track gone both ways, so trains can go across,
you can walk down one side, you can cycle across
the other side of it. And that was built, you know,
fifty years ago. That's not enough. Their cities grew and
(27:50):
they've got a tunnel going underneath. Now you've got theories.
You've got plenty of ways to get across the Sydney Harbor.
Right here, You've got a bridge that was built in
the sixties, I think, on the cheap. On the cheap,
it reached capacity five years later, so we tacked on
(28:10):
some clip ons and we've done nothing since. The only
other way to get across is with maybe a fury
if you're lucky, or a kayak' that's your option. Strong
swimmers need strong swimmers exactly. I think it just highlights
the difference between us. They can they can deliver these
big projects in Australia and they can think a lot
(28:32):
further ahead for some reason, and I just wish we
would snap out of it.
Speaker 2 (28:38):
Let's look at we're in the middle of earning season
at the moment. What are the economic themes, the macro themes,
the big bits of or clues you're getting about the
state of the world and the state of the economy
from some of the results that we're starting to see through.
We've had you know, like I think a two milk
and a couple of the big gent Taylor's here, ass
he's had the some of the resources reports in the
(29:00):
last couple of days. Does that help color your understanding
of what we're going through?
Speaker 1 (29:05):
Yeah, it does? It does you know, you get a
flavor as the house. You know, certain certain businesses are
fairing and you know it doesn't match the data yet
kind of does There's certain external businesses that are exporting stuff,
they're doing they're doing okay, tourism related stuff, some some
other things are bouncing back. But generally looking across the
(29:29):
whole economy, if you actually go beyond the listed companies
and you look at say corporate tax that the government's collecting.
It's very very weak, very soft. So you know it's
still it's still you know, better than last year, but
not good. And we're still sort of feeling our way
out of this of this recession. You know, earnings overseas
(29:52):
have been okay, but you know, I'm not shooting the
lights out.
Speaker 2 (29:56):
And you've got a lot of I D based liquidations.
They're already coming cracking down.
Speaker 1 (30:00):
They have just gone like that, and it's like, you know,
we see we sit there and go, you know, I'm sorry,
but that's exactly what you see in a recession. People
hold on for as long as they can and then
if the if you're not recovering quickly, which we're not,
then unfortunately a lot of these businesses go bust. And
(30:20):
we have seen quite a lift in receiverships, liquidations, you know,
all that, all that horrible stuff that we don't want
to see. And again we look at that and say, hey, yeah,
there's a lot of pain out there. What are we
doing as a country? Government's not stilatory, central banks not stilatory.
We've been through this huge recession. Where's the where's the
(30:43):
helping hand?
Speaker 2 (30:45):
You've been quite interested in understanding money and finance and
the economy for quite some time. How did that spark start?
Speaker 1 (30:54):
Yeah, pretty much my my my whole sort of adult life.
Like it started at school and like many students are
completely useless at English Mass, you know, I was getting
like you know b's and c's and stuff. And then
I had this fantastic economics teacher who's now teaching at
with Slate Girls, Dan Rennie, and he just brought it
(31:16):
to life. He got me reading the monetary policy statements
from the Reserve Bank at like the age thirteen fourteen,
and I've been reading my whole life. That's my whole life.
I've been reading these monetary policy statements. But my best
mate he went on to be a lawyer, so he
was dreaming about being a lawyer and I'm dreaming about
(31:37):
being an economist. And we both get together these days
and look back and laugh and you know we were
we basically have done what we said we're going to
do it, like age fifteen.
Speaker 2 (31:49):
How do we get people fired up about that interested
in those things?
Speaker 1 (31:52):
Is it just or yeah, try it out. I Mean
there's some cool things that I wish that I wish
were around when I was at at school. There's a
system or a program called Banker, which is so cool.
They get students, you know, really involved in finance and
making decisions as if they're adults and you know, running
(32:14):
a home, running a business, buying shares, that sort of stuff,
and they get them involved in it early. I think,
you know, financial literacy is something where I don't think
it requires a lot and I'm glad the government's tackled
this and said, you know, we need to do this.
I don't think it requires a lot of teaching to
(32:35):
give you just a real basic understanding. I'm always saddened
when I hear of people being so scared to walk
into a bank. Oh, I don't want to talk to them.
They're not going to approve my loan. It's like walk
in there, slap it on the desk and say I
want my loan, you know, and if they say no,
go to the next one. Go to the next one.
Speaker 2 (32:54):
You know what.
Speaker 1 (32:54):
The bank's there. They want you as a customer. And
it's that financial literacy. You know, if you if you're
not there and you and you're you're not comfortable in
your own understanding, you are going to be nervous walking
into a bank. And that shouldn't be the case if
they had had proper bit of training on on on
just how to do simple things and putting money away
(33:14):
into it into a shares your account I think is
part of that.
Speaker 2 (33:17):
Right, money makes it matter.
Speaker 1 (33:20):
Yeah, yeah, they'll be scared of it. Just just start
doing it right.
Speaker 2 (33:26):
Well, let's see if that attitude will infuse itself out
after this podcast and we'll start to see those green shirts.
Jared Kre thank you very much for your time here,
and thanks very much for your attention for listening in.
Whatever you made of that, let us know, let us
know if there's something else that we should be covering
here on the Shared Lunch. That's us for now,
Go to Koto.
Speaker 2 (00:05):
Welcome to Shared Lunch.
Speaker 1 (00:06):
I'm Garth Bray.
Speaker 2 (00:07):
Well, the Reserve Banks made another call on the official
cash rate and that has implications for our whole economy.
Will it provide the stimulus that we need. One of
the earliest voices calling for stimulus to get things running again?
Here we Banks chief economist Jared Kerr. He takes us
through why he sees the need for this right now.
(00:28):
But first, some important information you should always consider when investing.
Speaker 3 (00:32):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (00:46):
Here is a man who thinks that stimulus might just
be the answer. Would that be fair to say? Oh?
Speaker 1 (00:50):
Absolutely. I think it's pretty clear that the economy needs
a little bit of encouragement right now and we're just
not getting it. I think interest rates haven't reached that level. Well,
I know they haven't reached that level where you know,
investors and businesses feel like they want to take a
punt on something.
Speaker 2 (01:11):
We've launched straight into without even saying welcome to Charesis
and thanks for being that's all right, no mucking around,
and straight into it. So what is it that makes
you think that there needs to be a stimilatory track
to monetary policy? And for someone who just wants to
speak in single syllables, what does that even mean?
Speaker 1 (01:31):
It means that interst rates have not yet reached a
level that are exciting people or are that encouraging businesses.
So we have this theoretical rate called the neutral rate, right,
and we think it's around three. It's a Goldilocks rate.
It's not too hot, it's not too cold. Right. We
know that the cash rate at five and a half
percent last year was way way too restrictive, right, and
(01:54):
that drove the economy into a recession. They've cut the
cash rate from five and a half to three and
we haven't seen that, you know, inspire anyone. What it
has done is it's given relief to people, but it
hasn't really triggered them. We think it needs to go
down to at least two and a half and just
(02:17):
to give people that incentive.
Speaker 2 (02:19):
So much to unpacking there. I guess some would say
your head for the neutral rate will get you to
the place where it's up to you to make the
decisions to take the risks, all that sort of stuff.
Why are we relying on a central bank and a
monetary policy to try and fire things up if they
aren't already ready to go.
Speaker 1 (02:38):
Yeah, well, I mean that's their job, right, so they
let's go through it. They overstimulated during COVID. They you know,
they purchased a lot of government bonds, so they printed
a lot of cash. Central banks around the world printed
trillions of dollars, and we came out of it firing
on all cylinders right because governments were spending central banks
(02:58):
were printing cash. Next minute, we had an inflation rate
of over seven percent. Okay, they overdid it. They had
to get that back down to two. So they lifted
into shraps from their zero settings to quite aggressively high settings,
and that really hurt households and businesses, drove us back
(03:18):
into recession. And we haven't gotten out of that recession yet.
We're still like crawling out of this hole that the
central bank poured us into last year. And I think
you know, just using the car, you know, example, you've
had your foot on the heavy on the break, you've
taken it off, You've put the car in neutral. It's
(03:40):
just idling. We're saying, just put your foot on the accelerator,
not hard, just get the economy gone.
Speaker 2 (03:47):
Is that a consensus view? Are you guys? Are you
on the outer on that?
Speaker 1 (03:53):
We were? I mean we were calling this a year
and a half ago. We were well outside of the
consensus calling for a two and a half percent cash row.
Now there are a few more. Most economists are around
that sort of two seventy five three level, so we're
only arguing over fifty basis points.
Speaker 2 (04:12):
There was a sort of a split decision back in May,
although there was a consensus around holding steady in Wellington.
On the most recent one you had I think that
in the US the first time in about thirty something
years that two governors said we want to express our
descent with the rest of what you guys are coming
up with the Bank of England. I'm just telling this
(04:33):
for the people that haven't been paying attention, you know
this is it getting harder to work out what's going
on in that room, what they're deciding and how they'll pick.
Is this just part of the cycle.
Speaker 1 (04:44):
Yeah, I think it does get a little harder when
you're towards the end for starters. So from the Reserve
Bank of New Zealand's point of view, they've gone from
five and a half to three. You know, there's not
a lot left and they're just kind of feeling their
way down to the bottom, and the bottom's near right.
You can say the same thing for other central banks
around the world. But you know, let's not forget we've
(05:05):
had this tariff war of sorts over this year that's
really thrown a lot of things up in the year.
We know it's inflationary for the United States, so that's
why you're getting that sort of mixed feel from the
from the Fed governors, and we think it's deflationary for us,
(05:26):
but it's yet to feed through. So you know, there's
a lot of balls in the year. There's a lot
of volatility, there's a lot of question questions that need
to be answered.
Speaker 2 (05:34):
And we've got another complication because we've got an acting
governor at the moment and possibly a permanent replacement coming
through sometime soon. Does that mean that the Bank's going
to be saying, well, the Monetary Policy Committee are going
to be saying we will leave it to the new boss.
Speaker 1 (05:49):
No, I don't think so. I don't think so. They've
got a job to do. They know what the job is.
It is a it is a committee now rather than
a sole decision maker like it used to be. So
you've kind of you've spread that a little bit. And
Christian Christian knows what he's doing. Christian has been around
long time.
Speaker 2 (06:07):
This is Christian Hawksby.
Speaker 1 (06:08):
Christian Hawksby who's acting governor at the moment. He's been
at the Reserve Bank, I'm not sure about six or
seven years himself. He was working for Harbor Asset Management,
so he knows the markets very well. And he also
worked at the Bank of England prior to that. So
I'm going to talk about credentials. He knows what he's doing.
So there's no excuse, Oh, we better wait for the
(06:28):
next governor to come in. They just need to do
what they need to do.
Speaker 2 (06:34):
A lot of people are saying it's not so much
about whatever the decision has been, it's more about where
we're headed from here. Absolutely, what the shape of that
curve looks like when we're going to see rates start
to rise again, where that bottom is. Do you have
strong views there?
Speaker 1 (06:49):
Yeah, so our So, like I said, we're at two
and a half. Market's kind of around two seventy five ish,
So we're not arguing over a big difference. But from
our point of view, that extra twenty five is meaningful,
and it would just get mortgage rates, you know, that
little bit, that little bit lower than where they are today.
(07:10):
Whereas if we stop at two seventy five or three,
then mortgage rates that that's them done, that's that's the bottom.
And I just don't think that's stemmatry enough.
Speaker 2 (07:20):
All right, So we do get to two point seventy
five or even two point five, what does that mean
for a mortgage customer?
Speaker 1 (07:28):
So very simply, the cash rate is what the banks
deal with the central bank, right, the central bank is
the banker of the bank. So we're dealing at at
say three percent, but that's not where we've fund ourselves at.
Like we're all offer a term deposit rate. I think
we've got one out there at like four point one
at the moment, So that's quite a bit higher than
(07:49):
the cash right. That's because we're trying to get money,
you know, in the door, and then we lend it
out right, and then we're and then we're charging you know,
five percent on a on on a mortgage rate or above.
So you're all these rates, but the cash rate influences
everything above it. So you drop that cash rate from
(08:11):
five and a half to three, and what you've seen
is mortgage rates go from seven and a half to five.
So roughly lockstep doesn't happen precisely, but it has over
the over the year, we've seen that that whole lot
being being passed on. What does another fifty basis points mean?
(08:32):
Will those five percent rates or slightly above go into
the mid floors and you get that little bit of
extra a little bit of extra bang for buck and
delivering that that extra fifty basis points in the in
the cash rate term deposit rates four as well. So
there's a lot of savers out there that go, oh,
I didn't realize it so well. Actually, you know, we've
(08:54):
been talking about rate cuts for over a year. You
could have been preparing yourself on the way down. We
always talk about the household with debt, you know, your
mortgage rates falling. Actually, if you're if you're a retirement
you know, if you're in retirement and you're getting less
on you on your nest egg.
Speaker 2 (09:13):
And that fixed income suddenly isn't quite so attractive. You
need to look at diversification.
Speaker 1 (09:18):
Do you do this is precisely so. Putting the cash
rate at five and a half, you're trying to attract
savings right dropping it down, you're trying to get savings
to go out into more riskier assets. You want to
get them out into either simply buying shares or getting
businesses to put money out the door to buy you know,
(09:42):
investment like tractors and stuff.
Speaker 2 (09:44):
I mean, if we look around, there's been a lot
of worry about debt. I mean, there's been a lot
of talk about debt this week. I think one of
the major papers saying, look, we're on track to a
trillion dollars worth of combined public and brother big number.
Does a big number like that give you any pause,
any concern?
Speaker 1 (10:00):
Well, the big number, you know, shows a lot of
private debt, a lot of household debt right as a
percentage of income, it's gone sideways for a while, but
it's at a very high level, you know, comparatively speaking.
So we've got a lot of debt on the private side,
but we don't have a lot of public debt and
this is something that we need to smash, smash wide
(10:20):
open in the New Zealand public.
Speaker 2 (10:22):
Smashing it down, you look about smashing it up.
Speaker 1 (10:24):
I absolutely no smash the perception that we've got too
much debt as a government. I don't think we do.
I don't think we do it all. I think we
can take on a lot more debt to tackle the
infrastructure problems that we've got. That I would argue that
we have not only disappointed the New Zealand public, but
actually haven't fulfilled what we should have done as a
(10:45):
government over the last thirty years. We have not kept
up our infrastructure spending with our population. Right, that's just
a simple, simple message to everyone. You know, it takes
us forty minutes to drive tea case in Auckland.
Speaker 2 (11:02):
Right.
Speaker 1 (11:03):
Wellington looks more like Venice than it does anything else.
With all the water running down the streets. I mean,
you know, the burst pipes. There's so many examples, and
then the good examples christ Church. Look what happens when
you build back beautifully. It's a cool city. People are
a lot more upbeat down there, and it's because you know,
they've got the infrastructure, not.
Speaker 2 (11:25):
Just because the regional economy is strong and you've got
a lot of farming and something happening there and that's
supporting it, whereas other.
Speaker 1 (11:30):
Places Wykado and other areas not as upbeat as christ Church. Right,
they've got that farming base, you know, that's that external
sector that's doing well. You're getting high dairy price is
high meat prices, tourisms bouncing back. But the South Island
seems to be a lot more upbeat than the than
(11:51):
the North, and you know there's something going on there.
Speaker 2 (11:54):
If you look at farming and agriculture in general. I
think the total agricultural debt is down at the moment,
So at a time where those prices are great, where
farmers are making bank, they're choosing to retire that rather
than to invest. What does that say?
Speaker 1 (12:11):
Yeah, And I think they've been asked to do that too,
because they've taken on a little bit too much. So
I think the couple of the major banks have been asking,
you know, actually maybe you should repay a little bit,
which is prudent. But what we're seeing and is that
farmers are spending on the farm, so they may have
sort of run down their maintenance a bit. Now they're
(12:34):
back up to where it should be, spending more on
animal welfare, spending more on the farm, but not past
the farm gate. So they might be buying a tractor,
for example, but they're not buying a use. They might
be doing their fences, but they're not going on a holiday.
And I think that just shows you how cautious they are,
even though things are pretty good and they're getting a
(12:55):
very high payout, they're spending on the farm, they're not
spending outside of it.
Speaker 2 (13:00):
And then if we're looking at business, I think the
business landing as well. You know, business borrowing in the
UNA was sort of up just a fraction, not even
a full percentage point. Again, that's you say, because it's
not stimulatory enough or companies just don't see the reward
justifying the risk.
Speaker 1 (13:16):
Same same thing, even with the investment boosts.
Speaker 2 (13:19):
What happened to the investment boost so right off a
larger portion of a capital purchase, we're not seeing that
play through.
Speaker 1 (13:25):
No, no, we're not, And that that just proves the
fact that we're still in this recession, I believe. So
we recorded quite a sharp contraction last year and we're
going sideways, and it looks like in the current quarter
where and now we might we might record another contraction.
So it's pretty weak out there. Businesses aren't taking on
(13:47):
debt because they are cautious that they're worried about what
does all this tariffs mean for us? You know, the
New Zealand households not spending yet. You know, you're very
cautious as a business right now, and we're noticing that
in in our lending. That investment boost helps, but it's
not driving you to make the decision. And businesses aren't
(14:09):
making that decision at the moment. You ask them are
you investing? And you're getting quite a mixed response. Most
of them are saying no. And you ask them, are
you hiring people? Again, most of them will say I
actually go through a bit of a restructure still, So
until that turns and we see it going positive, and
(14:30):
there's signs that it is, such.
Speaker 2 (14:32):
As sidelined, but there's signs there isn't. I mean, the
Performance of Services index I think came out this week
and it was the twentieth month in a row.
Speaker 1 (14:40):
Less negative but negative.
Speaker 2 (14:42):
Yeah, but the employer right that's been in the dumpster
for twenty months now, twenty months, Yeah, that tells you,
I suppose that if you're a services business, which is
sort of what two thirds of the economy. Yeah, that's
a lot of businesses out there that are weary about hiring.
H landing. Who's getting hit by that?
Speaker 1 (15:01):
Oh well, you know, it depends what industry you're looking at.
Like I said, the agriculture side's doing well and they're
finding the workers that they need, so there's definitely not
a shortage of workers anymore that we had just a
couple of years ago. There's actually a bit of an oversupply.
And then you go across, like you say, most of
the services side, they're not hiring. I gave a few
(15:23):
presentations to quite large groups recently. One was in Wellington
and there were about two hundred people in the crowd
and I said, are you investing? Are you hiring? And
about eight people put their hands up. I counted them eight.
And then I went to christ Church and at least
a third, maybe forty percent put their hands up, So
(15:45):
still less than fifty, but Jesus a massive difference between
Wellington and christ Church and Auckland's kind of in the middle.
About twenty percent people put their hand up. So when
I do that and I sort of gauge a crowd.
I sort of walk out going okay, that's you know,
depending on where you are, it's worse. But overall it's
still quite weak, even in the hot spots like christ Church.
Speaker 2 (16:07):
But then as cutting if there's that much gloom, as
cutting interest rates really going to provide people with the
stimulus because they're still going to be nervous about taking action.
Speaker 1 (16:16):
Right, better than doing nothing, It's better than leaving the
cash rat restrictive or neutral, so you're effectively not not
doing anything.
Speaker 2 (16:25):
We talked about tariffs there, and I would just want
to ask you have we overbaked the concern around the
trade war and the tariffs and that kind of thing.
With US tariffs, I think US experts are about two
percent of our GDP. There's plenty of other places we're
doing business.
Speaker 1 (16:40):
Right, and talking to exporters, they'll say, you know, the
US is actually one of the most profitable markets that
we that we export into, so they can actually wear
a bit of that tariff themselves. Kiwi dollars come down
a little bit as well. I hope it goes a
little bit further, and again that helps, you know, it
helps from the the US side. There's fewer US dollars
(17:02):
they need to buy Kiwi. So you know, we definitely
got panicked at the start when Trump came out with
these massive numbers, but we all turned to each other
and said, that's a negotiating in tact. He's going to
water it down. He warded it down a lot more
than what we thought, and I think if we look
at the impact, most of it's going to be on
the US consumer. I would love New Zealand to get
(17:23):
a ten percent tariff rather than a fifteen percent, but
you know, it's not going to end the New Zealand story.
They are a very very big export destination for US,
but we export meat and they're not going to stop
eating burgers, and they'll wash it down with a Kiwi
wine as well, So I'm not too worried about that.
(17:47):
To be fair, we thought, what does it mean for
the rest of the world. It's a world that's slower
and trading less with each other, but not to the
extent we were worried about. In April. There's a slow
down there. China is already diverting some of their exports
into Europe and elsewhere. I think that's a bit deflationary,
(18:09):
you know, that slower growth, that diversion of trade. So
from our perspective, we actually think it's deflationary. It's going
to add to inflation dropping below two percent.
Speaker 2 (18:18):
Of these people will worry that, like you said, it
was going to be a widespread tip for tach kind
of reciprocally, people haven't sort of done the tack right.
Speaker 1 (18:26):
Typical analysts like ourselves, you know, you go down these
rabbit holes, you go, well, this is what we've seen.
It could spiral off over here, or it could calm
right down, and we were worried more about the spiraling
into uncharted territory, whereas it just at the end of
the day, the tariffs are a tax take. It's all
(18:48):
mostly what it is. It's let's just, you know, take
ten to fifteen percent, and when you model what the
impacts of tariffs are going to be ten to fifteen percent,
you actually generate quite a bit of revenue for the
government thirty forty fifty percent. Tariffs don't generate much revenue
because it smothers the trade exactly, people divert their trade elsewhere.
(19:11):
It actually changes behavior. If you're a government and you
want to take you want to generate revenue, you don't
want to change behavior, and that's where we've ended up
on most of these tariffs. So I'm looking at it
and going, Okay, he's done a whole lot of negotiating,
He's done a whole lot of things behind the scenes,
but he's kind of he's just wanted to generate some revenue.
I mean, he's got to pay for the tax cuts
that he brought in in his first term.
Speaker 2 (19:33):
Someone asked to I mean we worry about this, I
suppose as a nation, going back to what you said
about our debt levels and whether we've serviced the needs
of our society. Around economy, there's a lot of pressure
on governments to return to surplus quickly, and a lot
of scolding gets applied to whether it's national or labor holding.
(19:54):
The Treasury ventures about that return. I think at the moment,
even Fitch, one of the ratings agencies, when it reconfirmed
that New Zealand's got a I think.
Speaker 1 (20:04):
It's a double a plus under them.
Speaker 2 (20:06):
I think, great credit school to have to borrow, but
please don't do any borrowing instead of almost the thing.
It's nice, but don't take it for a drive because
they're saying you keep pushing down the road to the point
at which you're returning to surplus. And they're saying that
to worry. I mean, you've worked in international money markets
and you know you've got to heed those people, haven't you.
Speaker 1 (20:25):
Yeah, yeah, oh absolutely, it's a it's a big deal.
And New Zealand's got a triple A rating under under Movies, right,
that's as high as it gets. I kind of wish
we didn't have that, to be fair, and it was
double A and that was all we were all we
were going for. But yeah, no, there's there's a there's
an op x versus capex thing here. So there's running
(20:46):
a deficit because you're spending too much and you're not
collecting enough revenue and you need to think about your taxes.
You need to think about your spending, and you know
this government's doing doing that. But then there's the well,
if we went out to the market and issued an
infrastructure bond and said hey, we want fifty billion dollars
(21:07):
and we're going to issue that and it's going to
go towards infrastructure, then most people will turn around and
go okay, fine.
Speaker 2 (21:17):
New Zealand.
Speaker 1 (21:18):
Good risk would put how money there Singapore going into
building as sets people. There's going to be a return
on it, hopefully, you know, it might be a toll road,
it might be whatever. Get the private people involved, you know,
do what you need to do to build the infrastructure.
I don't think the rating agencies or investors would even blink.
(21:38):
It's like, yeah, okay, you're finally playing catch up for
thirty years of not doing enough, cutting taxes, spending more
on on on beneficiaries or whatever. That's what gets the
rating agent's more concerned building a bridge, building a road
or whatever. That that's not a that's building in the
(22:02):
productivity of your economy. And we sit here looking at
these really disappointing productivity numbers for New Zealand and elsewhere,
but for New Zealand in particular, and we just go,
you know what, A lot of that's just the lack
of infrastructure. We haven't invested in ourselves, and governments need
to realize that if you think about the long game,
(22:23):
and unfortunately they're only thinking about three year games, if
you think about the long game, spending more on infrastructure today,
we'll give you a harder, faster, stronger economy. Oh and
that's a larger tax base tomorrow. We don't seem to
be able to think in ten twenty fifty year chunks.
We're only thinking in three yearly chunks. Look at this
(22:44):
government now that they haven't been in there that long.
They're kind of halfway through and they're already looking to
next year, going jeez, we've got to deliver in order
to get voted back in. It's not enough time, not
enough time for either side of government.
Speaker 2 (22:58):
We might get to decide on a four year term
at the next selection.
Speaker 1 (23:01):
But it's like you want to give them a four
year term with the expectation to get in two almost
like the US, you kind of expect them to get
two terms and you've got them in there for a
chunk of time and you can kind of get stuff
done over that over that time frame. But three yearly
and then and then the complications of coalitions, it's just,
(23:23):
you know, it really inhibits their ability to get stuff done.
Speaker 2 (23:29):
Well. It provides ideas, yeah, possibly, but I mean you
get ideas. You get minority parties like Act with the
Greens that are living in sort of slightly saltier suggestions
like we should run hard on that deficit or we should,
you know, really pull the chucks out and go for
an extremely simultary position and that what what function does
(23:49):
that have?
Speaker 1 (23:50):
Well, I think you get you get these two centralist parties,
and then you get some on either side recommending the
more extreme, and a lot of odors will look at
the two central parties and go, you know what, they're
not really either size, not really giving me something. So
I'll go to the ones that are a bit more extreme,
and we and we see that. I just wish we
(24:11):
would have a better debate about the type of debt
that we could issue and what that money would be
used for. If we went out to the investment community
and said, give us fifty billion dollars we want to
do these projects over the next ten years, will you
fund us? Absolutely? They would absolutely. They are looking for
(24:33):
ten twenty thirty year debt. ACC is a great example.
Insurance companies. They want long term bonds to invest into,
so they would be you know, itching to buy twenty
thirty year bonds.
Speaker 2 (24:46):
Were the world champions of comparing ourselves straight to kicker,
who's doing it better than us? Right now?
Speaker 1 (24:53):
I think Australia is definitely uperforming us at the moment.
And that's because they are, and you know they're. Their
central bank didn't go as hard on the rate hikes,
so therefore the Ossie economy didn't slow down as much.
They didn't record a technical recession. They've got a recession
(25:13):
in per capita terms, but it's quite shallow compared to ours.
So we just look at the Aussie economy and go,
oh man, it's just growing nicer than ours. The labor
markets tighter, wage growth is more. They're just more buoyant
than we are at the moment, and that's why we've
seen a net forty three thousand kiwis leave in the
(25:33):
last year.
Speaker 2 (25:34):
People are heading there, mostly.
Speaker 1 (25:36):
Didn't going to Australia, so we've seen seventy odd thousand
kiwis leave and then some coming back, but that net
forty three is huge. That's a lot of kiwis leaving.
It goes in cycles, and we saw it in twenty
and twelve when the Aussie mining boom was really in
full flight and people were going over driving a truck
(25:59):
and per for like two hundred thousand dollars. Not so
much of that these days, not so much of that,
but definitely better prospects at the moment. Otherwise we wouldn't
be seeing the numbers of kiwi are leaving to Australia.
Speaker 2 (26:11):
How much of it is off savings and just a stronger,
you know, a better national superinnuation structure so that people
are putting more money aside.
Speaker 1 (26:20):
Oh, I mean that's been a strength of Australia for
a while. Now. They've got I think the fifth largest
sovereign wealth fund on the planets for an economy, which
is less than two percent of the global economy. To
have that sort of savings there, and do you know what,
they don't think they've got enough. They are still increasing
their compulsory I think it's gone up to twelve percent now.
(26:42):
It was nine percent when I was working there. I
tell you what, working thirteen and a half years in Australia,
I've actually got this nice little nest egg sitting there
that I wouldn't have had Otherwise. There's no way I
could afford to put nine percent away over that entire period.
But it's sitting there and it's great. We're doing it
here now. Should be compulsory should be a much higher rate.
(27:05):
But you know, some things Australians just do do better
than us. They dig holes better than us, I can
tell you that much. But we grow stuff on top
much better than them. One thing they are pretty good at,
and particularly at the state level, is the big infrastructure stuff.
You know, they just seem to get stuff done. And
(27:25):
I use Sydney as a classic example, where you've got
this bridge and it's got heaps lanes, it's got a
train track gone both ways, so trains can go across,
you can walk down one side, you can cycle across
the other side of it. And that was built, you know,
fifty years ago. That's not enough. Their cities grew and
(27:50):
they've got a tunnel going underneath. Now you've got theories.
You've got plenty of ways to get across the Sydney Harbor.
Right here, You've got a bridge that was built in
the sixties, I think, on the cheap. On the cheap,
it reached capacity five years later, so we tacked on
(28:10):
some clip ons and we've done nothing since. The only
other way to get across is with maybe a fury
if you're lucky, or a kayak' that's your option. Strong
swimmers need strong swimmers exactly. I think it just highlights
the difference between us. They can they can deliver these
big projects in Australia and they can think a lot
(28:32):
further ahead for some reason, and I just wish we
would snap out of it.
Speaker 2 (28:38):
Let's look at we're in the middle of earning season
at the moment. What are the economic themes, the macro themes,
the big bits of or clues you're getting about the
state of the world and the state of the economy
from some of the results that we're starting to see through.
We've had you know, like I think a two milk
and a couple of the big gent Taylor's here, ass
he's had the some of the resources reports in the
(29:00):
last couple of days. Does that help color your understanding
of what we're going through?
Speaker 1 (29:05):
Yeah, it does? It does you know, you get a
flavor as the house. You know, certain certain businesses are
fairing and you know it doesn't match the data yet
kind of does There's certain external businesses that are exporting stuff,
they're doing they're doing okay, tourism related stuff, some some
other things are bouncing back. But generally looking across the
(29:29):
whole economy, if you actually go beyond the listed companies
and you look at say corporate tax that the government's collecting.
It's very very weak, very soft. So you know it's
still it's still you know, better than last year, but
not good. And we're still sort of feeling our way
out of this of this recession. You know, earnings overseas
(29:52):
have been okay, but you know, I'm not shooting the
lights out.
Speaker 2 (29:56):
And you've got a lot of I D based liquidations.
They're already coming cracking down.
Speaker 1 (30:00):
They have just gone like that, and it's like, you know,
we see we sit there and go, you know, I'm sorry,
but that's exactly what you see in a recession. People
hold on for as long as they can and then
if the if you're not recovering quickly, which we're not,
then unfortunately a lot of these businesses go bust. And
(30:20):
we have seen quite a lift in receiverships, liquidations, you know,
all that, all that horrible stuff that we don't want
to see. And again we look at that and say, hey, yeah,
there's a lot of pain out there. What are we
doing as a country? Government's not stilatory, central banks not stilatory.
We've been through this huge recession. Where's the where's the
(30:43):
helping hand?
Speaker 2 (30:45):
You've been quite interested in understanding money and finance and
the economy for quite some time. How did that spark start?
Speaker 1 (30:54):
Yeah, pretty much my my my whole sort of adult life.
Like it started at school and like many students are
completely useless at English Mass, you know, I was getting
like you know b's and c's and stuff. And then
I had this fantastic economics teacher who's now teaching at
with Slate Girls, Dan Rennie, and he just brought it
(31:16):
to life. He got me reading the monetary policy statements
from the Reserve Bank at like the age thirteen fourteen,
and I've been reading my whole life. That's my whole life.
I've been reading these monetary policy statements. But my best
mate he went on to be a lawyer, so he
was dreaming about being a lawyer and I'm dreaming about
(31:37):
being an economist. And we both get together these days
and look back and laugh and you know we were
we basically have done what we said we're going to
do it, like age fifteen.
Speaker 2 (31:49):
How do we get people fired up about that interested
in those things?
Speaker 1 (31:52):
Is it just or yeah, try it out. I Mean
there's some cool things that I wish that I wish
were around when I was at at school. There's a
system or a program called Banker, which is so cool.
They get students, you know, really involved in finance and
making decisions as if they're adults and you know, running
(32:14):
a home, running a business, buying shares, that sort of stuff,
and they get them involved in it early. I think,
you know, financial literacy is something where I don't think
it requires a lot and I'm glad the government's tackled
this and said, you know, we need to do this.
I don't think it requires a lot of teaching to
(32:35):
give you just a real basic understanding. I'm always saddened
when I hear of people being so scared to walk
into a bank. Oh, I don't want to talk to them.
They're not going to approve my loan. It's like walk
in there, slap it on the desk and say I
want my loan, you know, and if they say no,
go to the next one. Go to the next one.
Speaker 2 (32:54):
You know what.
Speaker 1 (32:54):
The bank's there. They want you as a customer. And
it's that financial literacy. You know, if you if you're
not there and you and you're you're not comfortable in
your own understanding, you are going to be nervous walking
into a bank. And that shouldn't be the case if
they had had proper bit of training on on on
just how to do simple things and putting money away
(33:14):
into it into a shares your account I think is
part of that.
Speaker 2 (33:17):
Right, money makes it matter.
Speaker 1 (33:20):
Yeah, yeah, they'll be scared of it. Just just start
doing it right.
Speaker 2 (33:26):
Well, let's see if that attitude will infuse itself out
after this podcast and we'll start to see those green shirts.
Jared Kre thank you very much for your time here,
and thanks very much for your attention for listening in.
Whatever you made of that, let us know, let us
know if there's something else that we should be covering
here on the Shared Lunch. That's us for now,
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