The Country 28/05/25: Cameron Bagrie talks to Jamie Mackay

Independent economist comments on today’s OCR announcement, the Investment Tax Boost, and National Super.

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Episode Transcript

Speaker 1 (00:00):
Host see our announcement time this afternoon at two pm.
The new or the fill in Reserve Bank governor what's
his name, Christian Hawksby, I think, well, make the announcement.
We all know it's a drop of twenty five basis points.
But cam Bagrey independent economists, the big question is is
the one or two more cuts after this is neutral?
Three percent or two point seventy five percent? Good afternoon.

Speaker 2 (00:24):
There's a little bit of, I guess, conjecture about where
neutral is where. What we know is that we're getting
into that sort of zone where monetary pilot policies neither
got the foot on the accelerator or the break, which
is sort of where you want to be when you've
got inflation under control around two percent. We know the
economy there's a recovering, but it's still pretty weak. There's

(00:47):
going to be a decent injection from the dairy sector
over the next twelve months, which will be encouraging. But yeah,
the inflation story as well is a little bit too
sided on some levels. When you've got demand, there's no
pricing powers. The construction prices are being trimmed. It's tough
in the retail land as well. But there's other parts

(01:07):
of the economy that are just not economically sensitive. We're
seeing pretty big inflation increases. You look at local authority rates,
you look at metal insurance, you look at your gas,
you look at your electricity bill. I just see ports
of walk and just put some whopping charges into the
freight industry as well, which are consumers are going to
end up paying down the pipeline.

Speaker 1 (01:26):
Let's move on to the budget. Well, last week's budget
the investment boost tax credit effectively an additional twenty percent
depreciation to be able to be claimed in year one.
This is going to be a real kickstart, I would
think for productivity.

Speaker 2 (01:41):
Well potentially, I think it's going to be a pretty
big kick staff with some vehicle sales and potentially a
few tractors are going to go out the door at fields,
because if you're front loading that sort of tax deduction
up front, it's a excuse to scrump a little bit
in regard to what you're going to spend it on. Yeah,
but if you commercial buildings are included in it as well,

(02:05):
which will sort of scratch my head over that one.
The real big productivity kicker. If we can get the
dial turning on your plant, machinery and equipment, and some
of that on farm investment outside of the vehicles. So
I watched the space in regard to where the people
said to take it up, move forward. Some sectors have

(02:27):
got cash flow at the moment that take advantage of that,
but cash is still pretty tight across the rest of
the economy.

Speaker 1 (02:32):
Yeah, you're right about commercial buildings. That's an interesting choice
because effectively that's not an appreciating asset like a tractor
or a truck.

Speaker 2 (02:40):
Yeah, exactly. Yeah, those things have tended to appreciate largely
driven drive construction costs. You're out of replacement value of
the items. We'll just see where it goes. Is it
going to magically turn the dial on New Zealand's productivity story?
The answer is none. Will help around the edges. Yeah,
the answer is yes.

Speaker 1 (03:01):
One to finish on because I know that Brad Olsen
from Infometrics and Heather Duplessly Allen had a good scrap
on this one last night on ZB the age of
eligibility for National Super. I'm a pensioner now CAAM I
get paid National Super. I also get a winter energy payment.
I'm still working. I'm well paid. I don't need it.
I'm putting mine to a good use other than myself.

(03:23):
But the thing is, it is surely an entitlement. You
say it's not because I'm happy to wait till i'm
sixty seven, But when I'm sixty seven, I want my
entoldment because I think I've earned it.

Speaker 2 (03:38):
Well. I guess there's different interpretations over what's the role
of government in regard to supporting sports, support communities. And
my view is that the wealthiest debate, which is a
critical part of New Zeond. It's a critical safety net.
We need to have it in place, but it's there
for the needy. It's not there for greedy. You are

(04:00):
those that have done well. It's a safety in debt
to help people out when their in need. I think
it's a critical part of New Zeon's institutional, economic and
social framework.

Speaker 1 (04:13):
But under your scenario, Cameron, aren't you punishing effectively people
who have worked hard all their lives, paid lots of
taxes with a view to having that benefit to enjoy
in their retirement. Does this incentivize people to do.

Speaker 2 (04:27):
Less well at the margin? Right? But I don't think
you're going to be making your decisions in your twenties
to thirties. You're working year years based on what you're
bound in New Zealon's superannuation titlement could be at the
age of sixty five or sixty seven. The bottom line, though,
is Jamie, is that the state is quo. It's not sustainable. Yeah,

(04:48):
so you can go back and have a look at
the long term fiscal projections. You have the last time
Treasury that the statement in the long term fiscal position,
if left unchecked, the current state is quot and it's
a combination of musical serp anuation and health expendent. Show
is where you get ready whacked. If left unchecked, Ie,
we continue with the status quo. Net government debt is

(05:08):
going to go to one hundred and eighty percent of
GDP in the next thirty to forty years. So what
are the choices?

Speaker 1 (05:15):
Totally get that, But is it sustainable at sixty seven
years of age or do we eventually, as Jim Bolger
has suggested, move it to seventy.

Speaker 2 (05:24):
Well, yeah, presumably as life expectancy moves up, you'd expect
to turn the dial a little bit on New Zealand
superannuation in titlement. I think there's other options we can
look at as well. You say you've done really well
in your life, You've been paid a lot of money
and you've got a pretty big kiv Saver balance. Why
on earth should inuity income that you draw off your

(05:47):
chivysaver balance not be taken off your New Zealand superpation entitlement,
which is effectively means justtin and we've already got that.
We've potentially got the mechanism in place. If you ever
look at a couple of things we saw within the budget.
There was element of means testing which is coming through
for those eighteen nineteen year old kids that are on

(06:08):
a benefit. If they're living at home and their family's
got the means to support them, you're wished the government.
There was a means testing theme that came through with Chemisaber.
If you're earning over a certain amount of money, the
Gun's not going to give you one thousand bucks o.
Your means testing is an area where I think we're
going to need to see a lot more of because
the alternative is given spending presses. Taxes are going to

(06:31):
go up and.

Speaker 1 (06:32):
No one wins. Then hey, Cameron Bagray, it's a really
interesting debate slash discussion. I'm sure it will continue, especially
into the next election. Thanks for your time, always appreciated
here on the country, and I'll see you at field Days.

Speaker 2 (06:46):
Looking forward to it. I'll just drive it up from
Hamilton this Morner