Latest / Early Edition with Ryan Bridge / Mark Smith: ASB Senior Economist on the spike in global shipping prices

Transcript

Mark Smith: ASB Senior Economist on the spike in global shipping prices · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: The old shipping cost issues. Back costs here on our
• 0:02
  Speaker 1: triple what they were at the end of last year.
• 0:04
  Speaker 1: The trouble with that is, of course it's all inflationary.
• 0:06
  Speaker 1: We've got a bit of a problem with inflation at
• 0:08
  Speaker 1: the moment. Mark Smith is the ASB senior economists back
• 0:11
  Speaker 1: with us. Mark, very good morning to you. Good morning
• 0:13
  Speaker 1: make where's the spike come from? Is this just all
• 0:16
  Speaker 1: red sea stuff or more than that?
• 0:18
  Speaker 2: Yeah, that's probably a large part. Also, things like the
• 0:21
  Speaker 2: pend On Mark Canal. There are some disruptions there. The
• 0:24
  Speaker 2: water levels are quite low and that's disrupting shipping. This
• 0:28
  Speaker 2: concerns about strikes in the US. And the other thing
• 0:31
  Speaker 2: also is that with COVID, people are caught out with
• 0:34
  Speaker 2: not having enough stock to move when demand picked up,
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  Speaker 2: and that's a concern there. So there's a lot more
• 0:40
  Speaker 2: for cauternary stock building as well, and that's adding to
• 0:43
  Speaker 2: demand and adding to the impact on prices.
• 0:45
  Speaker 1: So is this temporary? I mean, if the strikes don't happen,
• 0:48
  Speaker 1: for example, of once you get stocked up and you know,
• 0:51
  Speaker 1: the water eventually fills back into the Panama, does that
• 0:54
  Speaker 1: solve all of these issues?
• 0:56
  Speaker 2: Yeah? I hope it is. This has been very quickly,
• 0:59
  Speaker 2: very quick up. So the hope is that app all
• 1:01
  Speaker 2: sort of suicide in time. Really what really matters there
• 1:04
  Speaker 2: errors and how long the impasists for its stalled early days.
• 1:09
  Speaker 1: Okay, it's not as bad a couple of things to
• 1:11
  Speaker 1: point out. It's not as bad as twenty one at
• 1:12
  Speaker 1: the peak of the peak. And two I'm assuming it's
• 1:15
  Speaker 1: offset to some degree by the fact we're not as
• 1:17
  Speaker 1: importing as much because we're all going backwards in the economy.
• 1:21
  Speaker 2: Ah yeah, but that's exactly it. In terms of the impact.
• 1:25
  Speaker 2: The increases have been size of all, but they're still
• 1:27
  Speaker 2: below where they're word pre COVID. This is only one
• 1:30
  Speaker 2: form of shipping costs. Others have not picked up as much,
• 1:33
  Speaker 2: and as you point out, New Zealand is a consumer
• 1:36
  Speaker 2: demand is quite a lot weaker than I was around
• 1:39
  Speaker 2: COVID times. And as well as that, New Zealand retailers
• 1:42
  Speaker 2: have added only quality of stocks on hand, so we're
• 1:45
  Speaker 2: unlikely to see the impact of the tumor place. It's
• 1:48
  Speaker 2: just here.
• 1:48
  Speaker 1: So where do we get on? The cost gone up?
• 1:51
  Speaker 1: So I need to pass it on, But then I
• 1:52
  Speaker 1: can't pass it on because no one can afford it.
• 1:54
  Speaker 1: Where where are we at with that argument?
• 1:57
  Speaker 2: Yeah, we're in a very very unfor the juncture. At
• 2:00
  Speaker 2: the moment. Corporate profitability as a share of income as
• 2:04
  Speaker 2: the lowest it's been for the last twenty five years
• 2:07
  Speaker 2: or so, so there's some real pressure on margins, particularly
• 2:11
  Speaker 2: for retailers as well. So there's probably three options that
• 2:14
  Speaker 2: they can really do. One is to increase prices, well,
• 2:17
  Speaker 2: good luck on that. Two is to try and ichieve
• 2:19
  Speaker 2: higher proactivity. Again, that's much easier said and done. And
• 2:23
  Speaker 2: FOD is ready to cut costs and that's really where
• 2:25
  Speaker 2: the focus will be for a lot of firms. Unfortunately,
• 2:29
  Speaker 2: that will be investment being cut as well as some
• 2:32
  Speaker 2: jobs as well.
• 2:33
  Speaker 1: Does it settle for the rest of the year or
• 2:35
  Speaker 1: not all We don't know.
• 2:38
  Speaker 2: Again, it's one of the unknowns. The hope is that
• 2:41
  Speaker 2: New Zealand inflation will fall below three percent by the
• 2:44
  Speaker 2: end of the year. Now, the longer these be shipping
• 2:46
  Speaker 2: costs remain higher, the less the chance that is that
• 2:49
  Speaker 2: that will happen.
• 2:50
  Speaker 1: YEA, all right, Mike, you go well and have a
• 2:52
  Speaker 1: good day. I appreciate it very much. Mike Smith, ASP senior
• 2:54
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• 2:57
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