Latest / Best of Business / Anna Breman: Reserve Bank Governor on whether we can expect more OCR hikes after recent increase

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Anna Breman: Reserve Bank Governor on whether we can expect more OCR hikes after recent increase · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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  Speaker 2: Good afternoon. The official cash rate has gone up for
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  Speaker 2: the second straight time by 25 basis points to 2.75%.
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  Speaker 2: And there is a warning that it may not be
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  Speaker 2: the last increase of the year. The Reserve Bank Governor,
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  Speaker 2: Anna Bremen, is with us now. Hi, Anna.
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  Speaker 3: Hello, Heather. Hi.
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  Speaker 2: It's good to have you back on the show. Thanks
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  Speaker 2: for joining us. Now, is it fair to say that
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  Speaker 2: your biggest concerns, at least inflation-wise, are fuel prices and
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  Speaker 2: power prices?
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  Speaker 3: Well, fuel prices is what's causing currently high inflation. And
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  Speaker 3: our concern is that that will cause other prices to
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  Speaker 3: increase and then we keep having high inflation, which we
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  Speaker 3: can't accept. So we're focused on bringing inflation back so
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  Speaker 3: that households get their purchasing power back. That will help
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  Speaker 3: growth in jobs.
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  Speaker 2: And you're heading towards neutral. Do you have any idea
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  Speaker 2: what neutral is?
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  Speaker 3: Well, we do believe that neutral is around 3%, but
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  Speaker 3: it is uncertain. So what we said is that with
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  Speaker 3: today's decision, that will allow us to assess the impact
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  Speaker 3: of these two OCR increases. And then we will see
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  Speaker 3: whether we need to do further increases or not.
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  Speaker 2: Should we read into that that you might pause next time?
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  Speaker 3: Well, I think it's important that the OCR is not
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  Speaker 3: on a preset course. We really do look at all
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  Speaker 3: the incoming data. We're looking at what is the outlook
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  Speaker 3: for inflation and how is the labor market doing and
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  Speaker 3: how is the recovery going. So we're not going to
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  Speaker 3: commit to hiking or not increasing the OCR because it
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  Speaker 3: will depend on how how inflation evolves and the outlook
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  Speaker 3: for inflation and the labour market, etc. But we are
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  Speaker 3: carefully looking at all the data that's incoming.
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  Speaker 2: Did you consider what impact this hike might have on
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  Speaker 2: the tiny bit of economic growth that some parts of
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  Speaker 2: this country are seeing?
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  Speaker 3: Of course we do. So what we're actually seeing is
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  Speaker 3: that some parts of the economy in New Zealand is
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  Speaker 3: performing better really well, which is particularly the exporting sector.
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  Speaker 3: And then there's other parts that are still struggling. And
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  Speaker 3: what we're starting to see is that this export-led growth
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  Speaker 3: is starting to broaden. So we're expecting now when we're
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  Speaker 3: in the third quarter, the September quarter, we're expecting to
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  Speaker 3: see broadening of growth in New Zealand. And we're seeing
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  Speaker 3: signs of that. But we know that many people are
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  Speaker 3: not feeling that yet. We know that the labour market
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  Speaker 3: is still growing. weak in parts of New Zealand and
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  Speaker 3: then it's much better in other parts of the country.
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  Speaker 1: Yeah.
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  Speaker 2: I mean, how much of the work is being done
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  Speaker 2: for you by the fact that our house prices, the
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  Speaker 2: growth there is so weak and the confidence is so
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  Speaker 2: low that we're largely not spending?
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  Speaker 3: Well, households are being cautious. So we actually, and that's
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  Speaker 3: in the monetary policy statement, we can see that overall
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  Speaker 3: incomes are actually higher than spending. So households are saving
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  Speaker 3: and we believe that that's precautionary savings because people have
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  Speaker 3: been concerned about the outlook. So if we see now
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  Speaker 3: confidence coming back, and we've seen also consumer confidence improving,
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  Speaker 3: and we're seeing this exporting sector actually doing really well,
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  Speaker 3: we do think that households could use some of those
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  Speaker 3: savings and start consuming a bit more again. And we've
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  Speaker 3: seen employment growth. So in the June quarter, there were
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  Speaker 3: 13,000 people higher in employment. Then there's still a lot
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  Speaker 3: of unemployment, and I'm not trying to you know, diminish
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  Speaker 3: the fact that it's really tough for many people, but
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  Speaker 3: we do see employment growth now.
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  Speaker 2: Good stuff. Hey, Anna, it's good to talk to you
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  Speaker 2: as always. Thank you for your time.
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