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Liam Dann: NZ Herald Business Editor on the OCR cut, inflation · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk SEDB. Follow
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  Speaker 2: As we've been discussing the Reserve banks continuing to walk
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  Speaker 2: a fine line where it's move to cut the OCR
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  Speaker 2: fifty basis points. Economic data suggests inflation has now hit
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  Speaker 2: three percent. Nicola Willis has directed her pointing finger at
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  Speaker 2: councils and says rights are having a disproportionate effect on
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  Speaker 2: alate on inflation. Other sectors are stabling, are stabilizing. But
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  Speaker 2: it's really a confidence game, isn't it. New Zealand Herald
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  Speaker 2: Business editor at largely M Dan joins me to discuss
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  Speaker 2: good morning to you and thank you very much for
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  Speaker 2: putting the bike into the tent, into the tenth speed
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  Speaker 2: here and getting here and time.
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  Speaker 3: Well it's electric. So there.
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  Speaker 2: I love an election.
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  Speaker 3: Not too much of us sweat.
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  Speaker 2: Why are we feeling better? We should be. There's a
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  Speaker 2: lot that's going right.
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  Speaker 3: Yeah. I think that's it's almost like a self fulfilling thing,
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  Speaker 3: a kind of a negative spiral, because we should be
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  Speaker 3: feeling better we aren't, and then it's like, oh, you know,
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  Speaker 3: like we're questioning ourselves. I think it's a lack of
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  Speaker 3: confidence and I think, you know, our recovery started, and
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  Speaker 3: that's almost worth The worst part of it is we
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  Speaker 3: had that recovery starting the first quarter. The last quarter
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  Speaker 3: of last year was good growth, and then the first
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  Speaker 3: quarter of this year was good growth, and then of
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  Speaker 3: course it fell off a cliff on the second quarter.
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  Speaker 3: And it's what a confidencenock when you think you're finally
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  Speaker 3: coming back from all the terrible economic ups and downs
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  Speaker 3: of COVID and the after COVID period to sort of
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  Speaker 3: just feel like you're back to square one in the
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  Speaker 3: middle of a pretty lousy New Zealand winter that's really
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  Speaker 3: hit people hard. So yeah, and people aren't spending and
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  Speaker 3: that's really what's affecting retail, out investing, that's affecting construction
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  Speaker 3: and to some extent, manufacturing. So you know, there are signs.
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  Speaker 3: I mean, I was trying to be positive in my
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  Speaker 3: story this morning. An z's Sharon Zolnes says, we're definitely
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  Speaker 3: passed the worst and we're closer to, you know, something
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  Speaker 3: looking like a recovery than than not. But it does
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  Speaker 3: feel like we're sort of starting again, and that's pretty
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  Speaker 3: It really knocks the stuffing out of you if you
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  Speaker 3: been sort of waiting all that time.
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  Speaker 2: Did did I mean I think for businesses probably it did.
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  Speaker 2: But did COVID really mau Less, Yeah.
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  Speaker 3: I mean COVID and then and then the aftermath, you know,
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  Speaker 3: the inflation was a real shock to everybody, and then
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  Speaker 3: dealing with the inflation was a shock. And then you know,
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  Speaker 3: inflation hasn't really gone away. They've they've got it into
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  Speaker 3: the right band. So overall inflation is.
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  Speaker 2: But they're having to keep it close eye on it. Yeah,
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  Speaker 2: and she's a horse that could bolt at any minute.
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  Speaker 3: That's right, and that is this The single mandate they
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  Speaker 3: have now is inflation. So they haven't. I mean people
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  Speaker 3: have said the Reserve Bank didn't cut rates fast enough
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  Speaker 3: this time. Well they they you know, the government changed
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  Speaker 3: the mandate single mandate inflation, and you know, with some
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  Speaker 3: good reason because we saw how bad inflation was. But
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  Speaker 3: it's food. You know, food prices up five percent in
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  Speaker 3: a year. It's power. I think they were about eight
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  Speaker 3: point five. I don't know rates, but rates are obviously
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  Speaker 3: being bad. And assurance and so it's the thing that
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  Speaker 3: you everybody kind of has to pay and it's what
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  Speaker 3: you really feel there's a whole bunch of other inflationary
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  Speaker 3: things in the economy that because the economy is sort
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  Speaker 3: of flat, they can expect will be disinflationary, will come down.
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  Speaker 3: But the things we actually feel ourselves getting into our
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  Speaker 3: wallets and pulling out the card and paying for are
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  Speaker 3: the things that have kept going up. So people feel
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  Speaker 3: like there's still a cost of living crisis, you know,
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  Speaker 3: And that's what matters. I mean, it's not really about
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  Speaker 3: the numbers on the speedsheet or whatever. If you're paying
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  Speaker 3: more for food and more for power and you're on
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  Speaker 3: a fixed income, that hurts, And then the flip side is,
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  Speaker 3: of course, because of the higher interest rates. Trying to
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  Speaker 3: deal with inflation with the government hasn't to say the
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  Speaker 3: government cutting spending because the nominal amount that the government's
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  Speaker 3: spending is still actually going up, and they get criticized
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  Speaker 3: for that as well, but they have cut what you'd
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  Speaker 3: call the fiscal impulse, so they're not increasing spending the
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  Speaker 3: rate that it was increasing.
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  Speaker 2: So it'd be a hell of a lot worse. Yeah,
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  Speaker 2: it could be a hell of a lot.
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  Speaker 3: Worse, but the fiscal impulse isn't there, So that means
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  Speaker 3: that you haven't got the government spending to sort of
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  Speaker 3: boost the economy. Obviously again with good reason because they
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  Speaker 3: saw what happened last time. But that means, you know,
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  Speaker 3: so we have got rising unemployment and job and security,
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  Speaker 3: people losing their jobs at the same time as it
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  Speaker 3: still feels like there's this inflation and that's pretty rough.
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  Speaker 3: That's kind of what economists called stagflation.
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  Speaker 2: But that's I mean, the government should have more runs
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  Speaker 2: on the board than they do. I mean, when you
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  Speaker 2: look at the latest polls, that says National sucks, but really,
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  Speaker 2: when you look at the factory closures, that's because there
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  Speaker 2: isn't reliability of power and that's on labor. And when
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  Speaker 2: you look at the public service job cuts, they committed
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  Speaker 2: bloody economic vandalism. In the last six months of twenty three.
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  Speaker 2: They went on a hiring spree despite being explicitly told
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  Speaker 2: not to by labor and by National and that as
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  Speaker 2: economic treason. Yeah, I think they cannot moan about losing
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  Speaker 2: their jobs.
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  Speaker 3: No, I guess you know. One of the things I think,
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  Speaker 3: where is the government going wrong?
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  Speaker 1: Then?
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  Speaker 3: I think, I mean it's partly it's the storytelling in
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  Speaker 3: the leadership. Unfortunately, I think instead of saying, you know, look,
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  Speaker 3: which is what I've been saying, because you know, me
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  Speaker 3: and the economists and the commentators are saying, look, it's
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  Speaker 3: going to get better. It's going to get better because
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  Speaker 3: we believe that monetary policy works. We believe that the
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  Speaker 3: dairy export prices and things will work. But it's taken
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  Speaker 3: so much longer that you get into a situation where,
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  Speaker 3: you know, i'd be skeptical of myself coming in and
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  Speaker 3: saying it's all going to be fantastic next month, But
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  Speaker 3: the government's got themselves in the same trap. I'm just
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  Speaker 3: a newspaper commentator, but the government, you know, they sort
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  Speaker 3: of saying, well, it's getting better, it's getting better. It's
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  Speaker 3: a two speed economy. Most people live in the cities,
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  Speaker 3: not in the country. I'm sorry that that, so most
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  Speaker 3: people are still feeling that the wrong speed. And so
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  Speaker 3: maybe a bit more focus on telling us why they're
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  Speaker 3: doing the things they're doing that that are not helping
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  Speaker 3: the economy in the short term but are going to
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  Speaker 3: help the economy in the long term.
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  Speaker 2: Because it's better storytelling, better leadership.
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  Speaker 3: Well, I mean, I think that that would have to
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  Speaker 3: be their case. So you've had a bunch of what
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  Speaker 3: I would call left leaning economists and or more generously
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  Speaker 3: Kenzian economists who put out a letter this time last
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  Speaker 3: year saying if you don't, you know, if you cut
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  Speaker 3: back on spending, the recession will be worse. And they
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  Speaker 3: put out a letter last week saying, well, we told
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  Speaker 3: you so. Now they're sort of technically correct that that happened.
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  Speaker 3: But National or Christal Luxe and Nicola Willis had good
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  Speaker 3: reasons for doing what they do.
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  Speaker 2: They did it sound reasons, and the economic theory has
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  Speaker 2: to do with.
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  Speaker 3: The long term future of the country to do with,
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  Speaker 3: you know, fiscal position, you know, not letting debts spiral
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  Speaker 3: out of control, getting back to surplus, keeping our triple A.
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  Speaker 3: It's a harder cell I got to say, to talk
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  Speaker 3: about that stuff because people are very in the here
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  Speaker 3: and now, specially these days, it seems more and more
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  Speaker 3: people are focused on and that makes politics quite difficult,
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  Speaker 3: you know, you know, people are very short term focused.
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  Speaker 2: I just received a text from Jeff and this is
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  Speaker 2: something I was thinking too. I am so scared that
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  Speaker 2: the last loot will come back, and I have got
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  Speaker 2: no trust going forward. I've got plenty of money available
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  Speaker 2: to invest but I will not if there's the possibility
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  Speaker 2: of a Labor Greens to Partimoriti government.
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  Speaker 3: So that's that's an awkward problem for the coalition though,
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  Speaker 3: isn't it that people aren't getting the economy going, which
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  Speaker 3: would help them because they're worried that they might lose.
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  Speaker 3: So it's a sort of a lose lose exactly scenario
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  Speaker 3: for them. I look, I think things will change. I mean,
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  Speaker 3: I know I've just said that. It's but I still
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  Speaker 3: have I think so too. I still have faith in
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  Speaker 3: monetary policy. If it goes low enough, We've thought. We
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  Speaker 3: saw what happened in COVID. If you take it super low,
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  Speaker 3: people have there's lots more money in the economy and
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  Speaker 3: people do spend. And you know, people were nervous and COVID.
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  Speaker 3: But then when they really flooded the economy with money,
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  Speaker 3: you know, as it turns out, well.
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  Speaker 2: The flooring the people did gangbusters and the patio furniture people,
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  Speaker 2: and so that there.
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  Speaker 3: Is confidence to rebuild and that's taking time. And so
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  Speaker 3: what's happening is we're seeing two things are stopping the
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  Speaker 3: money that's already come through from mortgage cuts go into
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  Speaker 3: the retail sector and hospitality. One of them is that
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  Speaker 3: people are being quite careful about setting their mortgage rates.
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  Speaker 3: So if they think the mortgage rates got a bit,
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  Speaker 3: that the ocr's got further to go down, more people
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  Speaker 3: than usual are floating or taking a very short term
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  Speaker 3: rate because they want to lock in for five years
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  Speaker 3: when it's at its absolute lowest. So in a way,
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  Speaker 3: kiwis have got a bit smarter about the whole mortgage
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  Speaker 3: setting game. And so you know, we are nearing the
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  Speaker 3: end of that cycle. There might be another cut. If
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  Speaker 3: things still look really bad, there might be another two cuts,
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  Speaker 3: but you're getting near the end of what this cycle
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  Speaker 3: is likely to look like. So you'd hope that more
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  Speaker 3: people will lock in the lower rate and then actually
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  Speaker 3: start to get the gain. So people are leaving money
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  Speaker 3: on the table in the hope of getting a better
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  Speaker 3: rate later. The other thing is that lack of confidence,
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  Speaker 3: that real hit that we took is stopping people from,
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  Speaker 3: as you say, spending and investing, and so the money's
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  Speaker 3: going back on the mortgage, it's going into savings, which
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  Speaker 3: is good for people in the long run, but it
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  Speaker 3: reflects the fact that they're insecure about jobs. And it's
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  Speaker 3: also I mean, there's this economic cycle, but there's all
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  Speaker 3: this AI tech insecurity as well. If you're in your
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  Speaker 3: forties and fifties and thinking about your retirement or sixties,
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  Speaker 3: and you're noticing that more and more AI can do
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  Speaker 3: your job in the company's not making a big profit,
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  Speaker 3: whatever corporate you might be, and then you're thinking, gee,
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  Speaker 3: am I going to make it through to sixty five?
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  Speaker 2: And positive?
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  Speaker 1: Yes?
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  Speaker 2: What can I do to stimulate the economy? Shall I
• 10:10
  Speaker 2: go and get some new tiles and face flannels?
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  Speaker 3: And yes? People always going to want to hear your
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  Speaker 3: bright and Jerry Voyce on the radio. So so yeah, No,
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  Speaker 3: I mean, I think I think, you know, have some
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  Speaker 3: faith that monetary policy will work. You know, we're going
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  Speaker 3: to end up with low interest rates. We're going to
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  Speaker 3: this money from the dairy boom and the meat beef
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  Speaker 3: mystery boom that's still coming in, that's still booming. Exports
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  Speaker 3: are going gangbusters, and New Zealand isn't a big place,
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  Speaker 3: so it will start to turn around.
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  Speaker 2: Yeah, and you heard it here first. Every single time
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  Speaker 2: you heard any first. Liam Dan, New Zealand Terial Business
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  Speaker 2: Editor at Large, thank you so
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  Speaker 1: Much for more from News Talks Ed b listen live
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