Latest / Best of Business / Perspective with Heather du Plessis-Allan: Is there a positive side to this recession?

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Perspective with Heather du Plessis-Allan: Is there a positive side to this recession? · Best of Business

• 0:09
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• 0:17
  Speaker 2: Can I give you a positive spin on the recession
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  Speaker 2: that we're just coming out of. I mean, maybe it's
• 0:22
  Speaker 2: not so much a positive spin, but maybe it's an
• 0:23
  Speaker 2: explanation for why this recession was harder than it needed
• 0:26
  Speaker 2: to be, but why it actually did need to be
• 0:28
  Speaker 2: this hard. If you've been following the commentary around the
• 0:30
  Speaker 2: Reserve Bank's last two OCR decisions, you'll know there's been
• 0:33
  Speaker 2: a fair bit of chat about the wealth effect and
• 0:35
  Speaker 2: how that has made the recession worse. Now, the wealth
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  Speaker 2: effect is the thing that happens when your house goes
• 0:39
  Speaker 2: up in value, you feel rich. You're not rich. You
• 0:42
  Speaker 2: feel rich, so you go out and spend more money.
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  Speaker 2: And then, of course when it does the opposite and
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  Speaker 2: goes down in value, you feel poor. You're not poor,
• 0:48
  Speaker 2: you just feel it so you shut your wallet. And
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  Speaker 2: that is part of the recession. The reason why this
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  Speaker 2: recession has dragged because our house prices are not going up,
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  Speaker 2: they have gone backwards, and so we're not spending, which
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  Speaker 2: means that we're not spending our way out of the recession. Now,
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  Speaker 2: the thing about this is that the Reserve Bank has
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  Speaker 2: actually done things to deliberately keep our house press prices
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  Speaker 2: suprise right, things like debt to income ratios. Some of
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  Speaker 2: the stuff is not their fault, like people leaving the
• 1:13
  Speaker 2: country and therefore not wanting to buy a house, supply
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  Speaker 2: demand blah blah blah. But some of it is the
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  Speaker 2: fault of the Reserve Bank. Have done this deliberately, and
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  Speaker 2: we taught I warned you about this on the show
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  Speaker 2: before I said this to you in August, I said
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  Speaker 2: I was worried that the Reserve Bank was keeping house
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  Speaker 2: prices depressed and that it would drag out this recession longer,
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  Speaker 2: which it has. And I've been talking privately to Brad
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  Speaker 2: Olsen about it as well, who's been keeping an eye
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  Speaker 2: on it. Two and we've been debating the merits of it.
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  Speaker 2: But here's the silver lining. We actually needed to let
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  Speaker 2: go of this property recession. It's been hard, a property obsession.
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  Speaker 2: It's been hard, but we needed to do it because
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  Speaker 2: we have got to stop putting our money into property
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  Speaker 2: and we've got to start putting our money into businesses
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  Speaker 2: and other productive assets. And this is the breakup that
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  Speaker 2: we needed to have. No breakup is nice and this
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  Speaker 2: one isn't either. So we know our text Brad Olson
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  Speaker 2: this morning, Yet again he goes, oh, here we go
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  Speaker 2: use a text from Heather. I said, Brad, are you
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  Speaker 2: still sure that it was worth it was worth it
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  Speaker 2: to break up with our property obsession, given how hard
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  Speaker 2: it has made this recession? And he just replied with yes,
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  Speaker 2: I do. So what I would say is, if you're
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  Speaker 2: doing the glass half full, at least we will come
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  Speaker 2: out of this recession less in love with houses and
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  Speaker 2: more likely to put our dollars into stuff that will
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  Speaker 2: actually make New Zealand richer. And that's got to be
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  Speaker 2: a good thing.
• 2:23
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