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Nicola Willis: Finance Minister on the Reserve Bank's decision to hold the OCR · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: So split decision yesterday, shock decision, but split decision from
• 0:03
  Speaker 1: the Reserve Bank, 4-3 to hold. Forecasting inflation will hit 4.4%.
• 0:08
  Speaker 2: We think it's likely that we will do further OCR
• 0:12
  Speaker 2: increases at coming meetings. Annual inflation is expected to increase
• 0:17
  Speaker 2: to 4.4% in the December quarter, largely because of current
• 0:21
  Speaker 2: prices for fuel.
• 0:23
  Speaker 1: Let's go to Nicola Wittes, the Finance Minister, also National's
• 0:26
  Speaker 1: Finance Spokesperson. Good morning.
• 0:29
  Speaker 3: Good morning, Ryan.
• 0:30
  Speaker 1: Is this bad news for inflation in the short run?
• 0:32
  Speaker 1: You know, we are now looking at the dollar down 1%, 1.3%
• 0:37
  Speaker 1: against the greenback, 1.3% against the Aussie, 5% in six months.
• 0:41
  Speaker 1: It's going to cost us more for petrol and Kiwi dollars,
• 0:43
  Speaker 1: isn't it?
• 0:44
  Speaker 3: Well, the big inflation story is obviously about international oil prices,
• 0:49
  Speaker 3: which are unquestionably putting pressure on fuel prices. here at home.
• 0:53
  Speaker 3: But what the Reserve Bank said yesterday was that they're
• 0:56
  Speaker 3: not seeing inflation as high as they had previously forecast,
• 1:00
  Speaker 3: nor are they seeing those fuel prices put as much
• 1:03
  Speaker 3: pressure on other prices as they thought could have been
• 1:06
  Speaker 3: the case. So ultimately, this is positive news for the
• 1:10
  Speaker 3: economy because lower interest rates means lower debt servicing costs
• 1:14
  Speaker 3: for mortgage holders and for businesses. But looking internationally, there's
• 1:19
  Speaker 3: still a lot of instability, which reinforces why it is
• 1:22
  Speaker 3: so important we don't elect a government that will add
• 1:25
  Speaker 3: fuel to the inflation fire with excessive spending and borrowing.
• 1:29
  Speaker 1: You say it's good news for the economy, and yet
• 1:31
  Speaker 1: they are saying it's not an end to the hiking cycle,
• 1:34
  Speaker 1: it's just a pause to the hiking cycle, and the
• 1:36
  Speaker 1: reason they've paused is they're so worried about the recovery.
• 1:40
  Speaker 3: Yeah, that's right. As I say, there is no question
• 1:42
  Speaker 3: that there are significant international pressures on our economy. The
• 1:47
  Speaker 3: key question is what we as a country can do
• 1:52
  Speaker 3: to influence that. And the National is being very careful
• 1:57
  Speaker 3: to be disciplined about spending. And with all of that
• 2:00
  Speaker 3: international pressure, a government that chooses to rack up the
• 2:03
  Speaker 3: spending could put a lot more pressure on domestic inflation,
• 2:06
  Speaker 3: price increases here at home, and then interest rates, which
• 2:10
  Speaker 3: of course compound those effects across the economy.
• 2:13
  Speaker 1: Something has spooked them. They're talking about the global potential
• 2:16
  Speaker 1: of a global downturn. If I was to put you
• 2:18
  Speaker 1: on a scale of 1 to 10... To give voters
• 2:21
  Speaker 1: an idea of your mind, how worried are you about
• 2:23
  Speaker 1: a sudden global downturn?
• 2:26
  Speaker 3: Well, that's always something that we need to be considering.
• 2:29
  Speaker 3: And as I look out at the world, I do
• 2:32
  Speaker 3: see causes of massive instability. We have the war in
• 2:34
  Speaker 3: the Middle East. We have international bond markets and increases
• 2:38
  Speaker 3: in the cost for borrowing. We have seen riots on
• 2:41
  Speaker 3: the streets of France. There are potentially significant changes at
• 2:46
  Speaker 3: the US midterms. So all of those things are outside
• 2:49
  Speaker 3: of New Zealand's control, which, as I say, is why
• 2:52
  Speaker 3: I think it's so important that right now we do
• 2:54
  Speaker 3: control our own domestic response. And we know from our
• 2:58
  Speaker 3: last meeting experience through COVID that when governments keep spending
• 3:03
  Speaker 3: in a big way in response to international inflation pressures
• 3:06
  Speaker 3: that can make the situation a lot worse for Kiwis
• 3:09
  Speaker 3: at home with higher price increases, higher interest rates and
• 3:13
  Speaker 3: a much more difficult economic recovery.
• 3:15
  Speaker 1: Minister the Public Service Commission I just see in the
• 3:17
  Speaker 1: post has written to the government department bosses asking to
• 3:20
  Speaker 1: model out a 15% cut in staff numbers this is
• 3:23
  Speaker 1: what you promised in the budget. And yet we've got
• 3:25
  Speaker 1: more public sector jobs being added from the budget. So
• 3:29
  Speaker 1: do you have to cut more than 9,000 to get
• 3:32
  Speaker 1: to your 15%?
• 3:34
  Speaker 3: We need to make sure that we're hiring jobs in
• 3:36
  Speaker 3: the places that make a big difference for New Zealanders,
• 3:40
  Speaker 3: but find efficiencies in the back office. So yes, we
• 3:43
  Speaker 3: will need to keep hiring corrections officers to staff the
• 3:47
  Speaker 3: prisons so they can lock up the gang members. We
• 3:50
  Speaker 3: will need to keep hiring teacher aides to assist on
• 3:53
  Speaker 3: the front line in our schools. But that doesn't mean
• 3:57
  Speaker 3: that we need huge numbers of extra policy analysts, managers,
• 4:01
  Speaker 3: and more money being spent on consultants. So our approach
• 4:04
  Speaker 3: is all about being lean and focused on the frontline
• 4:07
  Speaker 3: service delivery.
• 4:09
  Speaker 1: Nicola Willis, Finance Minister and Nationals Finance Spokesperson.