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Paul Bloxham: HSBC chief economist on trade figures showing economic growth · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk sed B.
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  Speaker 2: Now we've got some good news for the economy today.
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  Speaker 2: Stats New Zealand has come out with its latest trade
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  Speaker 2: data for New Zealand, and our exporters have been going gangbusters.
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  Speaker 2: Exports were up nine point nine percent in the year
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  Speaker 2: to June, imports up three point two percent. Paul Bloxham
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  Speaker 2: as agspc's chief economist and with US eight, Paul got
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  Speaker 2: a how good is that?
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  Speaker 3: It is good? It is a good story, and this
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  Speaker 3: is one we've you know, we've known about, but I
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  Speaker 3: think the numbers today were even stronger than was expected
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  Speaker 3: in terms of the rise in dairy prices and the
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  Speaker 3: boost that that's giving to incomes. Also not just the
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  Speaker 3: price rises, but also that the volumes were reasonably solid.
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  Speaker 3: So this is one of the two elements of why
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  Speaker 3: we have thought that the New Zealand economy is going
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  Speaker 3: to be in an upswing. One is the dairy price
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  Speaker 3: is high and that's giving you a lift in the economy.
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  Speaker 3: And the second is that interest rates have come down
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  Speaker 3: a long way. It's not yet quite fed through to
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  Speaker 3: a recovery in consumption that been really strong, but we
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  Speaker 3: think it's coming and so this is one element and
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  Speaker 3: the other one is as interest rates have come down
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  Speaker 3: a long way.
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  Speaker 2: So can we say that the terms of trade have
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  Speaker 2: beat expectations?
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  Speaker 3: Yes, I think that's fair and I certainly on today's
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  Speaker 3: print it was stronger than the market had expected. And
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  Speaker 3: so I think the terms of trade is a very
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  Speaker 3: positive story for New Zealand. You've had a consistent boost
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  Speaker 3: to incomes in the agricultural sector from the fact that
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  Speaker 3: dairy prices are and meat prices actually are high, and
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  Speaker 3: volumes have been fairly solid as well. And I think that's,
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  Speaker 3: as I say, driving that sector. Now, it's only one
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  Speaker 3: sector and it hasn't really flowed over to the rest
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  Speaker 3: of the economy as yet, but I think most of
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  Speaker 3: that it's a lag story. It takes time for it
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  Speaker 3: to flow through, but I think it will get there.
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  Speaker 2: I mean, it's three days ago we had more consumer
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  Speaker 2: confidence numbers out that were down to a ten month low.
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  Speaker 2: How long before consumers actually start to read this stuff,
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  Speaker 2: feel good about it and feel confident again.
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  Speaker 3: Well, we also had the week before retail figures that
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  Speaker 3: actually were a bit on the stronger side than the
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  Speaker 3: market had expected. So I mean, I'm always a little
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  Speaker 3: bit cautious about reading too much into sentiment indicators. You know,
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  Speaker 3: we're you're effectively asking consumers how they feel. I tend
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  Speaker 3: to put a bit more weight on actual spending indicators.
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  Speaker 3: And the spending indicators have actually they have been they
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  Speaker 3: have been okay, they have been solid. So I think
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  Speaker 3: that's part of it. I think the other part of
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  Speaker 3: it is that it's taking time. You know, this is
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  Speaker 3: the thing. It takes monetary policy. Interest rates act with
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  Speaker 3: a lag on the economy. It takes time for it
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  Speaker 3: to start to feed through and support the economy. And
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  Speaker 3: I think it's perhaps the lags are a little bit
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  Speaker 3: longer this time around, but I think it's still likely
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  Speaker 3: to flow through to an upswing over time.
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  Speaker 2: What are you expecting from Australian GDP tomorrow?
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  Speaker 3: We think GDP growth will print in the quarter at
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  Speaker 3: a point six so point six quarter on quarter. That
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  Speaker 3: would be a one point seven percent growth rate over
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  Speaker 3: the year. And that's a pick up in pace from
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  Speaker 3: the past couple of quarters. So last year, the economy
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  Speaker 3: in twenty four grew by about one percent and now
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  Speaker 3: we're growing. We think it's something like one point seven,
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  Speaker 3: so that's an upswing, but only really a modest one.
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  Speaker 3: And I think the main thing we're pointing out is
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  Speaker 3: that really because productivity is so weak in Australia at
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  Speaker 3: the moment and the supply side there of the economy
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  Speaker 3: is therefore so constrained, this is more this is the
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  Speaker 3: new normal, that we can't really grow a whole lot
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  Speaker 3: faster than this rate of growth unless we see a
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  Speaker 3: pickup in productivity. The economy is already operating at its
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  Speaker 3: full capacity. We're fully employed, and inflation is coming down,
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  Speaker 3: but it's not quite at the midpoint of the RBA's
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  Speaker 3: target band, and we're in a modest upswing. Is this
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  Speaker 3: is perhaps as good as it gets.
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  Speaker 1: Yeah.
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  Speaker 2: Interesting, Hey, Paul, thank you very much. And it's interesting
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  Speaker 2: that everything that you've told us and predicted is bearing out.
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  Speaker 2: So there we go. We should listen to you more often.
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  Speaker 2: That's Paul Bloxham, ahsbc's chief economist.
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