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Nicola Willis: Finance Minister on the impact of the latest rise in inflation · Best of Business

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  Speaker 1: You're listening to a podcast from NEWSTALKSEDB. Follow this and
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  Speaker 2: In time to catch up with Finance Minister Nichola Willis,
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  Speaker 2: who's with us before the first cabinet meeting in the
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  Speaker 2: first day of parliament for twenty twenty six. I bet
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  Speaker 2: you won't be sleeping tonight. You will just be so excited, No.
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  Speaker 3: Doubt I am excited. Of course we have been back
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  Speaker 3: at work for a while, along with most of New Zealand.
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  Speaker 3: But as you say, tomorrow at first formal cabinet meeting
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  Speaker 3: and the reopening of parliament.
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  Speaker 2: So what do you make of these inflation figures? I
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  Speaker 2: think most of the analysts were picking a two point
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  Speaker 2: seven percent. Three point one was the final number.
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  Speaker 3: It is higher than was expected, and of course we
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  Speaker 3: target inflation staying under three percent and that's where we
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  Speaker 3: want it to be over the medium term and where
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  Speaker 3: it's been for more than a year now. Of course,
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  Speaker 3: the Reserve Bank has been having its foot hard on
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  Speaker 3: the accelerator with multiple reductions and the official cash rate
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  Speaker 3: over recent months, and they always have the opportunity to
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  Speaker 3: monitor the dart as it's coming through and then determine
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  Speaker 3: at what point they might ease their foot on the accelerator.
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  Speaker 2: So most of the banks, I think picking that they
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  Speaker 2: might ease the foot on the accelerator and start putting
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  Speaker 2: it on the brake a little earlier than previously expected,
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  Speaker 2: maybe even this year as opposed to twenty twenty seven.
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  Speaker 2: What would be the political impact.
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  Speaker 3: Well, the banks always monitor the data as it comes.
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  Speaker 3: Then this is one data point. There will be many
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  Speaker 3: over the next few months. It's likely that inflation will
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  Speaker 3: come back into band and banks will factor that in
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  Speaker 3: as well. Look, the Reserve Bank has a really important role.
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  Speaker 3: It needs to keep inflation under three percent, and we
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  Speaker 3: as a government really support them in that mandate because
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  Speaker 3: it's the inflation that is the broadest driver of the
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  Speaker 3: cost of living. At the same time, interest rate reductions
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  Speaker 3: have been really important to recovering our economy after a
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  Speaker 3: very difficult period. But it's always the case that as
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  Speaker 3: the economy recovers, you do expect that eventually interest rates
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  Speaker 3: to go up. They're now at very low levels compared
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  Speaker 3: to where they were. You know, for context, under the
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  Speaker 3: last government we had eleven interest rate hikes. On our watch,
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  Speaker 3: there have been nine reductions, So your.
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  Speaker 2: First step I think, in fact, the very first piece
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  Speaker 2: of legislation your government passed was to return the Reserve
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  Speaker 2: Bank to a single mandate from that previous dual mandate.
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  Speaker 2: Does the single mandate focused on price stability increase the
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  Speaker 2: likelihood that looking at a bit of surprised data like this,
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  Speaker 2: the Reserve Bank would move faster to start increasing interest rates.
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  Speaker 3: I don't think so. It does mean that the Reserve
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  Speaker 3: Bank would not be in a situation like it was
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  Speaker 3: under the last government where inflation was outside of target
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  Speaker 3: for three years and that was what led to the
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  Speaker 3: cost of living crisis, and we viewed that as unacceptable.
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  Speaker 3: So the Reserve Bank has a mandate to look at
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  Speaker 3: the medium term, so it will be analyzing all of
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  Speaker 3: the data to say, well, are some of this just
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  Speaker 3: a blip? These are transitory, temporary factors, what's really going
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  Speaker 3: on underneath? Economists have noted that the core inflation indicators
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  Speaker 3: are still in band and that some of these factors
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  Speaker 3: are seasonal international airfares in the like. But look, it's
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  Speaker 3: up for the Reserve Bank to analyze all of that
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  Speaker 3: data and make its judgments accordingly.
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  Speaker 2: So did you have a say on the election date.
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  Speaker 3: I discussed that with the Prime Minister.
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  Speaker 2: Yes, let me ask this, if you'd had this inflation
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  Speaker 2: data before that decision was made, would you have advocated
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  Speaker 2: for a different date.
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  Speaker 3: Look, the election date is really just about a bunch
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  Speaker 3: of operational factors. So we looked at things like when
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  Speaker 3: there were major sports matches, school holidays, all of those
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  Speaker 3: sorts of things, and really the date just fell out
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  Speaker 3: of that. It's much less of a political process than
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  Speaker 3: some might imagine.
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  Speaker 2: Really, I mean, sure, put it this way, if we
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  Speaker 2: thought that interest rates were going to be significantly increasing
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  Speaker 2: in the last quarter of this year, really more than
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  Speaker 2: just a twenty five basis point increase, then surely there
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  Speaker 2: would be political and see does not have an election
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  Speaker 2: at the same time.
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  Speaker 3: Well, I look at it a different Wayjack, which is
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  Speaker 3: what is the big risk at this election that people
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  Speaker 3: re elect a labor led government that has a proven
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  Speaker 3: track record of doing so much wasteful spending that they
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  Speaker 3: turbo charge inflation and turbid turbo charge interest rate hikes.
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  Speaker 3: So actually my view is, of course I want to
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  Speaker 3: see stable inflation. I'm really delighted for all those first
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  Speaker 3: home buys who are entering the market as rates come down,
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  Speaker 3: and for those mortgage holders who've got a bit more
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  Speaker 3: breathing space in their household budget. I do not take
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  Speaker 3: it for granted. Government has a role to play in
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  Speaker 3: ensuring we're disciplined about our own spending, and I think
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  Speaker 3: people will have to analyze very carefully the spending promises
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  Speaker 3: of other parties and consider what that might mean for
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  Speaker 3: inflation and interest rates.
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  Speaker 2: What did Anna Breeman say to you in her apology?
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  Speaker 3: Look, we had a discussion immediately after she signed the statement,
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  Speaker 3: and I reaterated to her that she should feel free
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  Speaker 3: to call me any time of day and that we
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  Speaker 3: will always ensure that she gets a broad range of
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  Speaker 3: advice on international matters. She did convey to me that
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  Speaker 3: she'd offered an apology to Winston Peters and that in
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  Speaker 3: future she would take exactly that course of action. She'd
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  Speaker 3: let me know and she'd seek advice.
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  Speaker 2: So was it naivety? Do you think.
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  Speaker 3: I think that she was in the urgency of a
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  Speaker 3: moment in which she had been asked to make a
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  Speaker 3: decision on a very late night phone call. And as
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  Speaker 3: I've said, I've just reiterated to her, do not hesitate
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  Speaker 3: to give me a call. That's what New zealanderes expect
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  Speaker 3: from me.
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  Speaker 2: Why does it matter, though, shouldn't she? Given the Reserve
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  Speaker 2: Bank is independent, Why does she have to check in
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  Speaker 2: with the government to see if it's okay with you.
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  Speaker 3: It's not so much that she has to check in
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  Speaker 3: to see whether it's okay with me. It's that we
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  Speaker 3: need to be informed because anything we do or say
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  Speaker 3: internationally obviously has implications for ministers and the government as
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  Speaker 3: a whole, and it is also our job to make
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  Speaker 3: sure that she has access to all of the information
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  Speaker 3: inspectives she might want it bear in mind when she's
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  Speaker 3: making that decision. I'm not sure that it would have
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  Speaker 3: led to a different decision or how she would affected it,
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  Speaker 3: but that's just good process. Jack.
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  Speaker 2: I know that many of your colleagues have spent a
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  Speaker 2: lot of time on the ground supporting the community. The
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  Speaker 2: Prime Minister was at the vigil at Mount Monganui last night.
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  Speaker 2: How have you found watching these awful events of the
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  Speaker 2: last few days just harrowing?
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  Speaker 3: I feel so deeply for the families involved. I've locked
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  Speaker 3: my kids in the eye several times over the last
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  Speaker 3: few days and just said I just feel so grateful
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  Speaker 3: that you guys are okay, And I just feel so
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  Speaker 3: devastated for the parents and families who have lost loved
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  Speaker 3: ones and have gone through that awful period of not
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  Speaker 3: knowing and then getting the worst possible news. It's every
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  Speaker 3: family's worst nightmare.
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  Speaker 2: Yeah, yeah, it's hideous a and just to try and
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  Speaker 2: think for a moment about what those families must be variency.
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  Speaker 2: Obviously the response there is the priority at the moment,
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  Speaker 2: but there are going to be never to be questions
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  Speaker 2: for various inquiries, but also questions about adaptation processes from
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  Speaker 2: here on out. Is it your sense at the moment
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  Speaker 2: that councils and land owners across the country have appropriately
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  Speaker 2: accounted for the landslip and landslide risks that they may
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  Speaker 2: have in their property Going forward.
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  Speaker 3: I think there'll be a mixed response from region to region,
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  Speaker 3: council to council, and one of the aspects of our
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  Speaker 3: replacement for the Resource Management Act is giving much clearer
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  Speaker 3: national direction on how councils need to plan for hazards,
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  Speaker 3: ie where they allow development to occur and what mitigations
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  Speaker 3: they take. So that work is going to be important
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  Speaker 3: because New Zealand can expect more extreme climatic events over
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  Speaker 3: the coming years, and so counsel and government and communities
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  Speaker 3: all have a role in preparing for that.
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  Speaker 2: Hey, we appreciate your time. Good luck tomorrow. But the
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  Speaker 2: day one of everyone being back, I know you've been
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  Speaker 2: back at work for a book.
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  Speaker 3: Everyone enjoys the first day of school, don't.
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  Speaker 2: They now looking forward to it. Thanks for your time,
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  Speaker 2: We appreciate it. That's Finance Minister Nikola Willis.
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