Latest / Best of Business / Brad Olsen: Infometrics Principal Economist on the RBNZ's new Kiwi-GDP measures and what it means for monetary decisions

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Brad Olsen: Infometrics Principal Economist on the RBNZ's new Kiwi-GDP measures and what it means for monetary decisions · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks be follow
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  Speaker 2: The Reserve Bank economists Paul Conway over here reckons all
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  Speaker 2: those new trade tariffs from Donald Trump are going to
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  Speaker 2: lead to lower inflation in New Zealand. Brad Olsen as
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  Speaker 2: infa metrics principle economist and with us, Hey, Brad, good evening,
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  Speaker 2: I would have thought, I mean, you know, when you
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  Speaker 2: talk about tariff's, your first conclusion is actually that is
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  Speaker 2: going to lead to higher inflation. Does it makes sense
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  Speaker 2: to you the lower inflation forecast?
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  Speaker 1: It does?
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  Speaker 3: I mean, I think also Paul Conway has highlighted here
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  Speaker 3: that the Reserve Bank still thinks that there's a lot
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  Speaker 3: of water to go under the bridge and they're still
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  Speaker 3: trying to figure out exactly what the impact will be.
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  Speaker 3: But at the same time, as yes, tariffs raised prices
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  Speaker 3: in the US, and that's I think probably where the
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  Speaker 3: reference comes from. Those higher price expectations that we keep
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  Speaker 3: talking about with tariffs are concentrated a bit more for
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  Speaker 3: the consumers that are paying the tariffs, and those are
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  Speaker 3: Americans for us at home. If we're seeing less trade
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  Speaker 3: activity starting to come through. You know, businesses that normally
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  Speaker 3: export from New Zealand don't have quite as many as
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  Speaker 3: much demand. They're not getting as much money in the door,
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  Speaker 3: they're not able to spend out as much on other
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  Speaker 3: New Zealand businesses. And if demand generally in the economy
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  Speaker 3: comes down, there's probably not as much ability to pass
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  Speaker 3: on some of those pricing pressures. And so we do
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  Speaker 3: wonder if, like the Reserve Bank, if some of this
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  Speaker 3: ter eff activity might well see lower prices than otherwise
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  Speaker 3: here at home.
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  Speaker 2: Okay, now what do you have You had a look
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  Speaker 2: at the.
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  Speaker 3: KIWI GDP, I have the new sort of model coming out.
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  Speaker 3: I mean, is it's a useful addition I think to
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  Speaker 3: the conversation. I think we've got to be clear that
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  Speaker 3: the Reserve Bank is not saying this is their definite,
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  Speaker 3: actual only GDP expectation, but it's I think it's useful
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  Speaker 3: to add into the mix, particularly because we know that
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  Speaker 3: other central banks around the world, particularly the US Federal
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  Speaker 3: Reserve over in the States has something similar where they
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  Speaker 3: do try to at least outline a bit where they're
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  Speaker 3: thinking is and probably more importantly how it evolves, because
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  Speaker 3: that's the thing that we're noticing even in the data
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  Speaker 3: the last couple of weeks, as there has been some ups,
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  Speaker 3: there has been some downs. Yesterday we had new tourism
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  Speaker 3: data out in New Zealand that showed slightly better numbers.
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  Speaker 3: At the same time card spending showed that spending activity
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  Speaker 3: was down to touch. The likes of the housing numbers
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  Speaker 3: out today again just another figure into the mix. So
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  Speaker 3: I think this model will give us a little bit
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  Speaker 3: more of a clue potentially where GDP could land at
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  Speaker 3: the end of it, and the Reserve Bank just wanting
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  Speaker 3: to put a little bit more data out there so
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  Speaker 3: that we can have a more informed conversation. But again
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  Speaker 3: I don't think this will replace what they're doing in
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  Speaker 3: terms of their estimates that they put out and similar
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  Speaker 3: but it adds just a little bit more transparency around
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  Speaker 3: some of the areas that they look into.
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  Speaker 2: Is it very different to what Massi University is running.
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  Speaker 3: Slightly different in terms of where the data comes from
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  Speaker 3: and probably the weights and similar they put onto it
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  Speaker 3: are the likes of GDP Live that Massi University put out.
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  Speaker 3: Some of that's got some quite big data sets from
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  Speaker 3: you know, likes the Kiwi Rail from food stuffs and
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  Speaker 3: similar This model that the Reserve Bank is running with
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  Speaker 3: kiwe GDP is much more based around official statistics and
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  Speaker 3: when they come out over time, but generally they seem
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  Speaker 3: to give similarly informed results. When you start to see
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  Speaker 3: some more challenging retail numbers coming through, both of the
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  Speaker 3: models will pick that up, but in slightly different ways.
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  Speaker 3: So again, I don't think we're going to use this
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  Speaker 3: number and go that's definitely going to be it. The
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  Speaker 3: numbers will keep being revised and they'll change, but it
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  Speaker 3: does let us have a bit more of a look
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  Speaker 3: under the hood of what things could be driving the
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  Speaker 3: economy at any point in time.
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  Speaker 2: Yeah, good stuff, Hey Brad, thanks very much appreciated. Brad Elson,
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  Speaker 2: Inframetrics Principal Economist.
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