Latest / Early Edition with Ryan Bridge / Brad Olsen: Infometrics Principle Economist on the Reserve Bank cutting the OCR, response to tariffs

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Brad Olsen: Infometrics Principle Economist on the Reserve Bank cutting the OCR, response to tariffs · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Alway, the Reserve Band kept their promised to cut the
• 0:01
  Speaker 1: official cash rate yesterday afternoon, dropping twenty five basis points
• 0:05
  Speaker 1: to three point five percent. Nikola Willis has welcomed the news.
• 0:09
  Speaker 1: She says she's keeping a close eye on the ongoing
• 0:11
  Speaker 1: global economic instability ahead of this year's budget. They but meanwhile,
• 0:15
  Speaker 1: and Barbara Edmonds says that they should be spending a
• 0:18
  Speaker 1: bit more right now to help us through this bad
• 0:20
  Speaker 1: time and joining us is Infometrics principal economists Brad Olsen
• 0:24
  Speaker 1: and good morning to you. Brad.
• 0:26
  Speaker 2: Good morning.
• 0:27
  Speaker 1: So in your opinion, this was the right move, Yes.
• 0:30
  Speaker 2: Very much the right move, very sensible and in line
• 0:33
  Speaker 2: what the Reserve Bank has been talking about previously anyway,
• 0:36
  Speaker 2: And I think that's important because when we've been looking
• 0:39
  Speaker 2: through all of the last couple of days, what's become
• 0:42
  Speaker 2: very clear and again very clear this morning, is all
• 0:45
  Speaker 2: of this can change in an instance. So I think
• 0:47
  Speaker 2: for the Reserve Bank, they made it very clear that
• 0:49
  Speaker 2: they are looking closely at the tariffs. They're trying to
• 0:51
  Speaker 2: understand all of those trials and tribulations, but at the
• 0:54
  Speaker 2: same time they're not willing to make a ration move.
• 0:57
  Speaker 2: They're just trying to understand what's going on.
• 0:59
  Speaker 1: First, all right, well, the tap was said the whole
• 1:02
  Speaker 1: thing when I was talking about this yesterday. We're going, yes,
• 1:04
  Speaker 1: if you're going to offer certainty to business, just keep
• 1:06
  Speaker 1: going with the plan. Because the plan is an extreme
• 1:08
  Speaker 1: zero point twenty five. So that's all right. But we
• 1:10
  Speaker 1: wanted to kind of know what the Reserve Bank thought
• 1:12
  Speaker 1: about the global economy. We had tariffs coming into effect
• 1:15
  Speaker 1: yesterday afternoon. Economists are alsaying they don't know what they're
• 1:18
  Speaker 1: going to do to the economy. Did you get any
• 1:21
  Speaker 1: better picture from the Reserve Bank?
• 1:24
  Speaker 2: There was a little bit more clarity in there. We
• 1:26
  Speaker 2: still didn't expect them to have a full, full understanding,
• 1:29
  Speaker 2: and I think again i'd rather they came out in
• 1:31
  Speaker 2: May when they do their next month policy statement, with
• 1:34
  Speaker 2: a full suite of forecast, with a whole bunch of
• 1:36
  Speaker 2: information that have had time to digest. Also, of course,
• 1:39
  Speaker 2: the changes that have even come through over night, I
• 1:41
  Speaker 2: mean a pause to the tariffs, but also ratching up
• 1:44
  Speaker 2: tensions on China changes the game again for New Zealand.
• 1:47
  Speaker 2: But the Bank did say that they were clearly concerned
• 1:51
  Speaker 2: about what it meant for the New Zealand Economy said
• 1:54
  Speaker 2: that the increased trade barriers globally do create downside risks
• 1:58
  Speaker 2: to the outlook for economic activity and inflation in New Zealand.
• 2:01
  Speaker 2: And on the back of that you have seen markets
• 2:04
  Speaker 2: and in fact some of the wording from the Reserve
• 2:06
  Speaker 2: Bank generally imply that, yes, interest rates could go lower
• 2:10
  Speaker 2: because of this. But there was also a little bit
• 2:12
  Speaker 2: of disagreement amongst the Monetary Policy Committee, it seems, and
• 2:15
  Speaker 2: I think this is healthy because they really do need
• 2:18
  Speaker 2: to grapple with what is a pretty challenging topic. Most
• 2:21
  Speaker 2: members of the committee consider that recent global policy developments
• 2:25
  Speaker 2: like the tariff stuff has shifted the balance of risks
• 2:27
  Speaker 2: in New Zealand inflation lower. Others though noted uncertainty around
• 2:31
  Speaker 2: the inflation outlook and the risks remain balanced. And again
• 2:35
  Speaker 2: I think that's appropriate. Yes, we're seeing tariffs around the
• 2:37
  Speaker 2: world and in some senses that could raise prices, but
• 2:40
  Speaker 2: also if you have weaker economic activity in New Zealand
• 2:43
  Speaker 2: because we're not trading as much, you could equally see
• 2:46
  Speaker 2: lower inflashy risks. So they have got to balance this
• 2:48
  Speaker 2: all up.
• 2:49
  Speaker 1: And how about the dollar, because I mentioned this morning,
• 2:52
  Speaker 1: if the dollar remains low. That means it actually negates
• 2:54
  Speaker 1: the ten percent increase in prices of our products at America,
• 2:57
  Speaker 1: if you know what I mean. So if we have
• 2:58
  Speaker 1: an isolight low dollar, then then we can still keep
• 3:01
  Speaker 1: our exports at a good price point in America. How's
• 3:03
  Speaker 1: our dollar doing? What's happening with our dollar?
• 3:06
  Speaker 2: I think I saw overnight it's pushed up just to touch,
• 3:08
  Speaker 2: but that's equally because of this expectation and talk of
• 3:11
  Speaker 2: a bit of a pause on tariffs. So I think
• 3:13
  Speaker 2: last I saw it had popped just above fifty six
• 3:16
  Speaker 2: US sense that had been trading more on that fifty
• 3:18
  Speaker 2: five and low fifty five through parts of yesterday. Again,
• 3:22
  Speaker 2: this is almost an automatic stabilizer sort of effect, where
• 3:26
  Speaker 2: when the challenges come through with those high prices, the
• 3:30
  Speaker 2: dollar drops to try and compensate, and at the same time,
• 3:32
  Speaker 2: if you start to see those better conditions, then the
• 3:35
  Speaker 2: dollar starts to push up a little bit higher. So
• 3:38
  Speaker 2: I think all of this highlights that we're still in
• 3:40
  Speaker 2: the early stages of trying to understand this. The Reserve
• 3:43
  Speaker 2: Bank didn't want to commit too much firepower too quickly.
• 3:46
  Speaker 2: That's been proven overnight to be very much the right,
• 3:48
  Speaker 2: call a little bit more of a stay of the course,
• 3:50
  Speaker 2: and they'll continue to assess in the future. Is good
• 3:53
  Speaker 2: All the while the global economy still convulsing, and here
• 3:56
  Speaker 2: in New Zealand we're sort of just watch, waiting and worrying.
• 4:00
  Speaker 1: Good on your Brad Olson. I thank you, and of
• 4:01
  Speaker 1: course Christian Hawksby made the announcements yesterday. He's there for
• 4:04
  Speaker 1: the next six months and then we don't know what's happening.
• 4:06
  Speaker 1: Is he a placeholder? Is he acceptable to the government,
• 4:10
  Speaker 1: Will the government then start agitating for their own or
• 4:13
  Speaker 1: a more approvable Reserve Bank governor? Will find that out
• 4:17
  Speaker 1: in the future. Ana Courst the next OCA in May.
• 4:20
  Speaker 2: For more from early edition with Ryan Bridge.
• 4:22
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• 4:26
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