Latest / Early Edition with Ryan Bridge / Nick Tuffley: ASB Chief Economist ahead of the release of GDP numbers

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Nick Tuffley: ASB Chief Economist ahead of the release of GDP numbers · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Right. It's hoped we'll get confirmation today that New Zealand
• 0:03
  Speaker 1: is crawling out of its recession. The GDP number for
• 0:07
  Speaker 1: Q four last year is out this morning. Most economists
• 0:10
  Speaker 1: are picking a rise between point three and point five percent,
• 0:14
  Speaker 1: but that comes off the back of a one point
• 0:16
  Speaker 1: one percent and one percent drop in Q three in
• 0:19
  Speaker 1: Q two last year. ASB chief economist Nick Toughly is
• 0:23
  Speaker 1: with us now, Good morning, Nick, Thanks for your time.
• 0:26
  Speaker 2: Good morning.
• 0:26
  Speaker 1: What numbers are you picking?
• 0:28
  Speaker 2: We are picking one point three percent lift and that's
• 0:32
  Speaker 2: the same as the Reserve Bank, So I think you
• 0:34
  Speaker 2: had a good analogy there. It is crawling, particularly when
• 0:36
  Speaker 2: you put in that context of just how much things
• 0:39
  Speaker 2: slowed down during the little parts of last year.
• 0:41
  Speaker 1: So the fact that we're going to be out of
• 0:43
  Speaker 1: a technical recession, that's good news. But this growth is
• 0:46
  Speaker 1: still pretty anemic, right.
• 0:48
  Speaker 2: It is going to be a greater recovery. I think
• 0:50
  Speaker 2: what we need to remember is that interest rates have
• 0:53
  Speaker 2: been falling for a little bit, but it hasn't been
• 0:56
  Speaker 2: until probably that fourth quarter of last year where we
• 0:58
  Speaker 2: started to see that average mortgage rate that people were
• 1:01
  Speaker 2: paying start to decline and start to actually impact on
• 1:05
  Speaker 2: people's cash flows, so we do see that we'll be
• 1:09
  Speaker 2: seeing those glimmers of light and consumer spending coming through,
• 1:12
  Speaker 2: which is a really really good start signaling recovery. But
• 1:16
  Speaker 2: we are really being saved over the quarter, assuming that
• 1:18
  Speaker 2: we do have a positive number by things like agriculture,
• 1:21
  Speaker 2: where we had really great weather in the dairy season
• 1:24
  Speaker 2: in particular, had a really strong lift into Christmas.
• 1:28
  Speaker 1: Yes, so as you're taking a look at the sectors
• 1:30
  Speaker 1: which are on the improve, which ones do you think
• 1:33
  Speaker 1: we'll have given it a boost and which ones would
• 1:36
  Speaker 1: you sort of hope to see better performance from going forward.
• 1:41
  Speaker 2: Where we've seen some good time sort of coming through
• 1:45
  Speaker 2: it is a dairy in the meat sector, so strong
• 1:48
  Speaker 2: sort of meat production as well, and despite what's happening
• 1:52
  Speaker 2: in the US for the time being anyway, they haven't
• 1:54
  Speaker 2: given up even handburgers, which has really helped a lot,
• 1:57
  Speaker 2: So that's been good that retail sector through spending, also
• 2:01
  Speaker 2: being helped by tourism. So expect those aspects to come
• 2:04
  Speaker 2: through and help us out. Where I think there still
• 2:07
  Speaker 2: looking quite soggy is in construction, so we're still coming
• 2:10
  Speaker 2: out of the tail end of the impacts of the
• 2:12
  Speaker 2: housing market and more general properties slow down, so that
• 2:15
  Speaker 2: sector really struggling still in the short term.
• 2:19
  Speaker 1: You mentioned the glimmers. We all like a glimmer. How
• 2:21
  Speaker 1: long do you think it will take the country to
• 2:23
  Speaker 1: bounce back from the major drops last year. Are we
• 2:25
  Speaker 1: going to see a boom or much more of a
• 2:28
  Speaker 1: slow burn?
• 2:30
  Speaker 2: It's I think much more realistically look at this as
• 2:33
  Speaker 2: being a slow burn. It's going to be I think
• 2:34
  Speaker 2: a bit of a challenge to suddenly see the economy
• 2:37
  Speaker 2: rebound and recover two percent and the conditions that we're facing.
• 2:40
  Speaker 2: But look where we've got some good tail winds. It
• 2:43
  Speaker 2: is those low interest rates gradually working their way through
• 2:46
  Speaker 2: this year, the good payouts that the farmers are getting,
• 2:49
  Speaker 2: the tourism sector picking up or working their way through.
• 2:53
  Speaker 2: And it's not obviously just about a dairy story. That
• 2:56
  Speaker 2: meets story as well starting to shine through. So look
• 2:59
  Speaker 2: at it as gradual recovery rather than sharp rebound. We're
• 3:03
  Speaker 2: going back to more normal interest rates settings rather than
• 3:06
  Speaker 2: dropping to some really low level where we all can't
• 3:08
  Speaker 2: afford not to borrow.
• 3:09
  Speaker 1: Is z point three percent rise enough of the government
• 3:12
  Speaker 1: to convince us things are turning around.
• 3:15
  Speaker 2: Look, it's a really good sign if we get a
• 3:18
  Speaker 2: positive number that we are starting to crawl our way
• 3:21
  Speaker 2: out of what's been a really challenging time. But look,
• 3:24
  Speaker 2: the challenges is that with growth being relatively modest, we're
• 3:27
  Speaker 2: not going to be suddenly getting back to low levels
• 3:31
  Speaker 2: of unemployment that quickly as well. And look, the general
• 3:35
  Speaker 2: challenges that the government faces are still around getting productivity
• 3:39
  Speaker 2: back up after a number of years of it been very,
• 3:42
  Speaker 2: very weak, and really focusing on what it can do
• 3:45
  Speaker 2: to enable growth, bring back the confidence, get people making
• 3:50
  Speaker 2: decisions that help the economy spack up.
• 3:55
  Speaker 1: I was going to ask you what the risks are
• 3:56
  Speaker 1: for the economy to continue to grow.
• 4:01
  Speaker 2: Where we are most vulnerable and most countries are at
• 4:05
  Speaker 2: the moment is what's happening globally at the moment, mainly
• 4:08
  Speaker 2: around Donald Trump. And there's a few areas where that's
• 4:10
  Speaker 2: impacting just simply all the going backward and forth on
• 4:16
  Speaker 2: whether there's a tariff or not. The fact that he
• 4:19
  Speaker 2: is also hitting a lot of his allies with tariffs
• 4:23
  Speaker 2: is creating a lot of uncertainty, and certainty is not
• 4:27
  Speaker 2: great for making clear decisions. So there is that risk
• 4:29
  Speaker 2: to global growth of it being slowed by both the uncertainty,
• 4:32
  Speaker 2: and that's even before you get into the drag that
• 4:35
  Speaker 2: we could have if we get some quite widespread tariffs.
• 4:38
  Speaker 2: And we are also going to have to be mindful
• 4:40
  Speaker 2: when we roll around it to April and we get
• 4:42
  Speaker 2: our report card on our trade practices, whether or not
• 4:45
  Speaker 2: we get directly impacted by tariffs as well. So biggest
• 4:48
  Speaker 2: risks seem to be coming from globally, whereas domestically, with
• 4:51
  Speaker 2: interest rates coming down, it's really a matter of time
• 4:54
  Speaker 2: until they start to work through and improve the economies locally.
• 5:00
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• 5:03
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• 5:06
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