Latest / Best of Business / Brad Olsen: Infometrics Principal Economist on Treasury issuing a warning about New Zealand's public finances

Transcript

Brad Olsen: Infometrics Principal Economist on Treasury issuing a warning about New Zealand's public finances · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from newstalk ZEDB. Follow this
• 0:13
  Speaker 1: and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: Is re resounding of warning bells over our public finances
• 0:20
  Speaker 2: and its long term fiscal forecast. Today this is their
• 0:23
  Speaker 2: sixth edition. If the government made no changes to current settings,
• 0:27
  Speaker 2: NETCRE Crown debt would hit two hundred percent of GDP
• 0:31
  Speaker 2: by twenty sixty five. That's largely down to the aging population,
• 0:35
  Speaker 2: health costs, record levels of government spending. Brad Olsen Informetric's
• 0:39
  Speaker 2: principal economists with us Hey, Brad good evening. So it's
• 0:42
  Speaker 2: interesting that some things they have in the most recent
• 0:47
  Speaker 2: reports sort of overestimated or underestimated. One of those was
• 0:52
  Speaker 2: the impact of migration on those super costs. Yes, that's right,
• 0:57
  Speaker 2: although realistically, when you look through the numbers, you've still
• 1:00
  Speaker 2: got some pretty ugly challenges coming up for the country
• 1:03
  Speaker 2: when it comes to the cost of everything. And I
• 1:05
  Speaker 2: guess look, the worry a little bit is that we've
• 1:07
  Speaker 2: had these warning before. We had something very similar from
• 1:10
  Speaker 2: the Treasury four years ago in twenty twenty one, and realistically,
• 1:14
  Speaker 2: I think what the Treasury.
• 1:15
  Speaker 3: Is continuing to highlight is that there's a lot of
• 1:18
  Speaker 3: big challenges in front of us. We don't have to
• 1:20
  Speaker 3: solve them all tomorrow, but we really do have to
• 1:22
  Speaker 3: start sometime soon to get us out of what looks
• 1:25
  Speaker 3: like a very unsustainable pathway going forward. But and here's
• 1:29
  Speaker 3: the biggest kicker for me. You can't do any one
• 1:33
  Speaker 3: thing and it will magically solve our sort of fiscal challenges.
• 1:36
  Speaker 3: There's a lot that's going to have to happen that
• 1:38
  Speaker 3: will be unpalatable to politicians across the political spectrum. But
• 1:42
  Speaker 3: by goodness, we've got to start soon.
• 1:44
  Speaker 2: Is in every country and would they not be getting
• 1:47
  Speaker 2: the same report?
• 1:49
  Speaker 3: Oh, they probably are getting the same report. But again
• 1:52
  Speaker 3: I think probably for New Zealand. When we're looking at
• 1:54
  Speaker 3: some of these factors, we know that and Treasury has
• 1:57
  Speaker 3: highlighted this in their analysis, that we continue to have
• 2:00
  Speaker 3: to pay something like ten percent of GDP every decade
• 2:03
  Speaker 3: for the various economic crises that come up. Yes, other
• 2:06
  Speaker 3: countries have also got to pay for that. Treasury is
• 2:09
  Speaker 3: now highlighting that considering where debt actually is more around
• 2:13
  Speaker 3: forty three percent of GDP that originally expected, if you
• 2:17
  Speaker 3: go back in time, that would currently be sitting around
• 2:19
  Speaker 3: twenty three percent, so we've eroded our savings and buffers
• 2:22
  Speaker 3: for stuff. Yes, other countries are also wearing it, but
• 2:25
  Speaker 3: again we've sort of got a look after ourselves start with,
• 2:28
  Speaker 3: and at the moment we're not on a sustainable path.
• 2:31
  Speaker 2: What did you make of Anna Bremen, the appointment of
• 2:34
  Speaker 2: the two ic to the Central Bank in Sweden being
• 2:37
  Speaker 2: appointed to head our Reserve bank from December.
• 2:41
  Speaker 3: Look, I thought it was a very smart, pragmatic appointment.
• 2:45
  Speaker 3: She has, of course a PhD in economics from Stockholm University.
• 2:50
  Speaker 3: You know she's got the ability than Nelse to take
• 2:54
  Speaker 3: on board the challenge that is a central bank, and
• 2:57
  Speaker 3: I think importantly when she was asked around what she
• 3:00
  Speaker 3: wants to do, what she's going to do in the role,
• 3:02
  Speaker 3: her immediate first answer was I need to keep a
• 3:05
  Speaker 3: laser focus on in fation and keeping that low and stuff.
• 3:08
  Speaker 3: And that was exactly what we needed to hear. But
• 3:10
  Speaker 3: it was reassuring that that really is that the immediate
• 3:14
  Speaker 3: focus for the Reserve Bank governor coming in. Of course,
• 3:18
  Speaker 3: she does come in after the last monetary policy announcement
• 3:22
  Speaker 3: for the year, so she'll only be starting to assist
• 3:25
  Speaker 3: or be part of those interest rate setting discussions from
• 3:28
  Speaker 3: Debruary twenty twenty six. It does sort of suggest that, look,
• 3:32
  Speaker 3: we've got a few interest rate cuts that are likely
• 3:35
  Speaker 3: to come through before she takes up her appointment, but
• 3:38
  Speaker 3: does give, I guess, give her the summer time to
• 3:40
  Speaker 3: get her head around sort of where the New Zealand
• 3:42
  Speaker 3: economy sitting and hopefully hit the ground running as we
• 3:45
  Speaker 3: head into the new year with some pretty big challenges
• 3:48
  Speaker 3: and a lot of uncertainty.
• 3:49
  Speaker 2: Still, yeah, it's conceivable that her first vote might be
• 3:53
  Speaker 2: to hold if all the cutting is done this year
• 3:56
  Speaker 2: of come February next year.
• 3:59
  Speaker 3: That's that's exactly right. And I think I mean one
• 4:02
  Speaker 3: thing though, and that's why it might be important to
• 4:05
  Speaker 3: have her on board for that first discussion of a
• 4:07
  Speaker 3: HOLD is because she's been pretty clear, not only today
• 4:10
  Speaker 3: but actually in a lot of her analysis that she's
• 4:12
  Speaker 3: done in her current role around the importance of transparency
• 4:16
  Speaker 3: from central banks and that look, there's a lot of
• 4:18
  Speaker 3: uncertainty and challenge out there, but central banks have got
• 4:21
  Speaker 3: to communicate well with the public, they've got to communicate
• 4:23
  Speaker 3: well with financial markets about all of those tricky things.
• 4:26
  Speaker 3: And I think again that focus alongside what she's saying
• 4:29
  Speaker 3: around inflation. They're very much striking the right tone so
• 4:32
  Speaker 3: early in the piece.
• 4:33
  Speaker 2: Yeah, absolutely, Brad appreciate that. Brad Olsen Informetric Principal Economists with.
• 4:37
  Speaker 1: Us for more from News Talks B Listen live on
• 4:41
  Speaker 1: air or online, and keep our shows with you wherever
• 4:44
  Speaker 1: you go with our podcasts on iHeartRadio