Latest / Best of Business / Liam Dann: NZ Herald Business Editor on the GDP rising by 1.1% in Q3

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Liam Dann: NZ Herald Business Editor on the GDP rising by 1.1% in Q3 · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk zed B.
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  Speaker 1: Follow this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: As you will have heard, news New Zealand's economy is
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  Speaker 2: officially in rebound. Data just out from Statscene's ed shows
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  Speaker 2: GDP rose one point one percent in the three months
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  Speaker 2: to September. The Reserve Bank had been forecasting a growth
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  Speaker 2: rate of about zero point four percent. Economists had been
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  Speaker 2: expecting it to sit around zero point nine. But here
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  Speaker 2: we are one point one. New Zealand Herald Business editor
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  Speaker 2: at largely M Dan Good morning.
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  Speaker 3: To you, morning carry.
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  Speaker 2: Nice to have you back again.
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  Speaker 3: Yeah, yeah, well with some good news, I think, yeah, yeah,
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  Speaker 3: I mean let's just take that as good news. I mean,
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  Speaker 3: there's all sorts of caveats. I'm going to sort of
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  Speaker 3: add to it.
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  Speaker 2: Go on, you come on, you're.
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  Speaker 3: It was stronger than we expected, and that means I
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  Speaker 3: guess that, you know, we can say there is a
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  Speaker 3: recovery underway. They revised the second quarter as expected, but
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  Speaker 3: they revised it downwards. Wow, so this SEK quarter was
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  Speaker 3: slightly you know these I wouldn't get hung up on
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  Speaker 3: decimal points too much, but it was. It was previously
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  Speaker 3: they thought it was zero point nine down for the
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  Speaker 3: second quarter. It turned out to be one percent down.
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  Speaker 3: Given that people thought that was going to be revised up,
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  Speaker 3: that just tells us that I think that the second
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  Speaker 3: quarter was as horrible as it felt. Too many businesses
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  Speaker 3: and but it you know, it's it's what the data
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  Speaker 3: is showing there today is some momentum, especially in manufacturing
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  Speaker 3: and business services, you know, so it's that business y
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  Speaker 3: core of the economy that's picking up. The consumer end
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  Speaker 3: was was just up, like there was a little bit
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  Speaker 3: of life and household spending and consumer spending, I think
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  Speaker 3: it was. I saw a zero point one percent growth,
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  Speaker 3: But that's better than going backwards. We knew that the
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  Speaker 3: consumers take a bit longer to feel upbeat, and we
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  Speaker 3: see it in the confidence surveys. But yeah, all up
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  Speaker 3: that that's a pretty good number. It needs to be sustained. Obviously,
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  Speaker 3: we don't want to keep bouncing round. But I would
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  Speaker 3: imagine I think we've already had the press release from
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  Speaker 3: the Prime Minister and the Finance Minister will be following saying, look,
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  Speaker 3: it's all happening, so hopefully it is.
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  Speaker 2: How do the Reserve Bank get it's so roll. That's
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  Speaker 2: a bit alarming, isn't it. Yeah, surprised did.
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  Speaker 3: Not upgrade it at their last in ps in November
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  Speaker 3: because that was late November, Like like Treasury can you
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  Speaker 3: know quite often has it terribly wrong because they only
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  Speaker 3: sort of do it every six months their forecasts and
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  Speaker 3: that they But yeah, I thought they stayed. I guess
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  Speaker 3: better to be conservative if you're the Reserve Bank. But
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  Speaker 3: there were some signs of green shoots, which the Reserve
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  Speaker 3: Bank talked about and it's in its monetary policy statements.
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  Speaker 3: I'm not sure why they stayed so gloomy on what
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  Speaker 3: they thought the GDP growth would be. The bank economists
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  Speaker 3: went far off, so you know, picks between zero point
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  Speaker 3: eight and zero point and one percent. I think A
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  Speaker 3: and Z picked one per cent more or less. They
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  Speaker 3: got they got the trend right. It's a bit like
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  Speaker 3: the weather forecasts. You can tell you if it's going
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  Speaker 3: to rain or not, but not exactly when the rain's
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  Speaker 3: going to arrive. And you know, that's now the best
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  Speaker 3: we can expect from forecasts.
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  Speaker 2: I can't remember if I said we would talk about
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  Speaker 2: it today.
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  Speaker 3: Or if there was something we were going to come
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  Speaker 3: back to.
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  Speaker 2: I think it was the fact that you had a
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  Speaker 2: a contributor to your columns say, is GDP a good measure?
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  Speaker 3: Yes, Oh that's right.
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  Speaker 2: That's what we were going to talk about, wasn't it.
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  Speaker 1: Yeah.
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  Speaker 3: Yeah, And so some people are very quick to say,
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  Speaker 3: and quite rightly, look what's happening with GDP per capita
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  Speaker 3: because it gets flatted by population growth. We don't have
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  Speaker 3: that much population growth at the moment, so that's solving
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  Speaker 3: that problem. So GDP per capital was zero point nine
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  Speaker 3: percent this time, So that's the best GDP per capita
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  Speaker 3: result we've had for probably years. But it's partly a
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  Speaker 3: symptom of the fact that our population is growing. So
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  Speaker 3: the two numbers are a little bit more in sync.
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  Speaker 3: And we had a decent sized fall and per capita growth,
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  Speaker 3: but per capita growth is probably a better approximation of
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  Speaker 3: what individuals might be feeling. But you know, GDP still
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  Speaker 3: falls down in the sense that it's a big aggregate number.
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  Speaker 3: It doesn't measure the inequality of growth and all that
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  Speaker 3: sort of stuff. So you know, you could have, you know,
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  Speaker 3: the kind of economy where one sector was just booming. Well,
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  Speaker 3: we kind of have with that agriculture exactly, and those
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  Speaker 3: people could be making lots of money and spending money,
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  Speaker 3: and there could be a whole bunch of people not
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  Speaker 3: doing well and the number on aggregate would look quite
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  Speaker 3: good even on a per capita basis potentially, So perhaps
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  Speaker 3: there is a bit of that. Certainly, that is the
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  Speaker 3: case that the you know, we know that Auckland and
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  Speaker 3: Wellington are lagging and that people are feeling a bit
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  Speaker 3: gloomier there, but you get to Canterbury, you Tago Southland,
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  Speaker 3: you can see it in house prices and confidence that
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  Speaker 3: things are moving more. And that's agriculturally related to agricultural
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  Speaker 3: exports and farmers and all that stuff, and maybe maybe
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  Speaker 3: tourism coming back as well. So that is all quite positive.
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  Speaker 3: You'd expect it to spread through the cities, hopefully with
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  Speaker 3: interest rates being a bit lower AND's.
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  Speaker 2: Going back up again.
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  Speaker 3: Well, yeah, there's been these movements because of the wholesale
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  Speaker 3: markets and the retail banks haven't mucked around and making
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  Speaker 3: sure they maintain their margins and their profits, which has
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  Speaker 3: you know, copped a bit of flack. But I don't
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  Speaker 3: think the ocr will be quick to you know, they'll
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  Speaker 3: be quick to move the OCR So you should see
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  Speaker 3: you know, so the readjustment of the longer term rates
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  Speaker 3: especially so there's been some the banks will say, oh,
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  Speaker 3: well we cut the six month rate yeh, because they
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  Speaker 3: want you to take the cheap rate because they know
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  Speaker 3: it's going to be worse later. But the longer term rates, well,
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  Speaker 3: you know, if the economy continues to improve, the next
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  Speaker 3: move of the ocr will probably be up to sort
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  Speaker 3: of get it back into neutral because we're in a
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  Speaker 3: sort of stimulatory phase at the moment. And there's a
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  Speaker 3: bit of debate on markets whether that's sort of middle
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  Speaker 3: next year or late next year or you know, and
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  Speaker 3: that'll depend on how the economy progresses. But because the
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  Speaker 3: market generally sees it happening later next year, anyone who's
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  Speaker 3: going to fix for longer than a year is going
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  Speaker 3: to see those longer term rates just just edge up slightly.
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  Speaker 3: So it's more about the window to lock in for
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  Speaker 3: the absolute lowest rate having sort of passed. It was
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  Speaker 3: a very tiny window.
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  Speaker 2: Yeah, you're still.
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  Speaker 3: Going to see a lot of people coming off higher rates,
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  Speaker 3: you know, if if her are on the two year
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  Speaker 3: fixed and if they'll be coming up in the next
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  Speaker 3: six months or so, and that that still flows through
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  Speaker 3: the economists still think we're going to see a fair
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  Speaker 3: bit of flow through for kiwis coming off sort of
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  Speaker 3: the one year, eighteen month two year fixed rates. If
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  Speaker 3: they were clever enough to do a five year fix
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  Speaker 3: fixed rate way back in the COVID gloom, then they
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  Speaker 3: may actually be going up at the moment, but they'll
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  Speaker 3: have hopefully banked all those you know, returns from being
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  Speaker 3: at a super rate for the last five years.
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  Speaker 2: Andrew says much the same good news about the GDP growth,
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  Speaker 2: but once again, the Reserve Bank is miles out on
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  Speaker 2: its projection. So let's hope the new Swedish governor in
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  Speaker 2: future will be much more astute in determining the bank's forecast,
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  Speaker 2: because if they do miss the mark by so much,
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  Speaker 2: how can we have faith in future projections?
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  Speaker 3: Don't have much faith in forecasts at all. Wild anybody's forecasts. Well,
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  Speaker 3: I mean, I still look at my Apple weather app
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  Speaker 3: and it says, oh, it's it's no rain today, and
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  Speaker 3: I look at the window and it's actually raining, and
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  Speaker 3: I still look at the app. It's hopeless. So so
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  Speaker 3: just but similarly with economic forecasts, and I've looked at
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  Speaker 3: the academic research on this, they're not bad in the
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  Speaker 3: sort of a few months up to about one quarter out.
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  Speaker 3: They can pick the direction. The more specific they have
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  Speaker 3: to be, the worse they are. So I mean, I
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  Speaker 3: guess the Reserve Bank pick GDP would grow so it
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  Speaker 3: got the direction of travel right, and you get out
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  Speaker 3: much further other than half a year, and they're absolutely useless.
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  Speaker 3: I mean, so when you see Treasury picking what's going
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  Speaker 3: to happen to house prices in twenty twenty eight, it's
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  Speaker 3: just box ticking. It's just filling in a box because
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  Speaker 3: they have to do that because the government needs something
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  Speaker 3: to work off with its budget projections. But there is
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  Speaker 3: no way an economist can pick what's say.
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  Speaker 2: Why are we picking surpluses? And times of when we're
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  Speaker 2: going to get.
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  Speaker 3: All of that will change around, you know. What you'll
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  Speaker 3: see is that there'll be a long period of, oh,
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  Speaker 3: we're doing better than treasury forecasts. We're doing worse than
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  Speaker 3: Treasury forecasts. I mean, I guess where it's needing something
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  Speaker 3: to hang on to as a baseline, you know, something
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  Speaker 3: our best guess. But yeah, I think long term forecasts
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  Speaker 3: are really not worth betting on if you're thinking about
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  Speaker 3: your own personal circuit. Something will happen. You know, at
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  Speaker 3: some point in the next four years, there will be
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  Speaker 3: a Wall Street crash, or there.
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  Speaker 2: Will be an airah yeah, yeah, or something good could happen.
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  Speaker 3: AI might deliver the amazing productivity gains that we all want,
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  Speaker 3: and we might all discover that, you know, the economy
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  Speaker 3: is more productive than we thought it was going to be.
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  Speaker 3: Things that are unexpected happen all the time. That's life,
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  Speaker 3: and you know, you can you can only you know.
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  Speaker 3: I think that the further you get it out with forecasts,
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  Speaker 3: the less seriously you should take them. They can be
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  Speaker 3: useful for a bit of context. And I don't know,
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  Speaker 3: but yeah, I think pointless once you get out beyond
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  Speaker 3: a year or so. It's yeah, what's.
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  Speaker 2: Kind of doing yourself out of a job.
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  Speaker 1: Isn't it?
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  Speaker 3: Well, I don't. To me, economics isn't you know. People
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  Speaker 3: love predictions and forecasts and maybe they're fun, maybe they're
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  Speaker 3: part of the game, but it's to me, it's more
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  Speaker 3: about having the context to understand what's happening in the
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  Speaker 3: world around you, and economics is such a big part
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  Speaker 3: of the world around us. We need a framework to
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  Speaker 3: know which direction we're traveling and that sort of thing.
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  Speaker 3: So it is you do want to look out to
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  Speaker 3: twenty twenty six and think, I you know, if you've
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  Speaker 3: got a business, I look, it looks like it's growing.
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  Speaker 3: You know, the economy is growing. It looks like the
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  Speaker 3: growth will continue for a while. There are some basic things,
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  Speaker 3: so now it's time to think about the opportunity, the
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  Speaker 3: chance to invest, whereas you know, a couple of years
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  Speaker 3: ago it was time to think about battening down the
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  Speaker 3: hatches and contracting and that sort of stuff. Is useful,
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  Speaker 3: but you just have to keep it in context of
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  Speaker 3: your own experience. So I do think, you know, economics
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  Speaker 3: has some real value, but I just always advise people
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  Speaker 3: not to treat it as gospel or something.
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  Speaker 2: Science and exact sciences.
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  Speaker 3: Not an exact science, and certainly sometimes it gets treated
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  Speaker 3: as a religion, and I think that's like these are
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  Speaker 3: soothsayers who sort of predict the future in a crystal
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  Speaker 3: ball for us, and that that's not the case as
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  Speaker 3: everyone has seen over the past few years.
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  Speaker 2: Well, thank you so much. I mean, whether it's an
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  Speaker 2: exact science or not, I always enjoy hearing what you
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  Speaker 2: have to say, and you're very relatable and make it
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  Speaker 2: really really interesting, even to somebody who got fifty six
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  Speaker 2: percent and school see maths.
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  Speaker 3: Yeah, well that's right. Don't ask me about six form maths.
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  Speaker 3: But thanks Kerrie, you know, always great to chat and
• 11:18
  Speaker 3: Merry Christmas to everybody.
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  Speaker 2: Merry Christmas to you.
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