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Cameron Bagrie: Independent economist comments on interest rate cuts · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
• 0:12
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  Speaker 2: Infametrix Brad Olsen's outfit reckons we might be overcooking it
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  Speaker 2: with interest right cuts. They say the cats have gone
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  Speaker 2: so far that they've done their job. The effects won't
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  Speaker 2: be felt until mid to late next year. Too much
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  Speaker 2: stimulus and we get all too excited again and then
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  Speaker 2: facing tickles up and then rate hikes from late next year.
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  Speaker 2: Independent economist Cameron Bagriy with me this morning to chat
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  Speaker 2: about it.
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  Speaker 3: Morning, Cameron, Oh, good morning, Nice to see you back.
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  Speaker 2: Yeah, good to be back. What's the situation here?
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  Speaker 1: Do you agree with this?
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  Speaker 3: You can argue both sides. If you look at the
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  Speaker 3: gross side of the equation and the gross side of
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  Speaker 3: the equation, the New Zealan at the moment are still
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  Speaker 3: pretty a name it. So the reserve ends well justified
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  Speaker 3: by look and they climbing it up to the defaibilat
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  Speaker 3: and giving a little bit of a shock so to
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  Speaker 3: speak of the form of a laugh push your cashrop.
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  Speaker 3: The other side is that giving the economy a little
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  Speaker 3: bit more juicio is not without risk and head by
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  Speaker 3: inflation is moving up. Core inflation looks a lot more contained.
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  Speaker 3: But this is the Reserve Bank that they just need
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  Speaker 3: to be a little bit weary here, because if this
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  Speaker 3: economy does kicking the gear, and I think it is
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  Speaker 3: going to kick in the gear into twenty twenty six,
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  Speaker 3: you could hit some capacity constraints pretty quickly. You hit
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  Speaker 3: capacity constraints pretty quickly in FLAC starts to wear its
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  Speaker 3: ugly head again. And for a lot of people out there, Brian,
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  Speaker 3: most people do not think head by inflation is two
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  Speaker 3: because you're seeing your electricity bill move up at a
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  Speaker 3: double digit clip, your rates bills moving up at a
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  Speaker 3: double digit clip, medical bills, they cost of food out
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  Speaker 3: there across the country as well.
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  Speaker 2: What's worse for the Reserve Bank going hard now and
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  Speaker 2: risk reversing later, or you know, letting the pain drag
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  Speaker 2: on and staying on one course.
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  Speaker 3: It's a Clayton's choice. We're welcome to being a central
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  Speaker 3: bank and they need a lot of it's about risk management,
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  Speaker 3: and the Reserve Band obviously decided after getting that week
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  Speaker 3: GDP number for Q two, but they needed up the
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  Speaker 3: NTY a little bit. But if you go through the
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  Speaker 3: adocument you know their statement, their minutes, they were still
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  Speaker 3: wary about some of those inflation risks because, as I said,
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  Speaker 3: you know, head by inflation is moving up. They're not
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  Speaker 3: focused on head by inflation. They're focused on core inflation
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  Speaker 3: that looks a lot more sedate. But there's a whole lot
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  Speaker 3: of things out there at the moment that the reserve
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  Speaker 3: bank can't control. You know, one of the big problems
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  Speaker 3: for a central bank is it but they sort of
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  Speaker 3: know where the economy is through a demand lens, but
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  Speaker 3: they don't know where the economy is through a supply lends. Yeah,
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  Speaker 3: this is how last the economy can grow, the combination
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  Speaker 3: of immigration, capital, the combination in line with productivity growth.
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  Speaker 3: And what we know is that that line is a
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  Speaker 3: very weak number. And if that line is even weaker
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  Speaker 3: than what the reserve band is estimating, we get hit
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  Speaker 3: capacity constraints very early in twenty twenty six. On the
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  Speaker 3: assumption that this economy is going to kick into gear,
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  Speaker 3: there's a whole lot more people roll the fose faxed mortgages,
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  Speaker 3: and we know there's a lot of stimminess in the pipeline.
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  Speaker 2: When it kicks into gear because it's been so long
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  Speaker 2: and dragged out. When it kicks into gear, does it
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  Speaker 2: kick in it third gear? Are we going to suddenly
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  Speaker 2: bolt out the gates.
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  Speaker 3: I'm not convinced we getting bolt out of the gate.
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  Speaker 3: And one of the reasons I'm not convincing in a
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  Speaker 3: bolt out of the gate is the economy is not
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  Speaker 3: just driven by what's called the cyclical leaders and a
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  Speaker 3: cyclical letters of things such as interest rates coming down,
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  Speaker 3: how much money to get it's pumping in. It's how
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  Speaker 3: much money the farmers have got. That's something yesel on dollar.
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  Speaker 3: It's the likes of that three point two bid, and
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  Speaker 3: that could hurt farmers, wallets in the form of that
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  Speaker 3: consumer business. So we know there's a there's some pretty
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  Speaker 3: big checks that they're going to come in. But to
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  Speaker 3: get the economy ready kicking into gear, you need to
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  Speaker 3: see the housing in a pretty pretty good space. Because
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  Speaker 3: the housing market's got about three speeds fIF neutral and reverse.
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  Speaker 3: If you've got a shortage of supply, you can't interstrate
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  Speaker 3: said you can have book you one how of a
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  Speaker 3: construction boom. You know what we got out there at
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  Speaker 3: the moment is if population growth relative to supply I
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  Speaker 3: building consents, it still looks like we're building too many
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  Speaker 3: houses as opposed to not enough housing. Valuations are not
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  Speaker 3: exactly what you're called cheap. There's a whole lot of
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  Speaker 3: other economic fundamentals across this economy. If you look at
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  Speaker 3: our infrastructure, you look at shortage of energy, if you
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  Speaker 3: lot at what's going on in regard to the quality
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  Speaker 3: of the roading system. These things just hold the economy
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  Speaker 3: back through a structural lens. And these are areas that
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  Speaker 3: the Reserve Bank cannot fix by cunning interest rates. Only
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  Speaker 3: time can through some good economic policy.
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  Speaker 2: Cameron Bagri and lead economists at Bagger Economics appreciate your time.
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  Speaker 2: This morning is always interesting stuff.
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