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Nicola Willis: Finance Minister voices surprise with latest GDP numbers · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
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  Speaker 2: The GDP number out today has come as something of
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  Speaker 2: a shock. It was far worse than expected for Q two,
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  Speaker 2: down zero point nine percent. That is three times as
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  Speaker 2: bad as predicted by the Reserve Bank just last month. Now,
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  Speaker 2: Nikola Willis is the Finance Minister. High Nichola Hi, is
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  Speaker 2: this worse than you thought it would be?
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  Speaker 3: Yes, the consensus forecast was that we did have a
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  Speaker 3: negative quarter, but the view was that it was more
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  Speaker 3: like zero point three percent. So this is bigger than forecast.
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  Speaker 2: Okay, Now you're putting this down to the tariffs, right,
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  Speaker 2: and I think to some extent you are right, but
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  Speaker 2: it is bigger than that as well. There is domestic
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  Speaker 2: stuff going on here.
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  Speaker 3: Well, what we know is in the first three months
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  Speaker 3: of the year we grow at zero point nine percent positive,
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  Speaker 3: which was far faster than anyone had been forecasting, three
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  Speaker 3: times the rate Australia was growing at that time. And
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  Speaker 3: we know that the Trump tariff announcement really knocked the
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  Speaker 3: stuffing out of people's confidence and we've felt in the
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  Speaker 3: economy that draw back on an investment in hiring intentions,
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  Speaker 3: and I think this data reflects.
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  Speaker 2: That there is also the manufacturing collapse, which feels like
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  Speaker 2: it's related to the energy prices.
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  Speaker 3: Yeah, well, the manufacturing is also about the timing of
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  Speaker 3: when farmers send stock to be processed. It's also about
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  Speaker 3: how much inventory firms are stocking up for export. So
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  Speaker 3: I think there are range of factors at play in
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  Speaker 3: that manufacturing data. What we know now is that this
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  Speaker 3: is a time to really be kicking off construction and activity.
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  Speaker 3: So I'm pleased that today we've announced the first FastTrack
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  Speaker 3: housing project that will see more than two thy seven
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  Speaker 3: hundred jobs created in Nelson with hundreds of homes, an
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  Speaker 3: uplift to GDP of three hundred and forty million. We
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  Speaker 3: want to get more of those fast track projects underway,
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  Speaker 3: more government construction underway. All of those will be tailwinds
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  Speaker 3: for growth.
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  Speaker 2: Are you worried that this is going to knock people's
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  Speaker 2: confidence all over again?
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  Speaker 3: Well, I don't think people should overread the data for
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  Speaker 3: the second quarter. They need to remember that data and
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  Speaker 3: forecasts do bounce around. In the first three months of
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  Speaker 3: the year. As I said, we grew a lot faster
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  Speaker 3: than anyone had predicted. We also know that we're now
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  Speaker 3: in a different phase where growth by consensus is faster
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  Speaker 3: than it was a few months ago. We've got those
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  Speaker 3: bigger interest rate reductions coming through, and I'm sure that
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  Speaker 3: the Reserve Bank will look at this data and see
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  Speaker 3: that that underestimated how slow the economy had been, and
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  Speaker 3: they'll have to reflect on that as they make future
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  Speaker 3: interest rate decisions.
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  Speaker 2: What I think the problem is is that it's going
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  Speaker 2: to knock people's confidence in the institutions. Don't you think
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  Speaker 2: it is going to knock confidence in the Reserve banks
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  Speaker 2: ability to see what is actually going on and do
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  Speaker 2: the right thing with the ocr It is going to
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  Speaker 2: knock people's confidence even in the government because you guys
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  Speaker 2: have been saying for the longest time there are green shoots,
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  Speaker 2: it's fine, we're on track, and then you get this
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  Speaker 2: massive contraction, maybe even in bank economists who haven't seen it.
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  Speaker 2: And there's the problem, isn't it is that if you
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  Speaker 2: don't know who to trust, you just keep your money
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  Speaker 2: in your wallet.
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  Speaker 3: Well, it's always the case that forecasts are crystal balls,
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  Speaker 3: and no one can ever be completely definitive. I think
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  Speaker 3: you have seen the Reserve Bank pivot in August, where
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  Speaker 3: they really focused at that point on the downside risks
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  Speaker 3: to growth and did price in that additional interest rate reduction.
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  Speaker 3: For our part as a government, this reinforces why it
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  Speaker 3: is not the time to be increasing taxes, Why we
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  Speaker 3: should be doing the investment boost tax deduction for businesses
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  Speaker 3: making investments. Why we must fast track projects despite the
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  Speaker 3: cries from environmentalists and others. We need to see that
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  Speaker 3: activity happening. Why we must say yes to more overseas
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  Speaker 3: investment and trade. We must get those spades in the
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  Speaker 3: ground on the government's own infrastructure projects. All of the
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  Speaker 3: activity that we're doing is more needed than ever, and
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  Speaker 3: an alternative course of just simply borrowing more and spending
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  Speaker 3: more would not have done anything to fix the second
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  Speaker 3: quarter resolve.
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  Speaker 2: It looks to me like we're going to get it.
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  Speaker 2: I mean, it must at least be a serious possibility
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  Speaker 2: that we get a fifty basis point cut next month. Yeah.
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  Speaker 3: Well, I've seen banker conomists predicting that others are more
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  Speaker 3: cautious in their outlock. Ultimately will be for the Reserve
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  Speaker 3: Bank to decide.
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  Speaker 2: Nichola, thank you for your time. Nicholallas finance Minister.
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