Latest / Early Edition with Ryan Bridge / Brad Olsen: Infometrics Principal Economist on the Treasury revising economic forecasts ahead of the Budget

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Brad Olsen: Infometrics Principal Economist on the Treasury revising economic forecasts ahead of the Budget · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Cry and Bridge taisury' is ripping up and starting again.
• 0:03
  Speaker 1: This is their forecast ahead of the budget. We're five
• 0:05
  Speaker 1: weeks out. The war is a moving feast. That's why
• 0:08
  Speaker 1: comes after Moody's yesterday put us on negative outlook from stable.
• 0:11
  Speaker 1: Here's the Finance Minister.
• 0:13
  Speaker 2: I am very conscious that many New Zealanders would like
• 0:16
  Speaker 2: to see us splashing the cash right now, and I
• 0:19
  Speaker 2: would love to ease the pressure that many people are feeling.
• 0:22
  Speaker 2: We simply can't do that responsibly as a country right now,
• 0:26
  Speaker 2: because we cannot just keep spending more and borrowing more,
• 0:30
  Speaker 2: as some have suggested.
• 0:31
  Speaker 1: Brad Oldson Infimetric's principal economis with us this morning. Brad,
• 0:34
  Speaker 1: good morning, Good morning. What of the three scenarios that
• 0:38
  Speaker 1: Nicola will has presented yesterday, I mean, she seemed to
• 0:40
  Speaker 1: think that the least bad was the most likely. Do
• 0:43
  Speaker 1: you think she'll be right.
• 0:45
  Speaker 3: At the moment, Yes, But that's a pretty big caveat
• 0:48
  Speaker 3: given that, you know, we continue to see things Wax
• 0:51
  Speaker 3: and Wayne overseas. That scenario one that best case scenario,
• 0:55
  Speaker 3: and it's still a not a particularly good case to
• 0:57
  Speaker 3: be clear, that was sort of based on the expectation
• 1:01
  Speaker 3: that crude oil prices would be around one hundred and
• 1:04
  Speaker 3: ten US a barrel, and that's sort of a little
• 1:06
  Speaker 3: bit higher than where they are at the moment and
• 1:09
  Speaker 3: have been over the last week. So that's why it
• 1:11
  Speaker 3: seems sort of more sensible to look at that one.
• 1:14
  Speaker 3: The other two scenarios, we're looking at the likes of
• 1:16
  Speaker 3: one hundred and thirty five dollars a barrel for an
• 1:19
  Speaker 3: extended period of time, and then scenario three, the sort
• 1:22
  Speaker 3: of worst case expectation was US one hundred and eighty
• 1:26
  Speaker 3: a barrel and lasting for a couple of years. So
• 1:29
  Speaker 3: I mean, certainly that worst cases is extremely unlikely at
• 1:32
  Speaker 3: the moment, but for the Treasury to reopen their full
• 1:35
  Speaker 3: cast so close to budget time really does show just
• 1:39
  Speaker 3: how uncertain things are for the government and how much
• 1:42
  Speaker 3: they're trying to understand not only what the fiscal impacts
• 1:45
  Speaker 3: will be in terms of what they will have to
• 1:47
  Speaker 3: do as a government, but also what the wider impacts
• 1:49
  Speaker 3: will be on the wider economy and what support they
• 1:52
  Speaker 3: might need to provide, or just how they interact in
• 1:54
  Speaker 3: that mix. Given everything is so up and down and
• 1:57
  Speaker 3: moving so much day to day.
• 1:59
  Speaker 1: Given the fat you don't know what's going to happen tomorrow,
• 2:01
  Speaker 1: very hard to know. You know the projections how much
• 2:04
  Speaker 1: revenue you're going to get as a government, right, Does
• 2:05
  Speaker 1: that mean that they take a more cautious approach with spending,
• 2:08
  Speaker 1: or more cautious than they otherwise would have.
• 2:12
  Speaker 3: I think they do try and retain as much of
• 2:14
  Speaker 3: a cautious approach as possible, particularly given you've had a
• 2:17
  Speaker 3: second ratings agency that's come through and put them on
• 2:20
  Speaker 3: a negative outlook. Clearly, things even before the war came
• 2:25
  Speaker 3: through were difficult from a government finances point of view.
• 2:28
  Speaker 3: It was still going to be the end of the
• 2:29
  Speaker 3: decade before we saw a surplus, and that would mean
• 2:32
  Speaker 3: that the government was again spending more than it was
• 2:35
  Speaker 3: earning each and every year. You look at current conditions,
• 2:39
  Speaker 3: government's probably going to be spending more because everything's going
• 2:41
  Speaker 3: to be costing them more, but like you say, they're
• 2:44
  Speaker 3: going to be making less revenue. So it makes the
• 2:46
  Speaker 3: whole sort of fiscal position a whole lot more difficult.
• 2:49
  Speaker 3: So yes, I think they do have to remain conservative.
• 2:51
  Speaker 3: And importantly, there's this question that keeps coming up around
• 2:55
  Speaker 3: should there could there be more government support? And one
• 2:57
  Speaker 3: of the challenges is given we don't know how long
• 3:00
  Speaker 3: this current crisis last. Do you lock in support for
• 3:03
  Speaker 3: what you think might be a couple of months but
• 3:05
  Speaker 3: could turn into an entire year, because that could be
• 3:07
  Speaker 3: a very big drawdown on limited government funds. And also
• 3:11
  Speaker 3: what sort of support are you providing, because we know
• 3:14
  Speaker 3: that looking at the likes of Australia where they've provided
• 3:16
  Speaker 3: some support at huge cost two point five billion dollars
• 3:20
  Speaker 3: on lower xis that's at the same time as they
• 3:22
  Speaker 3: don't have enough fuel, but effectively all else being equal
• 3:26
  Speaker 3: to subsidizing fuel, Like we just don't have that sort
• 3:29
  Speaker 3: of one money in the bank or two. There's not
• 3:32
  Speaker 3: a lot of great ways you can support the economy
• 3:34
  Speaker 3: when it's already constrained at the minute.
• 3:36
  Speaker 1: But that's before you talk about their loans free loans
• 3:39
  Speaker 1: for businesses, interest free loans for businesses. Brad.
• 3:41
  Speaker 3: Thank you.
• 3:41
  Speaker 1: Brad Olson Informetric's principal economists with us this morning.
• 3:45
  Speaker 3: For more from early edition with Ryan Bridge. Listen live
• 3:48
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• 3:51
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