Latest / Early Edition with Ryan Bridge / Kelly Eckhold: Westpac Chief Economist on the International Monetary Fund's report card, capital gains tax

Transcript

Kelly Eckhold: Westpac Chief Economist on the International Monetary Fund's report card, capital gains tax · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: The IMF's given to New Zealand a fairly positive report cards,
• 0:02
  Speaker 1: says government and Reserve banker steered the economy reasonably well
• 0:06
  Speaker 1: despite the tropity borders, the oil shock, etc. Forecasting GDP
• 0:10
  Speaker 1: growth at two percent this year rising to two point
• 0:12
  Speaker 1: seven next year in fation peaking at four percent, and
• 0:16
  Speaker 1: they say we need a capital gains tax. Kelli year
• 0:18
  Speaker 1: Cold westpact chev economists on us this morning, Kelly, good morning,
• 0:21
  Speaker 1: good morning. Are they just copied your forecast, didn't they?
• 0:25
  Speaker 2: Yeah, Well, you know, the as you know, I used
• 0:28
  Speaker 2: to work at the IMF for twelve years up until
• 0:30
  Speaker 2: a few years ago. And the thing about the IMF,
• 0:34
  Speaker 2: as we always used to joke in the hallway as
• 0:36
  Speaker 2: we're always three months too late. It's a very large
• 0:40
  Speaker 2: bureaucratic organization. Or their forecast had to be approved by
• 0:45
  Speaker 2: two departments in HQ before they got off the plane.
• 0:49
  Speaker 2: And as a result, whatever has happened in the last
• 0:51
  Speaker 2: six weeks will not be figuring very heavily on what
• 0:54
  Speaker 2: they're talking about yesterday, Kelly.
• 0:57
  Speaker 1: Just very seriously for a second on the ICR. You
• 1:00
  Speaker 1: know that there are some saying two, some saying three
• 1:03
  Speaker 1: hikes this year given that oil is coming down and
• 1:06
  Speaker 1: coming down quite quickly. Given that all of those different factors,
• 1:11
  Speaker 1: what do you reckon in terms of ocr Do we
• 1:14
  Speaker 1: need to hike it before October?
• 1:20
  Speaker 2: Well maybe in September, But I mean this is a
• 1:23
  Speaker 2: good point. It was kind of related to my little
• 1:25
  Speaker 2: quip there, right, Like, I mean, basically the IMS prescription
• 1:28
  Speaker 2: was orientated as if we were still six weeks ago
• 1:31
  Speaker 2: when oil was over one hundred bucks a barrel and
• 1:33
  Speaker 2: you basically had no idea how this was, how long
• 1:36
  Speaker 2: this is going to go on for now we've basically
• 1:39
  Speaker 2: done a round trick to where we were before the war.
• 1:42
  Speaker 2: And you know, at the start of the war, basically
• 1:45
  Speaker 2: the Brazil Bank was saying that they ever had to
• 1:49
  Speaker 2: raise rates in December, which I think is still a
• 1:52
  Speaker 2: reasonable possibility. That's where we go back to, or at
• 1:55
  Speaker 2: the start of the war in March they were saying, well,
• 1:59
  Speaker 2: it's just shock. You know, it goes up, it goes
• 2:02
  Speaker 2: down very quickly, but it's not going to really impact
• 2:04
  Speaker 2: on medium term inflation pressures. Well, I mean, hello, we're
• 2:07
  Speaker 2: at seventy two bucks a barrel. Petrols below three bucks
• 2:10
  Speaker 2: a barrel probably be sort of like towards two seventy
• 2:14
  Speaker 2: two eighty and a couple of months or so. So
• 2:16
  Speaker 2: the idea that you need to start tightening perhaps almost
• 2:20
  Speaker 2: six months earlier than you were saying before. I reckon
• 2:23
  Speaker 2: that biggest belief.
• 2:24
  Speaker 1: Yeah, oh, I'm glad you said that. Now, just on
• 2:26
  Speaker 1: the IMF report itself, they have like the OCD, Like
• 2:30
  Speaker 1: everyone who comes here for a visit, they go, oh,
• 2:32
  Speaker 1: you don't have a capital gains tax? Well you need one?
• 2:35
  Speaker 2: Is that?
• 2:36
  Speaker 1: And it where they reckon one percent of GDP would
• 2:38
  Speaker 1: have our deficit. All sounds great in theory, but do
• 2:41
  Speaker 1: you not then just encourage the same type of spending,
• 2:44
  Speaker 1: you know, give them an inch, they'll take a mile,
• 2:47
  Speaker 1: and then next time we have a deficit, they'll say, well,
• 2:49
  Speaker 1: extend your capital gains tax, you know. And it's just
• 2:51
  Speaker 1: sort of this never ending story of spend, debt and
• 2:55
  Speaker 1: then tax.
• 2:57
  Speaker 2: Well, I mean there is a truth, right like, as
• 2:59
  Speaker 2: soon as a new source of income is found by
• 3:01
  Speaker 2: the government, then it's the sending of the wedge. Once
• 3:05
  Speaker 2: you've gone to the well, once you'll be very happy
• 3:07
  Speaker 2: to go back there in the future. I mean, one
• 3:09
  Speaker 2: of the I think more disappointing things are the funds
• 3:12
  Speaker 2: analysis here is that basically just quietly said, oh yeah,
• 3:15
  Speaker 2: the fact that it's going to take maybe four or
• 3:18
  Speaker 2: five years to get back the surplus. The fact that
• 3:20
  Speaker 2: you've got a structural deficit sitting in there that you're
• 3:24
  Speaker 2: not really taking any immediate action on is fine, And
• 3:29
  Speaker 2: that's very non imf Like this capital gauge tax. I mean,
• 3:34
  Speaker 2: I think it probably has a whole lot of merits
• 3:36
  Speaker 2: to it, but for different reasons. I don't think you're
• 3:38
  Speaker 2: going to get much money out of it, but it
• 3:41
  Speaker 2: probably is useful in resetting the table in terms of
• 3:44
  Speaker 2: the sorts of investment options people should be thinking about.
• 3:48
  Speaker 2: There may be no capital gauge to tax once you
• 3:51
  Speaker 2: get this thing in, So if you got no tax,
• 3:54
  Speaker 2: then you're not going to be spending it on anything
• 3:56
  Speaker 2: and you'll have to find some other way of closing
• 3:57
  Speaker 2: the deficit.
• 4:00
  Speaker 1: And if you look at the one that's been announced
• 4:01
  Speaker 1: for this election campaign, it's already just going to cover
• 4:04
  Speaker 1: the cost of some doctors. Kelly cold who is Westpact?
• 4:09
  Speaker 1: For more from early edition with Ryan Bridge, Listen live
• 4:12
  Speaker 1: to News Talks.
• 4:13
  Speaker 2: It'd be from five am weekdays, or follow the podcast
• 4:16
  Speaker 2: on iHeartRadio.