Latest / Best of Business / Paul Bloxham: HSBC chief economist ahead of Wednesday's projected unemployment data

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Paul Bloxham: HSBC chief economist ahead of Wednesday's projected unemployment data · 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 2: Paul Blocks from ahspc's chief economist, is with us evening,
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  Speaker 2: Paul good A, what are you picking for our unemployment
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  Speaker 2: number tomorrow?
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  Speaker 3: Well, our forecast is a little bit more optimistic than
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  Speaker 3: the market, where forecasting that it might track sideways and
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  Speaker 3: sort of stay roughly the same level that it was
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  Speaker 3: at the last print, so just over five percent five
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  Speaker 3: point one. We've got in mind that you might see
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  Speaker 3: a little bit of positive employment growth and we'll just
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  Speaker 3: see what the print manages to deliver.
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  Speaker 2: Why why are you more positive than others? Do you
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  Speaker 2: think there's laborhooding going on? Or are you accounting for
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  Speaker 2: the fact that a lot of people are just when
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  Speaker 2: they lose their jobs here heading off to Australia.
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  Speaker 3: I think that actually the economy is in a modest
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  Speaker 3: up swing. We saw it in the first quarter GDP print,
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  Speaker 3: we saw it in the fourth quarter print from last year.
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  Speaker 3: I think there are some forces at work that are
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  Speaker 3: supporting theomy. You know, dairy prices have risen to very
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  Speaker 3: high levels. You've got interest rates that have come down
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  Speaker 3: it's not coming through all of the timely activity indicators
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  Speaker 3: as yet, but we're of the view that it will.
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  Speaker 3: And the labor market tends to lag everything. I mean,
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  Speaker 3: that's the thing to really keep in mind, that the
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  Speaker 3: labor market's one of the last things to actually see
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  Speaker 3: any of that sort of momentum. So you see an
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  Speaker 3: improvement and a sentiment to a degree, and then it
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  Speaker 3: feeds through to a bit more activity and then the
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  Speaker 3: hiring starts. So we're not looking for a strong result,
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  Speaker 3: but we're looking for some sense that the labor market's
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  Speaker 3: starting to find some stability.
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  Speaker 2: There is a bit of chat, renewed chat at the
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  Speaker 2: moment about how the economy is fearing, and people are
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  Speaker 2: getting pretty grountchy with the government because we're eighteen months
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  Speaker 2: into our electoral term and we thought things would be
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  Speaker 2: a little bit better. How do you see things kind
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  Speaker 2: of playing out this time next year when we're at
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  Speaker 2: election time.
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  Speaker 3: As I said, and we've talked about this before on
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  Speaker 3: this program, that you know, we sit and look at
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  Speaker 3: the big picture factors and say, actually, there are some
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  Speaker 3: things out there, some big forces at work that should
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  Speaker 3: be lifting the New Zealand economy and the primary ones
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  Speaker 3: are that commodity prices are at high levels, dairy prices
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  Speaker 3: are at higher levels. That's a really positive terms of
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  Speaker 3: trade shock that's been delivered to New Zealand that you've
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  Speaker 3: got a trade surplus at the moment. The agricultural sector
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  Speaker 3: is doing quite well. Is really the short of it.
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  Speaker 3: That tends to eventually feed through to activity in the
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  Speaker 3: cities as well in terms of a bit more spending.
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  Speaker 3: It just takes a bit of time for it to
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  Speaker 3: feed through. And then the other big force that's going
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  Speaker 3: to be helpful is that interest rates have already come
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  Speaker 3: down by two hundred and twenty five basis points, and
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  Speaker 3: I think as people start to realize that there's not
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  Speaker 3: that perhaps not that much more easy to come through,
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  Speaker 3: they'll start to roll off their five year fixed rate
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  Speaker 3: mortgages and then to choose to do a bit more spending.
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  Speaker 3: And so we've got both those forces sort of in
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  Speaker 3: mind when we're thinking that growth is actually going to
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  Speaker 3: have a bit of positive momentum running into the second
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  Speaker 3: half and into next year. Yeah.
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  Speaker 2: So at the moment, obviously the consumers are not feeling great.
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  Speaker 2: There are worries about inflation expectations, you know, the expectation
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  Speaker 2: is it will take up again. Do you think that
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  Speaker 2: will just dissipate as we start to feel little bit
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  Speaker 2: better about things.
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  Speaker 3: I think the primary driver of the lifted inflation has
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  Speaker 3: been things that are sort of short term factors. Food
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  Speaker 3: prices have risen a bit, and I think you've seen
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  Speaker 3: that come through as you're describing into inflation expectation surveys.
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  Speaker 3: But I think the other force at work on the
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  Speaker 3: inflation front is going to be a trade diversion. So
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  Speaker 3: you know, the global trade developments are going to lead,
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  Speaker 3: we think, at least to China needing to export a
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  Speaker 3: lot more of its manufactured goods to other markets that
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  Speaker 3: aren't the US. And one of one of the features
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  Speaker 3: is going to be that we're going to see more
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  Speaker 3: manufactured goods showing up in Australia and New Zealand. And
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  Speaker 3: we think that's going to be something that puts downward
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  Speaker 3: pressure on inflation in the coming quarters, over the coming period,
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  Speaker 3: and so that should sort of start to dissipate some
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  Speaker 3: of the inflation pressures a bit and give people a
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  Speaker 3: bit more spending power.
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  Speaker 2: So do you think come this time next year we
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  Speaker 2: are feeling better off like materially better off enough to
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  Speaker 2: want to re elect this slot.
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  Speaker 3: We should be the New Zealand economy should be in
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  Speaker 3: an up swing. That's what we think, and I think
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  Speaker 3: you know the other way to square it away would
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  Speaker 3: be if you don't get quite as much of an
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  Speaker 3: upswing and the inflation numbers do start to come down, well,
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  Speaker 3: then the Arbyenz may very well have more scope to
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  Speaker 3: lower interest rates for them. I mean, we've only got
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  Speaker 3: one more cut in for the Rbenz in our central case,
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  Speaker 3: but if it turns out the economy's weaker, they've got
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  Speaker 3: more scope to lower to lower things, to lower rates.
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  Speaker 3: I think you know that's going to be Those are
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  Speaker 3: going to be the two forces at least we've got
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  Speaker 3: that we've got in mind will lift it and lift
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  Speaker 3: the economy running into next year. Yeah.
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  Speaker 2: Were you surprised to see the fifteen percent tariff slept
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  Speaker 2: on New Zealand.
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  Speaker 3: I think we were all watching and waiting to see
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  Speaker 3: what the Trump administration was going to deliver. It's very
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  Speaker 3: difficult to pick what the numbers are going to be
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  Speaker 3: out of the administration, but I guess it is quite
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  Speaker 3: interesting that fifteen percent New Zealand got a fifteen percent.
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  Speaker 3: Australia ended up with a ten percent, and so that's
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  Speaker 3: that's been an interesting feature, but it was very difficult
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  Speaker 3: to predict what those numbers will go to be. Like,
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  Speaker 3: I mean, the key feature we're pointing out is both
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  Speaker 3: countries have actually got you know, comparatively low tariffs into
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  Speaker 3: the US, and both countries have a fairly limited exposure
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  Speaker 3: in terms of their direct sales into the US market anyway.
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  Speaker 3: So we are countries that are mostly tied to the
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  Speaker 3: growth story in Asia, and what happens in China matters
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  Speaker 3: more than you know, what happens in the US in
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  Speaker 3: terms of the growth story for Australia and for New Zealand,
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  Speaker 3: and China's got more scope to pull leavers and they
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  Speaker 3: are delivering more incremental support for their growth. So that
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  Speaker 3: should mean that, you know, I think the biggest effect
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  Speaker 3: on Australia and New Zealand is actually going to be
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  Speaker 3: the disinflationary impulse, the inflation coming down because we get
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  Speaker 3: lots of cheap manufactured goods showing up in our markets
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  Speaker 3: over the coming period.
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  Speaker 2: Not half bad, hey, Paul, as always really appreciate talking
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  Speaker 2: to you. Thank you, Paul Bloxham agspecies chief Economist.
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