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Cameron Bagrie: Economist ahead of Treasury's half yearly economic and fiscal update · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: High few day today. That is the half year Economic
• 0:02
  Speaker 1: and Fiscal Update Treasury. We'll release it this afternoon and
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  Speaker 1: we'll get new insight into how the economy is tracked
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  Speaker 1: over the past six months and what Treasury is forecasting
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  Speaker 1: as we go forward into twenty twenty five, the year
• 0:13
  Speaker 1: that we have to survive to. You may remember, it's
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  Speaker 1: all coming with a warning from the Finance Minister who
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  Speaker 1: yesterday said the government inherited difficult economic conditions. So Cameron
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  Speaker 1: Bagri is the lead economist from Bagri Economics and Jointing.
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  Speaker 1: Right now, how the Cameron? There we go, Sorry Cameron,
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  Speaker 1: the mouse wasn't working.
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  Speaker 2: How the Cameron, Good morning.
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  Speaker 1: I like what West Pax senior economist Darren Gibbs said,
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  Speaker 1: he expects a deeper shade of red. What are you expecting?
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  Speaker 2: Yeah, I guess. We go back and had a look
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  Speaker 2: at the twenty twenty four budget. There was a downside
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  Speaker 2: scenario in mate, and it looks like the economy has
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  Speaker 2: been tracking more in line with the downside scenario. And
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  Speaker 2: that downside scenario had a lot more red. It had
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  Speaker 2: net debt getting up an excess of forty five percent
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  Speaker 2: of GDP, that had the operating balance or what's called
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  Speaker 2: the obi gaal not getting back into surplus over the
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  Speaker 2: forecast period, and it looks like we're tracking more in
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  Speaker 2: line with that scenario than the central scenario they presented
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  Speaker 2: in the twenty twenty four budget.
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  Speaker 1: Would this be the lowest point as we look forward
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  Speaker 1: to twenty twenty five or you know, could we go lower?
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  Speaker 2: No. I think the low point is going to be
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  Speaker 2: this what's called fiscal year. The economy in a cyclical
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  Speaker 2: sense has actually turned the corner and we're starting to
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  Speaker 2: bounce back up. Monetary policy, the Reserve Bank is going
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  Speaker 2: to work a little bit of magic over twenty and
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  Speaker 2: twenty five that will help the fiscal forecasts out. But
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  Speaker 2: the real big problem with the fiscal forecast is not
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  Speaker 2: just where the the company does in the next sort
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  Speaker 2: of twelve months. It's sort of average growth. And the
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  Speaker 2: key variable here is what's called productivity growth. How smart
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  Speaker 2: we are with resources in The Treasury's chief Economic advisor
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  Speaker 2: the Reserve Bank have both been out warning about productivity growth.
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  Speaker 2: That goes straight to the heart of average growth over
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  Speaker 2: each year, and that goes straight to the heart of
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  Speaker 2: your tax revenue numbers. And I think they're going to
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  Speaker 2: find that the government's got a bit of a hole
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  Speaker 2: in regard to tax revenue. And if you don't have
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  Speaker 2: the tax reviguere coming in to the degree that you
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  Speaker 2: were expecting, you're going to have a little lot more
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  Speaker 2: problems getting back from deficit the surplus.
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  Speaker 1: Yeah, exactly on that tax revenue. It's a bit of
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  Speaker 1: a vicious circle, isn't it. The more we cut government
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  Speaker 1: spending to fit the revenue right, the more the economy retracts,
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  Speaker 1: meaning the less revenue the government receives and tax. Therefore,
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  Speaker 1: we can't really pay the debt. You know, it's we
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  Speaker 1: sort of it's sort of creates itself. It spins on itself.
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  Speaker 2: Yeah, and the governments station some pretty complex trade offs. Obviously,
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  Speaker 2: you need to be fiscally responsible. Now you've got to
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  Speaker 2: try to go from deficit surflace. You need to read
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  Speaker 2: what's called the fiscal buffers because New Zealand shakes a
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  Speaker 2: lot of it, and you want to have a bit
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  Speaker 2: of a water chest to deploy it to borrow if
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  Speaker 2: something nasty happens, and odds are something nasty is going
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  Speaker 2: to happen in the next sort of ten years, and
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  Speaker 2: we need to be prepared for that. But the other
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  Speaker 2: side is that governments need to invest in the economy.
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  Speaker 2: You need to have a well functioned the education system,
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  Speaker 2: you need to have a well functioning roading system, you
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  Speaker 2: need to have a well functioning health system. And it's
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  Speaker 2: a question again in that balance between being physically responsible
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  Speaker 2: but also investing for bit of economic prospiity for the economy.
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  Speaker 1: So are they being physically responsible hurt The Finance Minister
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  Speaker 1: yesterday said we've inherited difficult economic conditions, but that was
• 3:24
  Speaker 1: a year ago and they've made some quite big macro
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  Speaker 1: moves and that's helping to exasperate exascerberate the economic conditions.
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  Speaker 1: So are they managing.
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  Speaker 2: It well now? Look, my personal view is that the
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  Speaker 2: debt targets that are on the table at the moment,
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  Speaker 2: I don't think they're going to be hit. I think
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  Speaker 2: we need to be builting a little bit more towards
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  Speaker 2: the investing for for scurity, but investing with discipline. That's
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  Speaker 2: the key here. What we saw out of the previous
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  Speaker 2: government was there was a hell a lot of money
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  Speaker 2: that was being thrown around, but it was ill disciplined
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  Speaker 2: and it wasn't hitting the market regard to getting results.
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  Speaker 2: I'd like to see this government loosen their debt targets
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  Speaker 2: be probably a little bit more less esteb but you
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  Speaker 2: have a bit of a tagline about investing for prosperity
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  Speaker 2: and having a lot more discipline about where we're going
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  Speaker 2: because we need to fix the health system, we need
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  Speaker 2: to fix the education system, we need to fix their
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  Speaker 2: browning system.
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  Speaker 1: All good, Cameron, thank you so much for your wisdom.
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  Speaker 1: It is five point twenty investing for prosperity with discipline.
• 4:24
  Speaker 2: For more from early edition with Ryan Bridge. Listen live
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• 4:30
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