Latest / Early Edition with Ryan Bridge / Nick Tuffley: ASB Chief Economist on worst case scenario for NZ economy from Iran War

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Nick Tuffley: ASB Chief Economist on worst case scenario for NZ economy from Iran War · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: So the war scenarios treasury reckons are a worst case scenario,
• 0:03
  Speaker 1: which is the conflict lasting until the end of the year.
• 0:06
  Speaker 1: With elevated oil prices, inflation could three point seven percent
• 0:09
  Speaker 1: currently three point one. Nikola Willis though doesn't think that's
• 0:14
  Speaker 1: too bad.
• 0:15
  Speaker 2: That's too high for my liking, but it's lower than
• 0:18
  Speaker 2: Australia has today currently at three point eight. The reason
• 0:23
  Speaker 2: I share this point with you is to emphasize that
• 0:25
  Speaker 2: New Zealand does enter this period of unavoidable international cost
• 0:29
  Speaker 2: pressures from a stronger position than some other countries.
• 0:32
  Speaker 1: There's also no actual fuel shortaget Nick Toughly aspe Chief
• 0:35
  Speaker 1: Economists with us Nick, good morning, good mining. So what
• 0:39
  Speaker 1: did you make of the plan? I mean inflation, Yeah,
• 0:42
  Speaker 1: it looks bad, but as the Minister says, still less
• 0:44
  Speaker 1: than Australia and we would presumably see some demand come
• 0:48
  Speaker 1: off if price oil prices rose, would we not?
• 0:51
  Speaker 3: Well, you likely would with a sharp lift in prices
• 0:55
  Speaker 3: like this, and look to put it in context, a
• 0:58
  Speaker 3: few did have will remaining high for the rest of
• 1:01
  Speaker 3: the year. As the financement is the said lot, you're
• 1:04
  Speaker 3: going to have inflation in the high threes and it
• 1:06
  Speaker 3: would remain into at three percent something into next year.
• 1:10
  Speaker 3: But look we saw in twenty twenty two inflation pretty
• 1:14
  Speaker 3: quickly hit six percent when we had a pretty sharp
• 1:17
  Speaker 3: lift and oil prices back back then much sharper lift.
• 1:21
  Speaker 3: And we had five percent inflation back in two thousand
• 1:23
  Speaker 3: and eight when we had a lift in oil prices,
• 1:25
  Speaker 3: which also coincided with a lift in food prices as well.
• 1:30
  Speaker 1: Very hard to get rid of once it kicks in,
• 1:32
  Speaker 1: isn't it.
• 1:33
  Speaker 3: That's the challenge for the Reserve Bank be is what
• 1:35
  Speaker 3: it will be watching for. Is not just the sort
• 1:39
  Speaker 3: of short term immediate lift that we see at the pump,
• 1:42
  Speaker 3: it's also the flow on through the transportation sector, and
• 1:46
  Speaker 3: then if the costs get embedded, and really importantly it's
• 1:49
  Speaker 3: the reserve bank will worry if our behavior changes, if
• 1:53
  Speaker 3: we start going or here we go again seven percent
• 1:55
  Speaker 3: inflation and our behavior starts to shift in a way
• 1:58
  Speaker 3: that that trench is inflation just makes it a bit
• 2:01
  Speaker 3: more difficult to bring it down.
• 2:03
  Speaker 1: So what does the government do, Because politically, if they
• 2:06
  Speaker 1: went out and relieved a whole bunch of people at
• 2:08
  Speaker 1: the pump and spent a bunch of money at a
• 2:10
  Speaker 1: time when inflation's going up, it would be pretty dumb
• 2:12
  Speaker 1: for them, But economically would that be a smart thing
• 2:15
  Speaker 1: to do or not?
• 2:17
  Speaker 3: Well, it's pretty hard to avoid a shot like this,
• 2:20
  Speaker 3: so there's a big shock. It's affecting a lot of countries.
• 2:23
  Speaker 3: It does mean that you get a combination of higher prices,
• 2:26
  Speaker 3: but also it's slower consumer spending than otherwise because that
• 2:30
  Speaker 3: gets crowded out as well. So you can't wave a
• 2:33
  Speaker 3: magic wand the best thing the government can do is
• 2:37
  Speaker 3: either a lot to offset the impact on lower income
• 2:41
  Speaker 3: households who are going to feel more of a squeeze
• 2:44
  Speaker 3: from it, and also just try and see what it
• 2:47
  Speaker 3: can do to help the industry to smooth out any
• 2:50
  Speaker 3: sort of supply disruption. And the biggest impact threat potentially
• 2:54
  Speaker 3: is actually running out of fuel and needing to either
• 2:56
  Speaker 3: ration it or see the economy hit harder than just
• 3:00
  Speaker 3: merely having to deal with higher prices.
• 3:02
  Speaker 1: Which we're told is at least weeks away from happening. Nick,
• 3:05
  Speaker 1: appreciate your time this morning. As always, Nick Toufly aspe
• 3:08
  Speaker 1: chief economist.
• 3:09
  Speaker 3: It is for more from early edition with Ryan Bridge.
• 3:12
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• 3:16
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