Latest / Early Edition with Ryan Bridge / Cameron Bagrie: Independent economist comments on interest rate cuts

Transcript

Cameron Bagrie: Independent economist comments on interest rate cuts · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Infametris brad Olsen's outfit reckons we might be overcooking it
• 0:03
  Speaker 1: with interest straight cuts. They say, the cats have gone
• 0:05
  Speaker 1: so far that they've done their job. The effects won't
• 0:08
  Speaker 1: be felt until mid to late next year. Too much
• 0:11
  Speaker 1: stimulus and we get all too excited again and then
• 0:14
  Speaker 1: facing tickles up and then rate hikes from late next year.
• 0:18
  Speaker 1: Independent economist Cameron Bagriy with me this morning to chat
• 0:21
  Speaker 1: about it.
• 0:22
  Speaker 2: Good morning, Cameron, Well, good morning, Nice to see you back.
• 0:25
  Speaker 1: Yeah, good to be back. What's the situation here? Do
• 0:29
  Speaker 1: you agree with this?
• 0:31
  Speaker 2: You can argue both sides. If you look at the
• 0:34
  Speaker 2: gross side of the equation and the gross side of
• 0:37
  Speaker 2: the equation, the New Zealan at the moment are still
• 0:39
  Speaker 2: pretty ana. So the reserve ends well justified by looking
• 0:43
  Speaker 2: at the climbing it up to the defaibilated and giving
• 0:46
  Speaker 2: a little bit of a shock so to speak, of
• 0:48
  Speaker 2: the form of a law psial cashrop. The other side
• 0:51
  Speaker 2: is that given the economy, a little bit more juice
• 0:54
  Speaker 2: is not without risk, and head blind inflation is moving up.
• 0:58
  Speaker 2: Core inflation looks a lot more contained. But this is
• 1:02
  Speaker 2: the reserve bank that they just need to be a
• 1:03
  Speaker 2: little bit weary here because if this economy is kicking agear,
• 1:07
  Speaker 2: and I think it is going to kick in the
• 1:09
  Speaker 2: gear into twenty twenty six, you could hit some capacity
• 1:12
  Speaker 2: constraints pretty quickly. You hit capacity constraints pretty quickly, FLAC
• 1:17
  Speaker 2: starts to wear its ugly head again. And for a
• 1:20
  Speaker 2: lot of people out there, Brian, most people do not
• 1:22
  Speaker 2: think heed by inflation is two point because you're seeing
• 1:25
  Speaker 2: your electricity bill move up at a double digit clip,
• 1:29
  Speaker 2: your rates bills moving up at a double digit clip,
• 1:31
  Speaker 2: medical bills, they cost of food out there across the
• 1:34
  Speaker 2: country as well.
• 1:36
  Speaker 1: What's worse for the Reserve Bank going hard now and
• 1:39
  Speaker 1: risk reversing later, or you know, letting the pain drag
• 1:42
  Speaker 1: on and staying on one course.
• 1:45
  Speaker 2: It's a Clayton's choice. We're welcome to being a central
• 1:48
  Speaker 2: bank and they need a lot of it's about risk
• 1:53
  Speaker 2: risk management, and the Reserve Band obviously decided after getting
• 1:56
  Speaker 2: that week GDP number for Q two, but they needed
• 1:59
  Speaker 2: up the NTY a little bit. But if you go
• 2:01
  Speaker 2: through their document, you know their statement, their minutes now
• 2:03
  Speaker 2: they are still wary about some of those inflation risks
• 2:06
  Speaker 2: because as I said, yeah, headline inflation is moving up.
• 2:09
  Speaker 2: They're not focused on head by inflation. They're focused on
• 2:11
  Speaker 2: core inflation. That looks a lot more sedate. But there's
• 2:15
  Speaker 2: whole lot of things out there at the moment that
• 2:16
  Speaker 2: the reserve band can't control. You know, one of the
• 2:19
  Speaker 2: big problems for a central bank is that that they
• 2:22
  Speaker 2: sort of know where the economy is through a demand lens,
• 2:24
  Speaker 2: but they don't know where the economy is through a
• 2:26
  Speaker 2: supply lends. Yeah, this is how last the economy can grow,
• 2:30
  Speaker 2: the combination of immigration, capital, the combination in line with
• 2:34
  Speaker 2: productivity growth. And what we know is that that line
• 2:37
  Speaker 2: is a very weak number. And if that line is
• 2:40
  Speaker 2: even weaker than what the reserve band is estimating, we
• 2:43
  Speaker 2: get hit capacity constraints very early in twenty twenty six.
• 2:46
  Speaker 2: On the assumption that this eclonomy is going to kick
• 2:49
  Speaker 2: into gear, there's a whole lot more people roll of
• 2:51
  Speaker 2: those fixed mortgages, and we know there's a lot of
• 2:53
  Speaker 2: stimulus in the pipeline.
• 2:54
  Speaker 1: When it kicks into gear because it's been so long
• 2:57
  Speaker 1: and dragged out. When it kicks into gear, does it
• 2:59
  Speaker 1: kick in it third gear? Are we going to suddenly
• 3:03
  Speaker 1: bolt out the gates?
• 3:06
  Speaker 2: I'm not convinced to get a bolt out of the gate.
• 3:08
  Speaker 2: And one of the reasons I'm not convincing in a
• 3:10
  Speaker 2: bolt out of the gate is the economy is not
• 3:13
  Speaker 2: just driven by what's called the cyclical leaders and a
• 3:16
  Speaker 2: cyclical letters of things such as interest rates coming down,
• 3:20
  Speaker 2: how much money to get it's pumping in. It's how
• 3:22
  Speaker 2: much makeey the farmers have got. That's the giesel one dollar.
• 3:25
  Speaker 2: It's the likes of that three point two bidion that
• 3:27
  Speaker 2: could hurt farmers wallets in the form of their consumer business.
• 3:32
  Speaker 2: So we know there's a there's some pretty big checks
• 3:34
  Speaker 2: that they're going to come in. But to get the
• 3:36
  Speaker 2: economy ready kicking into gear, you need to see the
• 3:40
  Speaker 2: housing in a pretty pretty good space. Because the housing
• 3:44
  Speaker 2: market's got about three speeds for neutral and reverse. If
• 3:47
  Speaker 2: you've got a shortage of supply, you can't interstrates, then
• 3:51
  Speaker 2: you can have typically one hall of a construction boom.
• 3:53
  Speaker 2: You know what we got out there at the moment,
• 3:55
  Speaker 2: is it your population growth raout is to supply I
• 3:58
  Speaker 2: building consents. It's all looks like we're building too many
• 4:01
  Speaker 2: houses as opposed to not enough. Housing valuations are not
• 4:04
  Speaker 2: exactly what you're called cheap. There's a whole lot of
• 4:07
  Speaker 2: other economic fundamentals across this economy. If you look at
• 4:11
  Speaker 2: our infrastructure, you look at shortage of energy, if you
• 4:15
  Speaker 2: lot at what's going on in regard to the quality
• 4:18
  Speaker 2: of the routing system. These things just told the economy
• 4:21
  Speaker 2: back through a structural lens. And these are areas that
• 4:24
  Speaker 2: the Reserve Bank cannot fix by cunning interest rates. Only
• 4:28
  Speaker 2: time can through some good economic policy.
• 4:30
  Speaker 1: Cameron Bagri and lead economists at Bagery Economics appreciate your time.
• 4:33
  Speaker 1: This morning is always interesting stuff. For more from Earlily
• 4:37
  Speaker 1: Edition with Ryan Bridge, listen live to news Talks it'd
• 4:40
  Speaker 1: be from five am weekdays, or follow the podcast on iHeartRadio.