Latest / The SME Stream / Liam Dann: NZ Herald Business Editor on the GDP rising by 1.1% in Q3

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Liam Dann: NZ Herald Business Editor on the GDP rising by 1.1% in Q3 · The SME Stream

• 0:06
  Speaker 1: You're listening to the Kerry Wood and Morning's podcast from
• 0:09
  Speaker 1: News Talks.
• 0:10
  Speaker 2: He'd be as you will have heard no news. New
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  Speaker 2: Zealand's economy is officially in rebound. Data just out from
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  Speaker 2: Statscene's edgehows GDP rose one point one percent in the
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  Speaker 2: three months to September. The Reserve Bank had been forecasting
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  Speaker 2: a growth rate of about zero point four percent. Economists
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  Speaker 2: had been expecting it to sit around zero point nine.
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  Speaker 2: But here we are one point one. New Zealand Herald
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  Speaker 2: Business editor at largely M Dan Good morning to.
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  Speaker 3: You, morning carry.
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  Speaker 2: Nice to have you back again.
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  Speaker 3: Yeah, yeah, well with some good news, I think, yeah, yeah,
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  Speaker 3: I mean, let's just take that as good news. I mean,
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  Speaker 3: there's all sorts of caveats I'm going to sort of
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  Speaker 3: add to it.
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  Speaker 2: Go on, you come on.
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  Speaker 3: It was stronger than we expected, and that means I
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  Speaker 3: guess that, you know, we can say there is a
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  Speaker 3: recovery underway. They revised the second quarter as expected, but
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  Speaker 3: they revised it downwards. Wow, so the second quarter was
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  Speaker 3: slightly you know, these I wouldn't hung up on decimal
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  Speaker 3: points too much, but it was. It was Previously they
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  Speaker 3: thought it was zero point nine down for the second quarter.
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  Speaker 3: It turned out to be one percent down, Given that
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  Speaker 3: people thought that was going to be revised up. That
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  Speaker 3: just tells us that I think that the second quarter
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  Speaker 3: was as horrible as it felt. Too many businesses and
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  Speaker 3: but it you know, it's it's what the data is
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  Speaker 3: showing there today is some momentum, especially in manufacturing and
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  Speaker 3: business services, you know, So it's that business y core
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  Speaker 3: of the economy that's picking up. The consumer end was
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  Speaker 3: was just up, like there was a little bit of
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  Speaker 3: life and household spending and consumer spending, I think it was.
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  Speaker 3: I saw a zero point one percent growth, But that's
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  Speaker 3: better than going backwards. We knew that the consumers take
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  Speaker 3: a bit longer to feel upbeat, and we see it
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  Speaker 3: in the confidence surveys. But yeah, all up that that's
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  Speaker 3: a pretty good number. It needs to be sustained, obviously,
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  Speaker 3: and we don't want to keep bouncing round. But I
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  Speaker 3: would imagine I think we've already had the press release
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  Speaker 3: from the Prime Minister and the Finance Minister will be
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  Speaker 3: following saying, look, it's all happening, so hopefully it is.
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  Speaker 2: How do the Reserve Bank get it's a roll that's
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  Speaker 2: a bit alarming, isn't it.
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  Speaker 3: Surprised did not upgrade it their last in ps in
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  Speaker 3: November because that was late November, like like Treasury can,
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  Speaker 3: you know, quite often has it terribly wrong because they
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  Speaker 3: only sort of do it every six months their forecasts
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  Speaker 3: and that they But yeah, I thought they stayed. I
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  Speaker 3: guess better to be conservative if you're the Reserve Bank.
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  Speaker 3: But there were some signs of green shoots, which the
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  Speaker 3: Reserve Bank talked about and it's in its monetary policy statements.
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  Speaker 3: So I'm not sure why they stayed so gloomy on
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  Speaker 3: on what they thought the GDP growth would be. The
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  Speaker 3: bank economists went far off, so you know, picks between
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  Speaker 3: zero point eight and zero point and one percent. I
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  Speaker 3: think A and Z picked one percent, so more or
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  Speaker 3: less they got they got the ten right. It's a
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  Speaker 3: bit like the weather forecasts. You can tell you if
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  Speaker 3: it's going to rain or not, but not exactly when
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  Speaker 3: the rain's going to arrive, and you know, that's the
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  Speaker 3: best we can expect from forecasts.
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  Speaker 2: I can't remember if I said we would talk about
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  Speaker 2: it today or if.
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  Speaker 3: There was something we were going to come back to.
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  Speaker 2: I think it was the fact that you had a
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  Speaker 2: a contributor to your columns say, is GDP a good measure?
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  Speaker 3: Yes, Oh that's right.
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  Speaker 2: That's what we were going to talk about, wasn't it.
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  Speaker 3: Yeah. Yeah, And so some people are very quick to say,
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  Speaker 3: and quite rightly, look what's happening with GDP per capita
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  Speaker 3: because it gets flattered by population growth. We don't have
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  Speaker 3: that much population growth at the moment, so that's solving
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  Speaker 3: that problem. So GDP per capital was zero point nine
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  Speaker 3: percent this time, So this is that's the best GDP
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  Speaker 3: per capita result we've had for probably years. But it's
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  Speaker 3: partly a symptom of the fact that our population is growing.
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  Speaker 3: So the two numbers are a little bit more in sync.
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  Speaker 3: And we had a decent size fall and per capita growth,
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  Speaker 3: but per capita growth is probably a better approximation of
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  Speaker 3: what individuals might be feeling. But you know, GDP still
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  Speaker 3: falls down in the sense that it's a big aggregate number.
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  Speaker 3: It doesn't measure the inequality of growth and all that
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  Speaker 3: sort of stuff. So you know, you could have, you know,
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  Speaker 3: the kind of economy where one sector was just booming, Well,
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  Speaker 3: we kind of have with our agriculture exactly, and those
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  Speaker 3: backing lots of money and spending money, and there could
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  Speaker 3: be a whole bunch of people not doing well and
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  Speaker 3: the number on aggregate would look quite good even on
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  Speaker 3: a per capita basis potentially, so perhaps there is a
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  Speaker 3: bit of that. Certainly that is the case that the
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  Speaker 3: you know, we know that Auckland and Wellington are lagging
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  Speaker 3: and that people are feeling a bit gloomier there. But
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  Speaker 3: you get to Canterbury Otago, Southland, you can see it
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  Speaker 3: in house prices and confidence that things are moving more
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  Speaker 3: and that's agriculturally related to agricultural exports and farmers and
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  Speaker 3: all that stuff. And maybe maybe two the coming back
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  Speaker 3: as well, So that is all quite positive. You'd expect
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  Speaker 3: it to spread through the cities, hopefully with interest rates
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  Speaker 3: being a bit lower and.
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  Speaker 2: They're going back up again.
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  Speaker 3: Well yeah, there's been these movements because of the wholesale
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  Speaker 3: markets and the retail banks haven't mucked around and making
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  Speaker 3: sure they maintain their margins and their profits, which has
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  Speaker 3: you know, copped a bit of flack. But I don't
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  Speaker 3: think the ocr will be quick to you know, they'll
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  Speaker 3: be quick to move the ocr so you you should see,
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  Speaker 3: you know, so the readjustment of the longer term rates especially,
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  Speaker 3: so there's been some the banks will say, oh, well,
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  Speaker 3: we cut the six month rate year because they want
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  Speaker 3: you to take the cheap rate because I know it's
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  Speaker 3: going to be worse later. But the longer term rates, well,
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  Speaker 3: you know, if the economy continues to improve, the next
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  Speaker 3: move of the ocr will probably be up to sort
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  Speaker 3: of get it back into neutral because we're in a
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  Speaker 3: sort of stimulatory phase at the moment. And there's a
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  Speaker 3: bit of debate on markets whether that's sort of middle
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  Speaker 3: next year or late next year or you know, and
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  Speaker 3: that'll depend on how the economy progresses. But because the
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  Speaker 3: market generally sees it happening later next year, anyone who's
• 6:17
  Speaker 3: going to fix for longer than a year is going
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  Speaker 3: to see those longer term rates just just edge up slightly.
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  Speaker 3: So it's more about the window to lock in for
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  Speaker 3: the absolute lowest rate having sort of passed. It was
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  Speaker 3: a very tiny window. Yet you're still going to see
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  Speaker 3: a lot of people coming off higher rates, you know,
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  Speaker 3: if if her are on the two year fixed and
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  Speaker 3: if they'll be coming up in the next six months
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  Speaker 3: or so, and that that still flows through the economists
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  Speaker 3: still think we're going to see a fair bit of
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  Speaker 3: flow through for kiwis coming off sort of the one year,
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  Speaker 3: eighteen month two year fixed rates. If they were clever
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  Speaker 3: enough to do a five year fixed rate way back
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  Speaker 3: in the COVID gloom, then they may actually be going
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  Speaker 3: up at the moment, but they'll have hopefully banked all
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  Speaker 3: those returns from being at a super low rate for
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  Speaker 3: the last five years.
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  Speaker 2: And as much the same good news about the GDP growth.
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  Speaker 2: But once again the Reserve Bank is miles out on
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  Speaker 2: its projection. So let's hope the new Swedish governor in
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  Speaker 2: future will be much more astute in determining the bank's forecast,
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  Speaker 2: because if they do miss the mark by so much,
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  Speaker 2: how can we have faith in future projections?
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  Speaker 3: Don't have much faith in forecasts at all.
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  Speaker 2: Again, anybody's forecasts.
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  Speaker 3: Well, I mean, I still look at my Apple weather
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  Speaker 3: app and it says, oh, it's no rain today, and
• 7:33
  Speaker 3: I look at the window and it's actually raining, and
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  Speaker 3: I still look at the app. It's hopeless. So so
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  Speaker 3: just but similarly with economic forecasts, and I've looked at
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  Speaker 3: the academic research on this, they're not bad. In the
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  Speaker 3: sort of a few months up to about one quarter
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  Speaker 3: out they can pick the direction. The more specific they
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  Speaker 3: have to be, the worse they are. So I mean,
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  Speaker 3: I guess the Reserve Bank pick GDP would grow so
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  Speaker 3: it got the direction of travel right, and you get
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  Speaker 3: out much further than half a year, and they're absolutely useless.
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  Speaker 3: I mean, so when you see Treasury picking what's going
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  Speaker 3: to happen to house prices in twenty twenty eight, it's
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  Speaker 3: just box ticking. It's just filling in a box because
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  Speaker 3: they have to do that because the government needs something
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  Speaker 3: to work off with its budget projections. But there is
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  Speaker 3: no way an economist can pick what's going happened.
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  Speaker 2: Why are we picking surpluses and times of when we're
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  Speaker 2: going to get.
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  Speaker 3: All that will change around?
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  Speaker 1: You know.
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  Speaker 3: What you'll see is that there'll be a long period
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  Speaker 3: of oh, we're doing better than treasury forecasts. We're doing
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  Speaker 3: worse than Treasury forecasts. I mean, I guess and see
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  Speaker 3: where it's needing something to hang on to as a baseline,
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  Speaker 3: you know, something our best guess. But yeah, I think
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  Speaker 3: long term forecasts are really not worth betting on. If
• 8:54
  Speaker 3: you're thinking about your own personal circuit, something will happen,
• 8:58
  Speaker 3: you know, at some point in the next four years,
• 9:00
  Speaker 3: there will be a Wall Street crash.
• 9:01
  Speaker 2: Or there will be an AI crash, yeah, or.
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  Speaker 3: Something good could happen. AI deliver the amazing productivity gains
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  Speaker 3: that we all want, and we might all discover that,
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  Speaker 3: you know, that the economy is more productive than we
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  Speaker 3: thought it was going to be. Things that are unexpected
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  Speaker 3: happen all the time. That's life, and you know, you
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  Speaker 3: can only you know. I think that the further you
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  Speaker 3: get it out with forecasts, the less seriously you should
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  Speaker 3: take them. They can be useful for a bit of context,
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  Speaker 3: and I don't know, but yeah, I think pointless once
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  Speaker 3: you get out beyond a year or so's.
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  Speaker 2: Yeah, what's kind of doing yourself out of a job,
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  Speaker 2: isn't it?
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  Speaker 3: Well, I don't. To me, economics isn't you know. People
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  Speaker 3: love predictions and forecasts and maybe they're fun, maybe they're
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  Speaker 3: part of the game, but it's to me, it's more
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  Speaker 3: about having the context to understand what's happening in the
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  Speaker 3: world around you, and economics is such a big part
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  Speaker 3: of the world around us. We need a framework to
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  Speaker 3: know which direction we're traveling and that sort of thing. So,
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  Speaker 3: so it is you do want to look out to
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  Speaker 3: twenty twenty six and think, well, I you know, if
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  Speaker 3: you've got a business, look, it looks like it's growing.
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  Speaker 3: You know, the economy is growing. It looks like the
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  Speaker 3: growth will continue for a while. There are some basic things,
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  Speaker 3: so now it's time to think about the opportunity, the
• 10:16
  Speaker 3: chance to invest, whereas you know, a couple of years
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  Speaker 3: ago it was time to think about battening down the
• 10:22
  Speaker 3: hatches and contracting and that sort of stuff is useful,
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  Speaker 3: but you just have to keep it in context of
• 10:28
  Speaker 3: your own experience. So I do think, you know, economics
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  Speaker 3: has some real value, but I just always advise people
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  Speaker 3: not to treat it as gospel or something.
• 10:37
  Speaker 2: Science an exact science, not.
• 10:38
  Speaker 3: An exact science, and certainly sometimes it gets treated as
• 10:41
  Speaker 3: a religion, and I think that's like these are soothsayers
• 10:44
  Speaker 3: who sort of predict the future in a crystal ball
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  Speaker 3: for us, and that that's not the case as everyone
• 10:50
  Speaker 3: has seen over the past few years.
• 10:52
  Speaker 2: Well, thank you so much. I mean, whether it's an
• 10:54
  Speaker 2: exact science or not, I always enjoy hearing what you
• 10:57
  Speaker 2: have to say, and you're very relatable and make it
• 11:01
  Speaker 2: really really interesting, even to somebody who got six percentence.
• 11:05
  Speaker 3: Of maths yeah, well that's right. Don't ask me about
• 11:08
  Speaker 3: six four maths. But thanks Carrie, you know, always great
• 11:12
  Speaker 3: to chat and Merry Christmas to everybody, Merry.
• 11:14
  Speaker 2: Christmas to you.
• 11:16
  Speaker 1: For more from Carry Wooden Mornings, listen live to news
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