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Nicola Willis: Finance Minister on the impact of the OCR cut and dropping interest rates · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: So good news for mortgage holders. The official cash rate
• 0:02
  Speaker 1: yesterday dropped by fifty basis points. It's down to three
• 0:05
  Speaker 1: point seventy five percent. The question is will the banks
• 0:08
  Speaker 1: pass it on? Well, banks have already started doing that,
• 0:11
  Speaker 1: and Finance Minister Nichola Willis joins me. Now, hello, Nicola, Hi,
• 0:14
  Speaker 1: how are you. I'm good good news for us, good
• 0:17
  Speaker 1: news for mortgage holders. What does it say about our economy?
• 0:21
  Speaker 2: Well, it says that things are going to get better
• 0:23
  Speaker 2: for New Zealanders who are worried about the cost of
• 0:25
  Speaker 2: learning because their mortgages are going to get cheaper. And
• 0:29
  Speaker 2: the Reserve Bank is confirming the view that the economy
• 0:32
  Speaker 2: is going to grow this year, which means more people
• 0:35
  Speaker 2: on jobs, more business is doing well, and more wealth.
• 0:39
  Speaker 1: And in our economy this is true. The Reserve Bank has
• 0:43
  Speaker 1: made it clear that there will be more cuts. Do
• 0:45
  Speaker 1: you believe that because there is an argument that we
• 0:48
  Speaker 1: shouldn't be going to heart right now, considering the global situation,
• 0:51
  Speaker 1: considering the baked in non tradable inflation that we've got.
• 0:55
  Speaker 1: You know, we see rate rises the whole time, we
• 0:57
  Speaker 1: see water rises the whole time. Do you belie that
• 1:00
  Speaker 1: there will be more cuts.
• 1:02
  Speaker 2: Well, the Reserve Bank is forecasting more cuts, that's very clear.
• 1:05
  Speaker 2: They see that interrast rate reductions will continue for the
• 1:08
  Speaker 2: year ahead, and that's based on their view that New
• 1:11
  Speaker 2: Zealand has inflation under control, which is very good news
• 1:15
  Speaker 2: for all New Zealanders. It means less price rises and
• 1:18
  Speaker 2: it also means that interest rates can keep coming down.
• 1:21
  Speaker 2: So if you've got a mortgage or you're a small business,
• 1:24
  Speaker 2: interest rates are going to keep dropping.
• 1:27
  Speaker 1: So is the fact that inflation is now under control.
• 1:31
  Speaker 1: Who should get the credit? Is it because of your
• 1:33
  Speaker 1: policies and your fiscal management or is it just the
• 1:36
  Speaker 1: consequence of the Reserve bank squeeze of money supply over
• 1:39
  Speaker 1: the past two years.
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  Speaker 2: Well, the Reserve Bank has the decision making power when
• 1:43
  Speaker 2: it comes to reducing interest rates. All we can do
• 1:46
  Speaker 2: is the government is make it easier for them, and
• 1:48
  Speaker 2: we have since coming to government, we have been disciplined
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  Speaker 2: about government spending. We went through a period as a
• 1:55
  Speaker 2: country where the government was spending more than it ever
• 1:58
  Speaker 2: has even while inflation was driving to generational high as
• 2:03
  Speaker 2: it was up at more than seven percent, and the
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  Speaker 2: government kept on spending, and that makes it hard for
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  Speaker 2: the Reserve Bank produced infrastrates. So now it's in a
• 2:11
  Speaker 2: different point of the cycle where it can look at
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  Speaker 2: a government that's saying, well, be restrained, please just drop
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  Speaker 2: interest rates, and.
• 2:19
  Speaker 1: They are yes, Well, there's good spending and there's bad spending.
• 2:22
  Speaker 1: And I know. Over the weekend, Engineering New Zealand and
• 2:24
  Speaker 1: Philip Templar wrote a piece complaining about the lack of
• 2:27
  Speaker 1: spending on any infrastructure and the fact that because there
• 2:30
  Speaker 1: is no investment from the government in our infrastructure, we
• 2:32
  Speaker 1: are losing our best and brightest engineers to Australia and
• 2:36
  Speaker 1: the rebuild in America. So the question is when will
• 2:39
  Speaker 1: you start spending.
• 2:41
  Speaker 2: Well, one of the things that drives me in politics
• 2:44
  Speaker 2: is wanting new skilled New Zealanders to stay here in
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  Speaker 2: this great country. The factor is that we are spending
• 2:51
  Speaker 2: more on infrastructure than the previous government was forecasting to do.
• 2:56
  Speaker 2: We are continuing to invest in building hospitals and building
• 2:59
  Speaker 2: schools and building roads and we will keep doing so.
• 3:03
  Speaker 2: We need to also paint a better future for New
• 3:06
  Speaker 2: Zealanders and that is why we are so focused on
• 3:09
  Speaker 2: growing the economy so that we can create better opportunities
• 3:13
  Speaker 2: than the years ahead.
• 3:14
  Speaker 1: Are we building roads, Yes, we are.
• 3:17
  Speaker 2: I mean, we just last week opened the new road
• 3:23
  Speaker 2: in the Hawk's Bay. We've got new roads happening in
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  Speaker 2: christ Church. We've got new roads of national significance happening
• 3:29
  Speaker 2: across the country. We've got a record investment in the
• 3:32
  Speaker 2: National Land Transport Fund so that we can build roads
• 3:36
  Speaker 2: that will make a difference to New Zealander who can
• 3:38
  Speaker 2: meet from one region to another.
• 3:40
  Speaker 1: Those roads were ordered by another regime. What I'm asking is,
• 3:43
  Speaker 1: what are you going to do?
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  Speaker 2: No, we have announced new projects, Andrew.
• 3:47
  Speaker 1: Yes, but I'm just doing the light rail thing with you.
• 3:50
  Speaker 1: If you know what I mean. You know we announce projects,
• 3:54
  Speaker 1: but it's not a project until a side has turned.
• 3:57
  Speaker 2: Well, you are making a very good point, which is
• 3:59
  Speaker 2: we did cancel fantasy projects. I don't think anyone in
• 4:02
  Speaker 2: Auckland thought light rail was actually going to happen. Yes,
• 4:05
  Speaker 2: there are a lot of people involved in designing it,
• 4:08
  Speaker 2: but it wasn't ever going to happen. And similarly with
• 4:10
  Speaker 2: the Lake Conslow hydro project, that was never going to
• 4:13
  Speaker 2: happen either. We're focusing our resources on projects we will
• 4:17
  Speaker 2: actually open, and that's roads of national significance, that's big hospitals,
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  Speaker 2: that schools. We're doing things where we invest the resources
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  Speaker 2: and projects we will fund and we will di liver.
• 4:27
  Speaker 1: Okay, yes you're cutting the spending, but you're still having
• 4:30
  Speaker 1: to continue the borrowing because we have so we have
• 4:33
  Speaker 1: huge interest payments. Our dollar has had a year long
• 4:36
  Speaker 1: slide downward, and I want to know what's that doing
• 4:39
  Speaker 1: to our debt and its repayment and our economy.
• 4:42
  Speaker 2: Well, we have a flexible exchange rate, and the plus
• 4:46
  Speaker 2: side of that is it means that when our dollar
• 4:48
  Speaker 2: is coming down, our exporters get more for their exporting
• 4:54
  Speaker 2: and so if you're a dairy farmer or you're a
• 4:56
  Speaker 2: sheep farmer right now, there is a plus side to that. Overall,
• 5:00
  Speaker 2: it means that our exchange rate is adjusting to the
• 5:03
  Speaker 2: circumstances that are happening around the world. New Zealand just
• 5:07
  Speaker 2: needs to keep doing what it's always done well, which
• 5:09
  Speaker 2: is selling our beautiful, amazing products around the world for
• 5:14
  Speaker 2: good prices, and we will keep doing that.
• 5:17
  Speaker 1: Nikola Willis Finance Minister. I thank you for your time today.
• 5:21
  Speaker 2: For more from Early Edition with Ryan Bridge, listen live
• 5:24
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• 5:27
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