Latest / Best of Business / Michael Reddell: former Reserve Bank economist on the state of the economy following recent GDP figures

Transcript

Michael Reddell: former Reserve Bank economist on the state of the economy following recent GDP figures · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talk ZEDB. Follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio afternoon.
• 0:17
  Speaker 2: The GDP number for the last quarter of last year
• 0:19
  Speaker 2: is out, and it's a little on the disappointing side.
• 0:21
  Speaker 2: The economy grew at zero point two percent, which is
• 0:24
  Speaker 2: the low end of what was expected. The Reserve Bank
• 0:26
  Speaker 2: had packed zero point five percent. To analyze us, we
• 0:30
  Speaker 2: have former Reserve Bank senior economists Michael Radowald with us.
• 0:32
  Speaker 2: Welcome back Michael, to be here.
• 0:34
  Speaker 3: Healler.
• 0:35
  Speaker 2: Now, it's not great, I suppose, But on the bright side,
• 0:38
  Speaker 2: we finally have some annual growth. Is that worth considering?
• 0:44
  Speaker 3: Yes, no, I mean it's better than being a negative number,
• 0:49
  Speaker 3: but it's clearly a pretty sluggish recovery, or was up
• 0:54
  Speaker 3: to December. And the key thing though to remember is
• 0:56
  Speaker 3: that there's some statistical problems. SNZ have had some problems
• 0:59
  Speaker 3: with their measurement and you get quite big revisions on
• 1:03
  Speaker 3: these numbers. So I could end up being, you know,
• 1:04
  Speaker 3: anything for about plus point five to maybe minus point
• 1:07
  Speaker 3: one or the dust settled on the statistical revisions.
• 1:10
  Speaker 2: Yeah, okay, that is a fair point. I mean, because
• 1:12
  Speaker 2: the Q three number which was quite quite good at
• 1:14
  Speaker 2: one point one, has been revised right back to zero
• 1:16
  Speaker 2: point nine. Have we got a problem with stats here?
• 1:20
  Speaker 3: It does appear so. I mean, west PAC's got an
• 1:22
  Speaker 3: economist who's done some really good work sort of trying
• 1:24
  Speaker 3: to unpick it. And there do seem to be some
• 1:26
  Speaker 3: sort of issues that may result from the messing up
• 1:29
  Speaker 3: of the patterns of the economy during the COVID period.
• 1:32
  Speaker 3: They're really technical issues, but they do mean that you
• 1:34
  Speaker 3: have a little bit less confidence in some of what's
• 1:37
  Speaker 3: going on and what some of what's getting reported right
• 1:40
  Speaker 3: at the moment. Okay, Gay, Look, it's water under the
• 1:44
  Speaker 3: bridge at this point. But it does look like in
• 1:47
  Speaker 3: the second half of last year we had a pretty
• 1:49
  Speaker 3: news but real recovery and that's what you'd expect with
• 1:51
  Speaker 3: interest rates fall and commodity price is pretty good.
• 1:54
  Speaker 2: Okay, So yes, we have a recovery, which is fantastic,
• 1:57
  Speaker 2: and we have some manual growth for the first time
• 1:58
  Speaker 2: in two years, which is fantastic. But this is not
• 2:00
  Speaker 2: a great point for us to start off at when
• 2:03
  Speaker 2: we have the Iran war. Right, so you've got zero
• 2:05
  Speaker 2: point two, then you've got the Iran war. What should
• 2:07
  Speaker 2: we expect from here you're on in for the economy.
• 2:10
  Speaker 3: Well, for Q one, hard to tell, probably something reasonably
• 2:13
  Speaker 3: sort of low but positive. The real risk is what
• 2:16
  Speaker 3: happens next quarter as the full effects of high and
• 2:21
  Speaker 3: rising oil prices and perhaps shortages of physical supply cut in.
• 2:25
  Speaker 3: It wouldn't surprise me at all if Q two ended
• 2:27
  Speaker 3: up being negative, and perhaps quite severely negative, if we
• 2:31
  Speaker 3: actually find ourselves unable to source all the oil that
• 2:35
  Speaker 3: we want, even at the really high world prices. Business,
• 2:38
  Speaker 3: for example, is totally dependent on diesel in so many areas.
• 2:41
  Speaker 3: If you can't do it, it's going to really hamstrong activity,
• 2:45
  Speaker 3: even households. You know what you have to spend on
• 2:47
  Speaker 3: petrol to get to work. You can't spend on other things,
• 2:50
  Speaker 3: so the real volume of stuff that gets purchased will
• 2:52
  Speaker 3: fall as well.
• 2:54
  Speaker 2: Do you think that number that's been quoted by Treasury
• 2:57
  Speaker 2: of the worst case scenario for the inflation from the
• 2:59
  Speaker 2: Iran war being three point seven percent is realistic?
• 3:03
  Speaker 3: No, In the fairness to Treasury, I think the number
• 3:05
  Speaker 3: was probably done, you know, a week or ten days ago.
• 3:08
  Speaker 3: If they were doing it now, they'd come up with
• 3:09
  Speaker 3: a materially higher number. I think you know, one economist
• 3:12
  Speaker 3: I saw the other day said that's probably more like
• 3:14
  Speaker 3: a base case at the moment. It wouldn't surprise me
• 3:17
  Speaker 3: at all if we saw headline inflation over five percent
• 3:20
  Speaker 3: at some point this year. That's actually what we saw
• 3:22
  Speaker 3: back in two thousand and eight when oil prices last
• 3:25
  Speaker 3: rose to their really record highs. It wanted to endure,
• 3:29
  Speaker 3: but it would be very painful, and it's part of
• 3:31
  Speaker 3: the adjustment process. We need to crunch demand for oil
• 3:34
  Speaker 3: and petrol because the global supply has fallen quite sharply.
• 3:38
  Speaker 2: Michael, it's good to talk to you. Thank you, Michael Riddell,
• 3:40
  Speaker 2: who's the former Reserve Bank senior economists.
• 3:42
  Speaker 1: For more from us, Talk zed B, listen live on
• 3:45
  Speaker 1: air or online, and keep our shows with you wherever
• 3:48
  Speaker 1: you go with our podcast on iHeartRadio.