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Speaker 1: We're starting to get new forecasts around the economic impact

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Speaker 1: of the Iran incursion West pack of model. For example,

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Speaker 1: if the strait of a move shuts for a month,

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Speaker 1: oil could hit one thirteen a barrel. It eventually results

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Speaker 1: in a hard point being knocked off the GDP and

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Speaker 1: puts our inflation above four percent. Now, Kelly Echol, that

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Speaker 1: Westpac chief economist, of course, has done these numbers for us,

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Speaker 1: Kelly Morning, good morning. How fluid is this? I mean

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Speaker 1: best and overnight jaw bones oil and it's settled. Does

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Speaker 1: that unsettle your numbers?

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Speaker 2: Well, I mean I think the whole situation is quite fluid,

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Speaker 2: which is why if you look at our estimates, they

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Speaker 2: have really wide confidence bands, because we don't know how

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Speaker 2: long it s will last, how high the oil price

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Speaker 2: will go, and critically how quickly it will take the

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Speaker 2: trade to start to transit in an out of the Gulf.

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Speaker 1: Yeah, if it's do you have a timeline in mind

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Speaker 1: in terms of if it's two weeks or less, there's

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Speaker 1: a spring, if it's eight weeks there's a slow burn back.

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Speaker 2: I think that if it gets up to eight weeks,

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Speaker 2: it'll start becoming a pretty serious situation, right, now no

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Speaker 2: oil and gas is transiting through the region, and that's

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Speaker 2: going to have pretty big knock on effects to our

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Speaker 2: big industrialized trading partners up in East Asia who are

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Speaker 2: critically dependent on that gas and oil coming out of there.

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Speaker 2: That could really depress their output, and that would have

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Speaker 2: knock on effects in New Zealand as well as whatever

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Speaker 2: business and consumers make of it all. And whether there's

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Speaker 2: the potential there. That confidence really takes a big step back.

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Speaker 1: I was reading something similar in Australia yesterday. See Australia's

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Speaker 1: got l energy and coal, so therefore their price is rise,

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Speaker 1: so that gets offset with the oil they can't get.

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Speaker 1: We don't have any of that. I mean, we're just

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Speaker 1: so little and so vulnerable, aren't we.

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Speaker 2: That's right from an energy security perspective, we don't really

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Speaker 2: have that backstop. We've only got a few weeks of

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Speaker 2: key petroleum products sitting there in the tanks. After that,

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Speaker 2: we're really relying on the boat turning up afterwards to

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Speaker 2: kind of meet our needs. Afterwards, MB tells us that

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Speaker 2: they've got contracts in place for that. But in a

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Speaker 2: war situation, there's always going to be a degree of uncertainty.

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Speaker 2: Whereas the Australians do have some gas basically that they

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Speaker 2: can use for their own purposes if necessary.

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Speaker 1: Indeed, the numbers that you put yesterday they didn't strike

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Speaker 1: me to be honest as alarming. At what point should

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Speaker 1: we become I mean, in terms of GDP and C

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Speaker 1: behind all that sort of stuff, At what point should

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Speaker 1: we become alarmed?

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Speaker 2: I mean, I think if we're still sitting here in

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Speaker 2: say six weeks, and there hasn't been any progress, so

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Speaker 2: I think it'll be pretty alarming. I mean, the numbers

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Speaker 2: that we've estimated are imprecisely vetted, because it really does

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Speaker 2: depend on the degree of other factors that are going on.

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Speaker 2: For example, confidence is a very big impact in some

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Speaker 2: of these models, so it's also inflation expectations. So you know,

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Speaker 2: you could easily imagine that there could be bigger impacts

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Speaker 2: if I look at, say the confidence impact on business

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Speaker 2: confidence in the early nineties and the seventies in New

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Speaker 2: Zealand that had much larger impacts on GENDP.

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Speaker 1: But also a different world though, absolutely.

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Speaker 2: Yeah, so you can't necessarily translate that through to where

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Speaker 2: we are today.

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Speaker 1: Yeah, Kelly, good to talk. You appreciate it very much

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Speaker 1: Kelly you cold Westpac chief economists. For more from the

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Speaker 1: Mic Asking Breakfast, listen live to news talks. It'd be

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