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Speaker 1: And now Australian GDP comes out tomorrow and economists are

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Speaker 1: expecting some growth just a little bit. Paul blocks them

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Speaker 1: as Agspecies chief economist, and with us now, hey, Paul,

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Speaker 1: I see a couple of banks have revised their forecasts

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Speaker 1: down and they're just sitting above zero at the moment.

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Speaker 1: What are you calling on.

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Speaker 2: The quarter itself zero point three over the year one

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Speaker 2: percent and irrespective, that would be a pretty weak print really,

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Speaker 2: and that's what we're expecting. The growth is quite weak,

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Speaker 2: as you say, it's sort of somewhere in that very

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Speaker 2: very low range for growth in the economy. But that's

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Speaker 2: what's needed in order to get inflation down. We've been

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Speaker 2: having sluggish growth in Australia for some time. As you

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Speaker 2: also know, we haven't had a contraction in GDP. I mean,

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Speaker 2: other places in New Zealand included, have had declining GDP

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Speaker 2: in order to get inflation down. Australia has chosen this

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Speaker 2: pathway of slowing growth down, having sluggish growth for a

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Speaker 2: longer period to get inflation down, but not actually having

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Speaker 2: an outright contraction.

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Speaker 1: Yeah, I mean, is that as close as you get

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Speaker 1: to landing a jumbo jet on a postage step.

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Speaker 2: Well, this is it right? So this is the aim

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Speaker 2: is to deliver a soft landing and also get inflation

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Speaker 2: to come down. And the tradeoff is it may take longer,

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Speaker 2: We may have a long we are likely to have

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Speaker 2: a longer period of weak growth in order to get

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Speaker 2: inflation to come down. And the other option is to

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Speaker 2: have a shorter period of much much weaker growth, which

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Speaker 2: is sort of where the direction of New Zealand's travel.

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Speaker 2: We think when the New Zealand numbers come out in

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Speaker 2: a few weeks time, it will show that in the

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Speaker 2: second quarter GDP probably fell in New Zealand. So there

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Speaker 2: are two sort of slightly they're different pathways to looking

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Speaker 2: to get inflation back to target.

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Speaker 1: Which one is a better one?

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Speaker 2: Well, this is a good question, and it really is

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Speaker 2: difficult to answer because it depends on, you know, preferences.

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Speaker 2: It depends on how heavily you wit the priority of

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Speaker 2: getting inflation down fast and how you weight that against

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Speaker 2: how much unemployment you're prepared to accept, how much weaker

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Speaker 2: growth you're prepared to accept, And so it's how much

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Speaker 2: weight you place on those two priorities. And it seems

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Speaker 2: that the RBNZ has put a very high priority on

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Speaker 2: getting inflation down faster, and the RBA is finding, you know,

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Speaker 2: putting a bigger weight on trying to stay close to

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Speaker 2: full employment while getting inflation down. It really just depends

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Speaker 2: on how much weight those things carry.

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Speaker 1: Do you have an opinion, Paul, Because at the outset,

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Speaker 1: when this debate was happening, I thought, no, inflation's the

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Speaker 1: most important thing, go for it. But as the longer

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Speaker 1: this goes on in New Zealand and the more businesses

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Speaker 1: I see closed and the more economic scarring icy happen,

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Speaker 1: and particularly with the young people, I am starting to

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Speaker 1: question myself. So what's your opinion.

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Speaker 2: I think that it's going to take time for us

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Speaker 2: to be able to look back and assess where we landed.

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Speaker 2: I don't think it's actually reasonable to sort of sit

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Speaker 2: in the middle of this process and try to make

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Speaker 2: a care clear judgment as to which turns out to

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Speaker 2: be the better one. Unfortunately, it's going to take time

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Speaker 2: for us to sort of work out how things do

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Speaker 2: actually turn out, because inflation's not back at target yet

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Speaker 2: in Australia, it's still well well above target and it's

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Speaker 2: going to take time. It's actually not quite back at

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Speaker 2: target in New Zealand yet either, although the Arbians of

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Speaker 2: Zetas obviously decided they can start to lower inch. So

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Speaker 2: I still think it's a bit early to really decide

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Speaker 2: which one was the better pathway. We're going to need

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Speaker 2: a bit more time to work it out.

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Speaker 1: Listen back to the GDP number at zero point three

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Speaker 1: percent for the quarter. Is that still a recession per

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Speaker 1: capita per capita?

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Speaker 2: Yes, so population growth is still outpacing that. So GDP

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Speaker 2: per capita is falling. And that's the case of both

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Speaker 2: New Zealand and Australia. But in Australia's case, we had

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Speaker 2: very strong population growth and obviously quite weak GDP growth

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Speaker 2: per capita GDP is declining, but overall GDP is not

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Speaker 2: because the growth is being supported by more people coming in.

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Speaker 1: Yeah, fascinating stuff, Paul, thank you very much. We are

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Speaker 1: going to see a very interesting divergency here between the

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Speaker 1: two and be able to decide which are the two approaches,

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Speaker 1: is correct. That's Paul Bloxham, HSBC's chief economist.

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