1 00:00:00,040 --> 00:00:02,880 Speaker 1: High few day today. That is the half year Economic 2 00:00:02,880 --> 00:00:06,080 Speaker 1: and Fiscal Update Treasury. We'll release it this afternoon and 3 00:00:06,120 --> 00:00:08,399 Speaker 1: we'll get new insight into how the economy is tracked 4 00:00:08,400 --> 00:00:10,719 Speaker 1: over the past six months and what Treasury is forecasting 5 00:00:10,760 --> 00:00:13,360 Speaker 1: as we go forward into twenty twenty five, the year 6 00:00:13,360 --> 00:00:16,079 Speaker 1: that we have to survive to. You may remember, it's 7 00:00:16,079 --> 00:00:18,320 Speaker 1: all coming with a warning from the Finance Minister who 8 00:00:18,400 --> 00:00:23,240 Speaker 1: yesterday said the government inherited difficult economic conditions. So Cameron 9 00:00:23,280 --> 00:00:26,600 Speaker 1: Bagri is the lead economist from Bagri Economics and Jointing. 10 00:00:26,720 --> 00:00:30,080 Speaker 1: Right now, how the Cameron? There we go, Sorry Cameron, 11 00:00:30,120 --> 00:00:31,200 Speaker 1: the mouse wasn't working. 12 00:00:31,200 --> 00:00:32,960 Speaker 2: How the Cameron, Good morning. 13 00:00:33,880 --> 00:00:36,080 Speaker 1: I like what West Pax senior economist Darren Gibbs said, 14 00:00:36,120 --> 00:00:39,040 Speaker 1: he expects a deeper shade of red. What are you expecting? 15 00:00:40,479 --> 00:00:41,919 Speaker 2: Yeah, I guess. We go back and had a look 16 00:00:41,920 --> 00:00:44,400 Speaker 2: at the twenty twenty four budget. There was a downside 17 00:00:44,440 --> 00:00:48,199 Speaker 2: scenario in mate, and it looks like the economy has 18 00:00:48,240 --> 00:00:51,080 Speaker 2: been tracking more in line with the downside scenario. And 19 00:00:51,120 --> 00:00:54,360 Speaker 2: that downside scenario had a lot more red. It had 20 00:00:54,440 --> 00:00:57,040 Speaker 2: net debt getting up an excess of forty five percent 21 00:00:57,120 --> 00:01:00,560 Speaker 2: of GDP, that had the operating balance or what's called 22 00:01:00,560 --> 00:01:03,960 Speaker 2: the obi gaal not getting back into surplus over the 23 00:01:03,960 --> 00:01:06,560 Speaker 2: forecast period, and it looks like we're tracking more in 24 00:01:06,560 --> 00:01:09,280 Speaker 2: line with that scenario than the central scenario they presented 25 00:01:09,319 --> 00:01:10,679 Speaker 2: in the twenty twenty four budget. 26 00:01:11,600 --> 00:01:14,720 Speaker 1: Would this be the lowest point as we look forward 27 00:01:14,720 --> 00:01:17,679 Speaker 1: to twenty twenty five or you know, could we go lower? 28 00:01:18,880 --> 00:01:21,600 Speaker 2: No. I think the low point is going to be 29 00:01:21,680 --> 00:01:25,839 Speaker 2: this what's called fiscal year. The economy in a cyclical 30 00:01:25,920 --> 00:01:29,440 Speaker 2: sense has actually turned the corner and we're starting to 31 00:01:29,440 --> 00:01:32,679 Speaker 2: bounce back up. Monetary policy, the Reserve Bank is going 32 00:01:32,720 --> 00:01:35,360 Speaker 2: to work a little bit of magic over twenty and 33 00:01:35,520 --> 00:01:38,720 Speaker 2: twenty five that will help the fiscal forecasts out. But 34 00:01:38,800 --> 00:01:42,039 Speaker 2: the real big problem with the fiscal forecast is not 35 00:01:42,080 --> 00:01:44,000 Speaker 2: just where the the company does in the next sort 36 00:01:44,040 --> 00:01:46,880 Speaker 2: of twelve months. It's sort of average growth. And the 37 00:01:46,959 --> 00:01:50,200 Speaker 2: key variable here is what's called productivity growth. How smart 38 00:01:50,320 --> 00:01:54,120 Speaker 2: we are with resources in The Treasury's chief Economic advisor 39 00:01:54,240 --> 00:01:57,400 Speaker 2: the Reserve Bank have both been out warning about productivity growth. 40 00:01:57,960 --> 00:02:01,720 Speaker 2: That goes straight to the heart of average growth over 41 00:02:02,080 --> 00:02:04,560 Speaker 2: each year, and that goes straight to the heart of 42 00:02:04,600 --> 00:02:06,680 Speaker 2: your tax revenue numbers. And I think they're going to 43 00:02:06,720 --> 00:02:08,440 Speaker 2: find that the government's got a bit of a hole 44 00:02:08,480 --> 00:02:10,520 Speaker 2: in regard to tax revenue. And if you don't have 45 00:02:10,560 --> 00:02:12,600 Speaker 2: the tax reviguere coming in to the degree that you 46 00:02:12,680 --> 00:02:14,600 Speaker 2: were expecting, you're going to have a little lot more 47 00:02:14,639 --> 00:02:17,000 Speaker 2: problems getting back from deficit the surplus. 48 00:02:17,200 --> 00:02:19,320 Speaker 1: Yeah, exactly on that tax revenue. It's a bit of 49 00:02:19,360 --> 00:02:22,720 Speaker 1: a vicious circle, isn't it. The more we cut government 50 00:02:22,800 --> 00:02:27,400 Speaker 1: spending to fit the revenue right, the more the economy retracts, 51 00:02:27,560 --> 00:02:30,639 Speaker 1: meaning the less revenue the government receives and tax. Therefore, 52 00:02:30,680 --> 00:02:32,480 Speaker 1: we can't really pay the debt. You know, it's we 53 00:02:32,560 --> 00:02:36,120 Speaker 1: sort of it's sort of creates itself. It spins on itself. 54 00:02:37,360 --> 00:02:41,280 Speaker 2: Yeah, and the governments station some pretty complex trade offs. Obviously, 55 00:02:41,440 --> 00:02:44,560 Speaker 2: you need to be fiscally responsible. Now you've got to 56 00:02:44,600 --> 00:02:47,919 Speaker 2: try to go from deficit surflace. You need to read 57 00:02:48,120 --> 00:02:51,200 Speaker 2: what's called the fiscal buffers because New Zealand shakes a 58 00:02:51,240 --> 00:02:53,160 Speaker 2: lot of it, and you want to have a bit 59 00:02:53,200 --> 00:02:56,040 Speaker 2: of a water chest to deploy it to borrow if 60 00:02:56,080 --> 00:02:58,640 Speaker 2: something nasty happens, and odds are something nasty is going 61 00:02:58,680 --> 00:03:00,480 Speaker 2: to happen in the next sort of ten years, and 62 00:03:00,520 --> 00:03:02,280 Speaker 2: we need to be prepared for that. But the other 63 00:03:02,320 --> 00:03:06,359 Speaker 2: side is that governments need to invest in the economy. 64 00:03:06,440 --> 00:03:08,520 Speaker 2: You need to have a well functioned the education system, 65 00:03:08,600 --> 00:03:10,840 Speaker 2: you need to have a well functioning roading system, you 66 00:03:10,880 --> 00:03:12,720 Speaker 2: need to have a well functioning health system. And it's 67 00:03:12,720 --> 00:03:15,960 Speaker 2: a question again in that balance between being physically responsible 68 00:03:16,160 --> 00:03:19,079 Speaker 2: but also investing for bit of economic prospiity for the economy. 69 00:03:19,120 --> 00:03:21,680 Speaker 1: So are they being physically responsible hurt The Finance Minister 70 00:03:21,760 --> 00:03:24,600 Speaker 1: yesterday said we've inherited difficult economic conditions, but that was 71 00:03:24,680 --> 00:03:27,080 Speaker 1: a year ago and they've made some quite big macro 72 00:03:27,240 --> 00:03:32,160 Speaker 1: moves and that's helping to exasperate exascerberate the economic conditions. 73 00:03:32,240 --> 00:03:33,720 Speaker 1: So are they managing. 74 00:03:33,320 --> 00:03:37,720 Speaker 2: It well now? Look, my personal view is that the 75 00:03:38,480 --> 00:03:41,800 Speaker 2: debt targets that are on the table at the moment, 76 00:03:42,320 --> 00:03:45,400 Speaker 2: I don't think they're going to be hit. I think 77 00:03:45,440 --> 00:03:47,600 Speaker 2: we need to be builting a little bit more towards 78 00:03:47,600 --> 00:03:51,320 Speaker 2: the investing for for scurity, but investing with discipline. That's 79 00:03:51,360 --> 00:03:53,480 Speaker 2: the key here. What we saw out of the previous 80 00:03:53,480 --> 00:03:55,000 Speaker 2: government was there was a hell a lot of money 81 00:03:55,000 --> 00:03:57,440 Speaker 2: that was being thrown around, but it was ill disciplined 82 00:03:57,440 --> 00:03:59,680 Speaker 2: and it wasn't hitting the market regard to getting results. 83 00:04:00,160 --> 00:04:02,920 Speaker 2: I'd like to see this government loosen their debt targets 84 00:04:03,040 --> 00:04:06,760 Speaker 2: be probably a little bit more less esteb but you 85 00:04:06,840 --> 00:04:09,200 Speaker 2: have a bit of a tagline about investing for prosperity 86 00:04:09,480 --> 00:04:11,520 Speaker 2: and having a lot more discipline about where we're going 87 00:04:11,640 --> 00:04:13,520 Speaker 2: because we need to fix the health system, we need 88 00:04:13,560 --> 00:04:15,320 Speaker 2: to fix the education system, we need to fix their 89 00:04:15,320 --> 00:04:15,920 Speaker 2: browning system. 90 00:04:16,040 --> 00:04:19,200 Speaker 1: All good, Cameron, thank you so much for your wisdom. 91 00:04:19,240 --> 00:04:24,159 Speaker 1: It is five point twenty investing for prosperity with discipline. 92 00:04:24,320 --> 00:04:27,280 Speaker 2: For more from early edition with Ryan Bridge. 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