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Speaker 1: Kirakoto. I'm Garth Bray and this is Shared Lunch. Today.

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Speaker 1: We're with independent economist Tony Alexander. Another cut in the

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Speaker 1: official cash rate. What does that mean for investors and

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Speaker 1: homeowners alike? What's in store for twenty twenty five? Will

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Speaker 1: things be as rosy or as gray as predicted? All

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Speaker 1: of that? But first, some important information you always need

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Speaker 1: to consider.

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Speaker 2: Investing involves the risk you might lose the money you

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Speaker 2: start with. We recommend talking to a licensed financial advisor.

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Speaker 2: We also recommend reading product disclosure documents before deciding to invest.

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Speaker 2: Everything you're about to see and here is current at

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Speaker 2: the time of recording.

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Speaker 1: Tony, great to see you. You're zooming in from the

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Speaker 1: Gold Coast. There you look like you're surviving and getting

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Speaker 1: ready to thrive in twenty twenty five. What did you

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Speaker 1: make of the Reserve Bank's OCAR decision?

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Speaker 3: Yeah, obviously not unexpected zero point five percent. That was

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Speaker 3: what I was expecting, I guess. Ever, since the previous

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Speaker 3: half a percent our cut, a number of people were saying, oh,

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Speaker 3: things are so bad in New Zealand, need to be

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Speaker 3: cutting by three quarters of a percent. But the story

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Speaker 3: for the past four weeks or so has been people

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Speaker 3: pulling back on those expectations in evidence of that maybe

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Speaker 3: some of the underlying inflationary pressures are not necessarily falling

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Speaker 3: away as rapidly for for next year, at least as

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Speaker 3: people were thinking. For me, the most interesting thing I

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Speaker 3: guess was that their release encapsulated sort of the two

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Speaker 3: key themes I've been putting across for many months. Number One,

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Speaker 3: intrastrates will fall, but they're not going down to the

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Speaker 3: really low levels that we've seen in the past. And

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Speaker 3: number two, the economy will improve, but it's not going

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Speaker 3: to be a particularly robust upturn. And that's what we

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Speaker 3: saw with them cutting their economic growth forecast for the

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Speaker 3: years to March twenty six and twenty seven about zero

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Speaker 3: point six percent for each of them, and yet lifting

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Speaker 3: the inflation forecast zero point one to zero point two percent.

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Speaker 3: That I think was quite significant from them.

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Speaker 1: So if this is a weather forecast, we've gone from

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Speaker 1: mainly fine to scattered showers almost it doesn't look quite

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Speaker 1: as promising as we had first thought. And I mean, look,

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Speaker 1: we've got a lot to talk about here today. We've

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Speaker 1: had a President Trump's election in the US and how

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Speaker 1: that could affect things, and obviously where people see the

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Speaker 1: housing market and go. But I really want to sort

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Speaker 1: of dig in a little bit to some of the

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Speaker 1: information that we got from Adrian or there. Look, I

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Speaker 1: guess would you be expecting then if we look ahead

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Speaker 1: to February, which is what a lot of people were

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Speaker 1: trying to work out as well, are we looking at

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Speaker 1: a twenty five basis point cut fifty again or something

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Speaker 1: even stronger. Was there any indication that you took, particularly

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Speaker 1: from what was said there well.

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Speaker 3: In the press conference afterwards, the pretty strong indication was

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Speaker 3: given that they anticipate cutting zero point five percent, and

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Speaker 3: that's pretty much my expectation. It's going to take some

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Speaker 3: fairly either unusually strong or unusually weak economic data between

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Speaker 3: now and then, I think, to cause them to do

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Speaker 3: something different from that. For me, my greater interest is

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Speaker 3: not so much what happens in that third week of February,

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Speaker 3: but what happens after that. I'm advising people to pull

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Speaker 3: back on their optimism that rates might be falling to

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Speaker 3: a great degree and that mortgage rates will fall away

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Speaker 3: to a great degree. I really don't think that's going

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Speaker 3: to be happening.

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Speaker 1: Yeah, I guess the ocr is pretty much. It's pretty

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Speaker 1: much back where it was two years ago, right, I

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Speaker 1: mean we had that's when the RBNZ started to really

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Speaker 1: aggressively increase the rates. That was when that seventy five

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Speaker 1: basis point hype took off. I mean, so you don't

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Speaker 1: see another six months of aggressive cuts. It's more like

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Speaker 1: sort of eighteen months of slowly getting there.

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Speaker 3: No, I think they'll get to about as low as

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Speaker 3: they're going to go before the end of next year.

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Speaker 3: Now the Reserve Bank they project the cash rate will

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Speaker 3: finish twenty twenty five at about three point five percent

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Speaker 3: and the gain get down to three percent at the

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Speaker 3: end of twenty twenty six. I think the easing cycle

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Speaker 3: will be done and dusted well before the end of

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Speaker 3: twenty twenty five, with the cash rate bottoming out somewhere

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Speaker 3: between three three and a half percent if you're lucky.

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Speaker 3: I think. I recall one forecast I was reading just

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Speaker 3: earlier on talking about maybe a four percent low. Well,

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Speaker 3: we're at four twenty five percent at the moment, so

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Speaker 3: I don't think that's going to happen. But yeah, I

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Speaker 3: think it's going to be done and dusted by the

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Speaker 3: end of next year, especially as the Reserve Bank anticipates

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Speaker 3: extra strengthening and economic growth over twenty twenty six, which

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Speaker 3: of course is going to make people start thinking about

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Speaker 3: the cyclical upturn in inflation. And that's where my mind

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Speaker 3: is focusing on at the moment, not the weakness in

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Speaker 3: the economy at the moment, the falling away of inflationary

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Speaker 3: pressures right now. But when does the cyclical recovery in

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Speaker 3: inflation start? And that I think is going to be

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Speaker 3: occupying people's minds in the second part of twenty twenty five.

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Speaker 1: Why is that so important to be thinking about now?

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Speaker 3: Ah, because it limits the extent to which the medium

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Speaker 3: to long term wholesale interest rates are likely to go down.

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Speaker 3: We see elements of that are now, and therefore the

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Speaker 3: extent to which the medium to long term will even

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Speaker 3: two years plus fixed mortgage rates go down. And so

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Speaker 3: the time when people maybe more seriously start thinking about

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Speaker 3: not fixing six months and fixing for two or three years,

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Speaker 3: I think it's going to come sooner than people are thinking.

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Speaker 1: If you're talking about that long term picture, why is

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Speaker 1: that so important to be thinking about it now?

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Speaker 3: Because at the moment there's a high degree of optimism

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Speaker 3: amongst I think the general population, investors, potential home buyers,

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Speaker 3: that the interstrates cycle is going to be a really

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Speaker 3: generous one, that the interustrates are going to fall away

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Speaker 3: to a strong level, the economy is going to grow strongly,

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Speaker 3: and the risk is people start making mistakes. Investors will

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Speaker 3: bet on the interest rates going to low levels, so

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Speaker 3: they risk over committing themselves to interest our sensitive stocks,

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Speaker 3: maybe commercial property, where of course the prices can be

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Speaker 3: highly correlated with the other direction for the interest rate movements.

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Speaker 3: For businesses also thinking oh my goodness, we're going to

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Speaker 3: see a great upturn in the economy because interest rates

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Speaker 3: are going to go so low. I do not need

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Speaker 3: to restructure at the moment. I do not lead to

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Speaker 3: lay you off as many staff and find alternative supplies

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Speaker 3: of materials because there's going to be all these extra

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Speaker 3: customers coming through. It's going to be okay. Well, you know,

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Speaker 3: for many, many months, I've been trying to emphasize to

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Speaker 3: business people in particular, the upturn will be mild. Don't

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Speaker 3: think about just surviving to twenty five and thinking you're

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Speaker 3: going to thrive in twenty five. It's going to be

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Speaker 3: a relatively mild recovery. Therefore, continue with your cost cutting,

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Speaker 3: continue with trying to find efficiencies and boost productivity.

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Speaker 1: Can you see why the psychology might Can you see

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Speaker 1: why the psychology might be affecting people that for so

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Speaker 1: long interest rates will we're so low that perhaps there's

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Speaker 1: still a little bit of that hankering back to that

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Speaker 1: period of didictability and an expectation that somehow we're going

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Speaker 1: to return to that as the norm when there's a

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Speaker 1: completely different normal now available.

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Speaker 3: Yeah. Yeah, But that's why in my weekly publication, I

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Speaker 3: have a set of graphs at the on about the

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Speaker 3: final page or the one before it, looking at where

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Speaker 3: the fixed mortgage rates have gone over the past few years.

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Speaker 3: I go back about fifteen years something like that, but

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Speaker 3: I completely blank out the observations that the line stops

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Speaker 3: and restarts again. For the period twenty nineteen, when the

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Speaker 3: world was worried about deflation, the cash rate was only

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Speaker 3: one percent in New Zealand, I wipe that out. I

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Speaker 3: wipe out twenty twenty and twenty twenty one because they

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Speaker 3: were pandemic years, very unusual circumstance. So what I'm trying

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Speaker 3: to get people to do is realize, well, actually, the

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Speaker 3: likes of the three four, five year fixed rates are

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Speaker 3: pretty much already below their average levels for the past

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Speaker 3: ten years or so leading into twenty and nineteen, and

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Speaker 3: maybe that start people thinking a bit more about not

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Speaker 3: so much fixed six months. Maybe I'll start fixing longer.

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Speaker 3: Having said that, he was just love to fix for

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Speaker 3: the short term interest rates. Hardly anyone ever goes beyond

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Speaker 3: three years, and that'll stick around this cycle.

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Speaker 1: We're a long way from that American example where people

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Speaker 1: lock in for thirty years or whatever. Right, it's just

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Speaker 1: part of the psychology.

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Speaker 3: Yep, yep, and that generally that's worked out. Okay, So

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Speaker 3: if you look at the plot post GFC environment two

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Speaker 3: thousand and nine through two, you know, eighteen to nineteen

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Speaker 3: actually just rolling one year fixed gave the lowest cost

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Speaker 3: of funds compared with going two year FX, three, four

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Speaker 3: or five years over that period. But of course you

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Speaker 3: don't have much rate certainty. You're leaving yourself vulnerable to

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Speaker 3: something coming along and comeblue it. And of course the

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Speaker 3: world that we live in is one which is very uncertain.

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Speaker 3: We're all trying to figure out, you know, with the

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Speaker 3: Trump presidency, what does that actually mean for inflation. There's

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Speaker 3: a strong view on what it means is the but

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Speaker 3: what does it mean in New Zealand scope for inflation

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Speaker 3: and interst rate surprises is going to be really strong

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Speaker 3: in the next four years.

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Speaker 1: I do want to try and get to some of

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Speaker 1: that shortly, but let's just stay a little bit with

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Speaker 1: that bigger picture here. If we've got a more subdued

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Speaker 1: recovery through twenty twenty five, as you suggest, what is

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Speaker 1: that going to do for some of the big pain

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Speaker 1: points we've seen, like unemployment or the labor force participation

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Speaker 1: rate and so on. We've seen some pretty high profile

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Speaker 1: examples of entire businesses or even industries that are looking

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Speaker 1: like they're really under pressure after the energy crunch, you know,

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Speaker 1: mills shutting down in regional towns and just decimating that area.

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Speaker 1: Is there more of that to come? Do you think?

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Speaker 3: I think there's more to come across all sectors in

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Speaker 3: the economy. For a long time I was warning that

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Speaker 3: twenty twenty four would be a year of weeding out

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Speaker 3: in the business sector across all sectors, so not just

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Speaker 3: key pressure points like hospitality, the retail, house construction are

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Speaker 3: widely defined. But of course, as we can see with

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Speaker 3: the loss of a feeling of security about electricity availability

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Speaker 3: and the price that's feeding through to those long term

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Speaker 3: investment decisions in the electricity. In the manufacturing sector highly

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Speaker 3: dependent upon electricity, and this is one reason the upturn

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Speaker 3: in New Zealand's economy is going to be muted. Businesses

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Speaker 3: are whether you're already here in New Zealand or eure

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Speaker 3: overseas thinking about investing in New Zealand, are going to

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Speaker 3: have to think about the electricity availability. And you look

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Speaker 3: at something like the data centers which are opening up

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Speaker 3: in New Zealand. Estimated within about five years they're going

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Speaker 3: to be using five hundred megawatt of energy. By then,

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Speaker 3: that'll be about twenty five percent of what's used by

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Speaker 3: Auckland households. It says that the electricity availability is going

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Speaker 3: to get even worse, especially if people keep plugging in

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Speaker 3: more electric vehicles and maybe electric scooters and things. So

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Speaker 3: that's quite a change in New Zealand's dynamic where since

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Speaker 3: all the hydro electrics ends were developed into the late

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Speaker 3: nineteen seventies, there's been a feeling of electricity is readily

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Speaker 3: available in New Zealand. That's a sea change in view

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Speaker 3: this year. So there's probably a bit more of that.

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Speaker 3: Unfortunately it's rolled through part of the manufacturing sector.

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Speaker 1: Let's try and give people some hope. Do you see

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Speaker 1: any green shoots in there? Are the any investment decisions

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Speaker 1: that are likely to proceed in this uncertain environment?

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Speaker 3: Oh? Look, we are undoubtedly looking at an improvement in

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Speaker 3: the New Zealand economy. When I've been giving talks over

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Speaker 3: the past star three to four months and I've been

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Speaker 3: running through my long list of reasons why we're not

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Speaker 3: going to thrive, I have to stop myself about every

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Speaker 3: seven minutes and say, now, just to remind you, we

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Speaker 3: asked going to see a recovery in the New Zealand economy.

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Speaker 3: But it's going to be more like when we came

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Speaker 3: out of the global financial crisis, where the peak rate

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Speaker 3: of growth was about four point one percent in twenty fifteen.

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Speaker 3: It took a long time for things really to get

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Speaker 3: chugging along. It's not going to be for this cycle

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Speaker 3: or repeat of coming out of the recession ninety seven

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Speaker 3: ninety eight when we were growing six percent within eighteen months,

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Speaker 3: or coming out of the nineteen ninety one recession when

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Speaker 3: we were also growing six percent within about two and

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Speaker 3: a half years. This is going to be a relatively

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Speaker 3: mild upturn and some of the factors contributing to it

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Speaker 3: will be obviously the intrastrate or the foot on the

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Speaker 3: pedal being lifted off the brake by the reserved bank,

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Speaker 3: so taking off intrastraight restraint, not putting on intrastrate stimulus.

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Speaker 3: As I think what I'm saying to people, they're not

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Speaker 3: going to put the foot on the extra salrator by

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Speaker 3: cutting the cash right to two and a half percent,

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Speaker 3: but thank goodness, they'll be taking the foot off the brake.

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Speaker 1: There's a lot of.

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Speaker 3: Infrastructure spending to be done in New Zealand over the

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Speaker 3: next world century, quite frankly, so there's going to be

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Speaker 3: a lot of firms actively involved in that. There are

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Speaker 3: some early signs of stand alone house construction starting to

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Speaker 3: look better through twenty twenty five, not multi unit construction, townhouses,

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Speaker 3: et cetera twenty twenty six if you're lucky, but for

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Speaker 3: the standalone houses, things are starting to look a little

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Speaker 3: bit better.

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Speaker 2: There.

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Speaker 3: There's been a good improvement in dairy prices recently, so

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Speaker 3: that will feed through, especially into your Taranaki Wycaddow, South

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Speaker 3: Canterbury Southland regions, So that's positive across here in Australia

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Speaker 3: at the moment. There's just people are noting there's some

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Speaker 3: reasonably good upward pressure on red meat prices for a

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Speaker 3: variety of reasons. So maybe there's some hope for our

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Speaker 3: red meat sector in New Zealand where about forty percent

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Speaker 3: of them are still running at losses at the moment.

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Speaker 3: So there are those positives. The tourism numbers slowly improving

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Speaker 3: and the net migration numbers. I don't think they're going

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Speaker 3: to go into the negative territory some people be forecasting

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Speaker 3: a few months ago. Maybe we bottom out with an

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Speaker 3: annual flow around about forty thousand or so, so down

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Speaker 3: from a year ago one hundred and thirty six thousand,

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Speaker 3: but are still in the positive territory.

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Speaker 1: I want to pick up what you said about standalone

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Speaker 1: construction there, and obviously that's an indication of some pretty

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Speaker 1: firm intensions that people are prepared to take a bed

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Speaker 1: on where interest rates are headed and so on. But

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Speaker 1: I noticed in one of your recent Invests briefings you

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Speaker 1: were saying that investors are really shying away from new builds.

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Speaker 1: What's going on there?

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Speaker 3: Yes, yeah, I think for the investors, they can see

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Speaker 3: that there are many properties listed for sale, so the

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Speaker 3: number stock of listings for buyers generally is the best

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Speaker 3: since twenty fifteen, up about twenty six percent from a

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Speaker 3: year ago. And the focus for buyers generally is on

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Speaker 3: those existing properties maybe where they can make some changes

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Speaker 3: and improve the yield. So as an investor, you're not

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Speaker 3: just looking at this is what it costs, this is

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Speaker 3: how much I'm going to borrow, this is the rent

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Speaker 3: I'm going to get, And it's a simple equation. You

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Speaker 3: just plug it in and where you go. As an investor,

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Speaker 3: you might be looking at, Okay, well, here's a property

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Speaker 3: with subdivision potential somewhere down the track. Here's a property

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Speaker 3: where I could think about adding or taking away your

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Speaker 3: room or garage or doing something. So frankly, it's more

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Speaker 3: fun buying an existing property as long as it's not

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Speaker 3: a townhouse, than would be the case just buying something

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Speaker 3: essentially or off the rack. I can see from my

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Speaker 3: various surveys, the real estate one in particular, that I

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Speaker 3: do that the investors are now coming back into the

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Speaker 3: market that are obviously encouraged by the restoration of interest

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Speaker 3: expense deductibility, bright line changes and interest rates are going down.

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Speaker 3: But yeah, they're very weary of what they see happening,

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Speaker 3: especially in the multi unit housing area, the townhouse area.

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Speaker 3: There are obviously some big problems in one or two

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Speaker 3: areas there. There's an oversupply. For the moment, there's only

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Speaker 3: temporary of townhouses up in Auckland, and there's I think,

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Speaker 3: just to concern that they may look to make a purchase,

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Speaker 3: but maybe I'm not going to get attend quite as

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Speaker 3: quickly as they would hope. That will change down the

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Speaker 3: track and the investors will start looking more favorably at

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Speaker 3: new construction and townhouses in particular, but just not at

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Speaker 3: the moment.

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Speaker 1: But that's I guess going to keep a bit of

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Speaker 1: a clamp on the supply, and that's going to dissuade

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Speaker 1: some of those developers from developing at scale, right, which

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Speaker 1: is just going to keep that, you know, keep people

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Speaker 1: focused in that established property market.

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Speaker 3: For the developers, certainly if the multi unit are complexes,

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Speaker 3: they can't get the pre sales at the moment and

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Speaker 3: they're not going to get the finance from the financial institutions,

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Speaker 3: and so that that's why I think maybe for some

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Speaker 3: of them. If they're still looking to be builders, they

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Speaker 3: may be biasing back towards purchasing sections and building something

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Speaker 3: rather than going down the townhouse route. For the moment,

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Speaker 3: New Zealand cities need to intensify, so this is definitely

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Speaker 3: going to come back again. The difficulty here is that

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Speaker 3: we have decades of data on standalone house construction. You know,

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Speaker 3: we've got the graphs going up and down. We can

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Speaker 3: see what happens. The numbers usually bottom out around about

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Speaker 3: fifteen thousand consents. We've done that, it's starting to slowly

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Speaker 3: edge up for the multi units. For the townhouses, basically,

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Speaker 3: we don't have any cycles at all. This is the

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Speaker 3: first decent downturn, so we really don't know how low

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Speaker 3: it's goning to go down. And that's why, frankly, when

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Speaker 3: we're economists are talking about house construction the levels of activity,

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Speaker 3: we're sort of all over the place at the moment

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Speaker 3: because we don't We've got a feeling for the standalone

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Speaker 3: house construction, but for the multi unit, no history gives

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Speaker 3: me zero guide on when that's going to start picking

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Speaker 3: up again. On the construction, I.

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Speaker 1: Won't hold you to it until we get the results

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Speaker 1: in I guess in terms of those new home buyers,

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Speaker 1: obviously the debt to income ratio changes that have come

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Speaker 1: in and so on, is that starting to filter through

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Speaker 1: from what you can see.

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Speaker 3: Yeah, for the DTI is there you know, twenty percent

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Speaker 3: is a reasonable exemption quite frankly for banks, you know,

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Speaker 3: to lend above us seven times income for the investors

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Speaker 3: and six six times for other people. So you know,

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Speaker 3: there are still quite some good scope in there. But

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Speaker 3: as the as the market heats up and prices rise

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Speaker 3: more for the existing houses, we will see people start

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Speaker 3: to look back at getting something built, but that the

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Speaker 3: numbers don't really work out out there. Relatively cheaper for

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Speaker 3: most people to be looking at purchasing and already constructed

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Speaker 3: property than getting something built. Now. You know, when I

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Speaker 3: look at the cost of building materials, there have been

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Speaker 3: some decreases, but it's relatively mild. I don't think there's

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Speaker 3: much of an extra decline in the cost of construction

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Speaker 3: that's going to come along. And you know, when we've

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Speaker 3: been talking for some time about forty percent increases in

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Speaker 3: the materials costs for building a residential property in New

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Speaker 3: Zealand in the past four years, you find the same

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Speaker 3: numbers if you're looking at material out of Australia or

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Speaker 3: out of Ireland, for instance, and there is not an

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Speaker 3: expectation that that goes backwards at.

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Speaker 1: All of a sudden.

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Speaker 3: Everybody's building lots of standalone houses, a lot of these

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Speaker 3: extra costs are locked in. So for home builders, it's

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Speaker 3: like they're going to have to actually wait until we

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Speaker 3: get a decent increase in the prices of existing houses.

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Speaker 3: And you know, for twenty twenty five, you know, I

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Speaker 3: think it's reasonable to think that house prices on average

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Speaker 3: rise five seven, maybe slightly more percent, and there maybe

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Speaker 3: a little bit more than that over twenty twenty six.

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Speaker 3: So the time will come for the higher residential construction.

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Speaker 3: But I think the pace of price increase is going

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Speaker 3: to be relatively mild the next couple of years.

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Speaker 1: Now, you're coming to us from the Gold Coast, so

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Speaker 1: I want you to quickly inflame people by telling us

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Speaker 1: how the property market's been working over there. Just by

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Speaker 1: way of comparison.

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Speaker 3: Yes, well, you've got the baby Boober generation and the

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Speaker 3: one below that cashing up out of the major cities

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Speaker 3: and they're selling four or five million dollar houses and

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Speaker 3: Mosman and other flash places across in Sydney and they

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Speaker 3: prepared to lay it down on one hundred and fifty

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Speaker 3: one to eighty square meter apartment. Here on the GC,

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Speaker 3: there's all these towers going up all over the place.

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Speaker 3: They build them really quickly, you know, two years from

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Speaker 3: go to woe for a twenty seven story building just

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Speaker 3: down the road for instance. The demand is massive for

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Speaker 3: property here. There was an estimate from a evaluation group

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Speaker 3: yesterday noting that on the GC they need to build

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Speaker 3: for expect population growth, fifty skyscraper apartment blocks each year

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Speaker 3: over the next few years for the population growth. What

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Speaker 3: it adds up to is demand is so strong and

390
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Speaker 3: supply is crimped. Remember cost materials have gone through the roof.

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Speaker 3: Prices on the GC have gone up on average seventy

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Speaker 3: to eighty seventy to eighty percent for apartments in the

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Speaker 3: past four years. Demand versus supply, that's what happens. Get

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Speaker 3: out really yeah, yeah, it's quite extreme. It's totally different

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Speaker 3: from the cities, the eight capital cities around Australia where

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Speaker 3: actually there's falling prices at the moment in Sydney and Melbourne.

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Speaker 3: Not sure about Brisbane, but the markets can be heavily

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Speaker 3: influenced in the cities by what's happening with migration numbers,

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Speaker 3: which have been relatively strong. But there's a bit of

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Speaker 3: a movement still of some people to the regions, and

401
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Speaker 3: that's a dynamic. We don't get to the same extent

402
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Speaker 3: in New Zealand during the pandemic. Yes, some keiw's sold

403
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Speaker 3: in the cities and moved to the regions, but probably

404
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Speaker 3: we're talking the older gen who we're going to do

405
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Speaker 3: it anyway, and they just brought forward those plans maybe

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Speaker 3: by three years of selling in Auckland and going to

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Speaker 3: have lock North, Hastings other places like that. It's a

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Speaker 3: stronger phenomenon in Australia of people moving out of the

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Speaker 3: cities and into the regions as the numbers are greater.

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Speaker 1: Gosh, if you can swing a hammer, get to call

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Speaker 1: and gatt a straight away. Look, I'm interested. We mentioned

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Speaker 1: the uncertainty that's been created in the world by the

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Speaker 1: US presidential election. People trying to work out what's going

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Speaker 1: on there. I mean, I know it's MAGA is the acronym,

415
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Speaker 1: but it's almost like vuoka volatile uncertain complex and forget

416
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Speaker 1: ambiguous as the last one is that a pretty fair

417
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Speaker 1: depiction of how investors are looking at what that election

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Speaker 1: means for the prospects of growth and where rates and

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Speaker 1: where exchange rates and things are going to go, and

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Speaker 1: how that could affect our economy.

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Speaker 3: Yeah, I mean the investors are scrambling around trying to

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Speaker 3: figure out exactly what this means. Now. Clearly with the

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Speaker 3: cryptocurrencies have rally done very strongly. I mean, are just

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Speaker 3: purely a speculative A said anyway, But the speculation is

425
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Speaker 3: that President Trump has been saying some nice things about it,

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Speaker 3: and Elon Musk is in there, and he's got his

427
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Speaker 3: own dough doge coin I think it is if it

428
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Speaker 3: still exists, and the department that he's heading there has

429
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Speaker 3: got the same dog acronym. There are first letters, so

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Speaker 3: people are looking at that asset. There's a feeling that

431
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Speaker 3: maybe inflation in the United States is going to be

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Speaker 3: high than would otherwise be the case because of the

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Speaker 3: tariffs which are going on materials goods going into America. Already,

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Speaker 3: firms in Australia are holding pre tariff increased sales by

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Speaker 3: now before the price goes up for goods coming in

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00:22:45,600 --> 00:22:49,520
Speaker 3: from Mexico from Canada, China et cetera. Of course, what

437
00:22:49,560 --> 00:22:51,440
Speaker 3: we don't know is how much of all of these

438
00:22:51,480 --> 00:22:55,080
Speaker 3: threats for tariff changes are really just bargaining positions to

439
00:22:55,200 --> 00:22:59,359
Speaker 3: get something else in exchange, either better trade access or

440
00:22:59,440 --> 00:23:03,720
Speaker 3: something of relevance in the geopolitical sphere, for instance. We

441
00:23:04,440 --> 00:23:07,880
Speaker 3: cannot know, and so this is going to be an

442
00:23:07,960 --> 00:23:11,760
Speaker 3: environment of high uncertainty for the next two four years,

443
00:23:11,800 --> 00:23:15,120
Speaker 3: et cetera. For New Zealand, the risks lie a bit

444
00:23:15,160 --> 00:23:20,359
Speaker 3: on the downside here because we export minimally processed commodities

445
00:23:20,359 --> 00:23:22,320
Speaker 3: to the rest of the world. A lot of the

446
00:23:22,320 --> 00:23:25,720
Speaker 3: rest of the world has strong farm lobby groups who

447
00:23:25,720 --> 00:23:28,359
Speaker 3: would like our stuff not to be going in there.

448
00:23:28,640 --> 00:23:31,879
Speaker 3: And if we're looking at a world reverting more towards

449
00:23:32,080 --> 00:23:38,399
Speaker 3: mercantilist policies of tariffs to somehow protect your domestic producers, manufacturers, farmers,

450
00:23:38,400 --> 00:23:41,680
Speaker 3: et cetera, we do risk getting a bit lost in

451
00:23:41,720 --> 00:23:44,399
Speaker 3: the wash there and having some negative outcomes. So the

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00:23:44,520 --> 00:23:48,320
Speaker 3: environment for ourselves has become riskier over for the next

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00:23:48,320 --> 00:23:51,280
Speaker 3: four years, and that may just constrain some investment in

454
00:23:51,280 --> 00:23:53,520
Speaker 3: New Zealand in this period of time. The intrast rate

455
00:23:53,560 --> 00:23:57,040
Speaker 3: implications difficult to figure out, but I'd say interest rates

456
00:23:57,040 --> 00:23:59,760
Speaker 3: again not going as low as people are thinking because

457
00:23:59,800 --> 00:24:02,120
Speaker 3: of enhancement of the inflation risk.

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00:24:02,720 --> 00:24:04,879
Speaker 1: If we were trying to wrap it all up, what's

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00:24:05,119 --> 00:24:07,240
Speaker 1: your best advice for how to make the best out

460
00:24:07,240 --> 00:24:08,480
Speaker 1: of twenty twenty five, Tony?

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00:24:09,080 --> 00:24:12,680
Speaker 3: I think people anticipates in recovery in the economy, the

462
00:24:13,000 --> 00:24:16,320
Speaker 3: labor market improving. You asked earlier on Garth about the

463
00:24:16,400 --> 00:24:18,560
Speaker 3: unemployment RATEE. You know, we're four point eight percent at

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00:24:18,560 --> 00:24:21,760
Speaker 3: the moment, go to five point five percent. I guess

465
00:24:21,800 --> 00:24:24,480
Speaker 3: I'm not greatly concerned about that. We had six point

466
00:24:24,560 --> 00:24:27,719
Speaker 3: seven percent back in about twenty twelve. I think eleven

467
00:24:27,720 --> 00:24:30,600
Speaker 3: point one percent or so back in about nineteen ninety two.

468
00:24:30,720 --> 00:24:34,080
Speaker 3: You know, we've seen far higher unemployment rates in the past.

469
00:24:34,359 --> 00:24:36,760
Speaker 3: That will act as a constraint on the strength of

470
00:24:36,840 --> 00:24:40,560
Speaker 3: recovery and consumers spending for a lot of twenty twenty five.

471
00:24:40,640 --> 00:24:45,120
Speaker 3: So I think there's more rationalization to come in the retail,

472
00:24:45,400 --> 00:24:48,840
Speaker 3: hospitality are sector. And because we're in sort of the

473
00:24:48,920 --> 00:24:52,280
Speaker 3: last stages of the weakness for the economy, that doesn't

474
00:24:52,320 --> 00:24:55,200
Speaker 3: mean things improve for businesses generally. As we see that

475
00:24:55,400 --> 00:24:59,239
Speaker 3: the failure's liquidations are picking up because some firms do

476
00:24:59,320 --> 00:25:01,679
Speaker 3: not have the care flow for the final three to

477
00:25:01,720 --> 00:25:03,720
Speaker 3: six months of the period of weakness. It mike the

478
00:25:03,760 --> 00:25:08,600
Speaker 3: ird demanding tax payments, etc. We will see further weeding

479
00:25:08,600 --> 00:25:11,920
Speaker 3: out across all sectors, but the scene is being set

480
00:25:12,000 --> 00:25:15,680
Speaker 3: for better activity in our economy, mainly the second half

481
00:25:15,720 --> 00:25:18,520
Speaker 3: of twenty twenty five and twenty twenty six rather than

482
00:25:18,560 --> 00:25:21,840
Speaker 3: the first half of twenty twenty five. Conversely, for the

483
00:25:21,880 --> 00:25:24,919
Speaker 3: biggest parts of the falls and interest rates, that'll be

484
00:25:25,040 --> 00:25:27,560
Speaker 3: done and dusted, I think, quite frankly by the middle

485
00:25:27,760 --> 00:25:28,760
Speaker 3: of twenty twenty five.

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00:25:29,400 --> 00:25:32,359
Speaker 1: Craky, So it sounds like Merry Christmas twenty twenty five

487
00:25:32,440 --> 00:25:36,000
Speaker 1: than Merry Christmas twenty twenty four from your point of view.

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00:25:36,040 --> 00:25:38,879
Speaker 1: Thanks very much, Tony, and thanks all of you for

489
00:25:39,040 --> 00:25:42,080
Speaker 1: watching and for listening. If you're listening, you're probably on Spotify,

490
00:25:42,240 --> 00:25:45,800
Speaker 1: Apple or WV podcasts. If you're watching, you're on YouTube.

491
00:25:45,800 --> 00:25:47,560
Speaker 1: And if you like what you see, let us know

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00:25:47,680 --> 00:25:49,440
Speaker 1: and let us know what you'd like to see next

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00:25:49,480 --> 00:25:54,679
Speaker 1: for us. That's done, Quimitu