1
00:00:00,120 --> 00:00:02,759
Speaker 1: Afternoon. The GDP number for the last quarter of last

2
00:00:02,840 --> 00:00:05,200
Speaker 1: year is out, and it's a little on the disappointing side.

3
00:00:05,240 --> 00:00:07,960
Speaker 1: The economy grew at zero point two percent, which is

4
00:00:07,960 --> 00:00:10,200
Speaker 1: the low end of what was expected. The Reserve Bank

5
00:00:10,320 --> 00:00:13,320
Speaker 1: had packed zero point five percent. To analyze us, we

6
00:00:13,360 --> 00:00:15,880
Speaker 1: have former Reserve Bank senior economist Michael redownd with us.

7
00:00:15,920 --> 00:00:18,200
Speaker 1: Welcome back Michael to be here.

8
00:00:18,200 --> 00:00:18,439
Speaker 2: Healler.

9
00:00:18,840 --> 00:00:21,400
Speaker 1: Now, it's not great, I suppose, But on the bright side,

10
00:00:21,440 --> 00:00:24,520
Speaker 1: we finally have some annual growth. Is that worth considering?

11
00:00:28,080 --> 00:00:32,159
Speaker 2: Yes, no, I mean it's better than being a negative number,

12
00:00:32,960 --> 00:00:37,440
Speaker 2: but it's clearly a pretty sluggish recovery, or was up

13
00:00:37,520 --> 00:00:39,839
Speaker 2: to December. And the key thing though to remember is

14
00:00:39,880 --> 00:00:43,320
Speaker 2: that there's some statistical problems. SNZ have had some problems

15
00:00:43,320 --> 00:00:46,400
Speaker 2: with their measurement and you get quite big revisions on

16
00:00:46,440 --> 00:00:48,239
Speaker 2: these numbers. So it could it end up being, you know,

17
00:00:48,280 --> 00:00:50,960
Speaker 2: anything for about plus point five to maybe minus point

18
00:00:51,040 --> 00:00:53,760
Speaker 2: one when all the dust settled on the statistical revisions.

19
00:00:54,280 --> 00:00:55,920
Speaker 1: Yeah, okay, that is a fair point. I mean, because

20
00:00:56,080 --> 00:00:58,200
Speaker 1: the Q three number, which was quite quite good at

21
00:00:58,200 --> 00:00:59,959
Speaker 1: one point one, has been revised right back to zero

22
00:01:00,160 --> 00:01:02,120
Speaker 1: point nine. Have we got a problem with stats here.

23
00:01:03,440 --> 00:01:05,760
Speaker 2: It does appear, so, I mean, west PAC's got an

24
00:01:05,760 --> 00:01:07,759
Speaker 2: economist who's done some really good work sort of trying

25
00:01:07,760 --> 00:01:09,920
Speaker 2: to unpick it. And there do seem to be some

26
00:01:09,959 --> 00:01:12,880
Speaker 2: sort of issues that may result from the messing up

27
00:01:12,880 --> 00:01:15,200
Speaker 2: of the patterns of the economy during the COVID period.

28
00:01:15,400 --> 00:01:17,720
Speaker 2: They're really technical issues, but they do mean that you

29
00:01:17,760 --> 00:01:20,560
Speaker 2: have a little bit less confidence in some of what's

30
00:01:20,600 --> 00:01:23,880
Speaker 2: going on and what some of what's getting reported right

31
00:01:23,880 --> 00:01:28,000
Speaker 2: at the moment. Okay, Gay, Look it's water rund to

32
00:01:28,000 --> 00:01:30,760
Speaker 2: the bridge at this point, but it does look like

33
00:01:30,800 --> 00:01:32,399
Speaker 2: in the second half of last year we had a

34
00:01:32,400 --> 00:01:35,119
Speaker 2: pretty news but real recovery and that's what you expect

35
00:01:35,160 --> 00:01:37,720
Speaker 2: with interest rates fall and commodity price is pretty good.

36
00:01:38,080 --> 00:01:40,440
Speaker 1: Okay, So, yes, we have a recovery, which is fantastic,

37
00:01:40,480 --> 00:01:42,040
Speaker 1: and we have some manual growth for the first time

38
00:01:42,040 --> 00:01:43,880
Speaker 1: in two years, which is fantastic. But this is not

39
00:01:43,920 --> 00:01:46,600
Speaker 1: a great point for us to start off at when

40
00:01:46,640 --> 00:01:49,040
Speaker 1: we have the Iran war. Right, so you've got zero

41
00:01:49,040 --> 00:01:50,960
Speaker 1: point two, then you've got the Iran War. What should

42
00:01:51,000 --> 00:01:52,840
Speaker 1: we expect from here on in for the economy?

43
00:01:54,040 --> 00:01:56,800
Speaker 2: Well, for Q one, hard to tell, Probably something reasonably

44
00:01:56,840 --> 00:02:00,160
Speaker 2: sort of low but positive. The real risk is what

45
00:02:00,200 --> 00:02:04,520
Speaker 2: happens next quarter as the full effects of high and

46
00:02:04,600 --> 00:02:07,840
Speaker 2: rising oil prices and perhaps shortages of physical supply cut in.

47
00:02:08,400 --> 00:02:11,200
Speaker 2: It wouldn't surprise me at all if Q two ended

48
00:02:11,280 --> 00:02:15,080
Speaker 2: up being negative, and perhaps quite severely negative, if we

49
00:02:15,120 --> 00:02:18,320
Speaker 2: actually find ourselves unable to source all the oil that

50
00:02:18,360 --> 00:02:21,640
Speaker 2: we want, even at the really high world prices. You know, business,

51
00:02:21,639 --> 00:02:24,440
Speaker 2: for example, is totally dependent on diesel in so many areas.

52
00:02:24,639 --> 00:02:27,600
Speaker 2: If you can't do it, it's going to really hamstrong activity,

53
00:02:28,400 --> 00:02:30,920
Speaker 2: even households. You know, what you have to spend on

54
00:02:30,919 --> 00:02:33,200
Speaker 2: petrol to get to work. You can't spend another thing,

55
00:02:33,400 --> 00:02:36,160
Speaker 2: so the real volume of stuff that gets purchased will

56
00:02:36,160 --> 00:02:36,840
Speaker 2: fall as well.

57
00:02:37,840 --> 00:02:40,640
Speaker 1: Do you think that number that's been quoted by Treasury

58
00:02:40,760 --> 00:02:43,240
Speaker 1: of the worst case scenario for the inflation from the

59
00:02:43,280 --> 00:02:45,840
Speaker 1: Iran war being three point seven percent is realistic?

60
00:02:47,000 --> 00:02:49,280
Speaker 2: No, In the fedness to Treasury, I think the number

61
00:02:49,320 --> 00:02:50,680
Speaker 2: was probably done that, you know, a week or ten

62
00:02:50,760 --> 00:02:52,679
Speaker 2: days ago. I suspect if they were doing it now

63
00:02:52,680 --> 00:02:55,399
Speaker 2: they come up with a materially higher number. I think.

64
00:02:55,440 --> 00:02:57,239
Speaker 2: You know, one economist I saw the other day said

65
00:02:57,240 --> 00:02:59,280
Speaker 2: that's probably more like a base case at the moment,

66
00:03:00,080 --> 00:03:02,000
Speaker 2: it wouldn't surprise me at all if we saw headline

67
00:03:02,000 --> 00:03:05,119
Speaker 2: inflation over five percent at some point this year. That's

68
00:03:05,160 --> 00:03:06,919
Speaker 2: actually what we saw back in two thousand and eight

69
00:03:06,960 --> 00:03:10,080
Speaker 2: when oil prices last rose to their really record highs.

70
00:03:11,440 --> 00:03:14,400
Speaker 2: It wanted to endure, but it will be very painful

71
00:03:14,440 --> 00:03:16,480
Speaker 2: and it's part of the adjustment process. We need to

72
00:03:16,520 --> 00:03:19,680
Speaker 2: crunch demand for oil and petrol because the global supply

73
00:03:19,760 --> 00:03:20,920
Speaker 2: has fallen quite sharply.

74
00:03:21,520 --> 00:03:23,400
Speaker 1: Michael, it's good to talk to you. Thank you, Michael Riddell,

75
00:03:23,440 --> 00:03:26,720
Speaker 1: who's the former Reserve Bank senior economists. For more from

76
00:03:26,760 --> 00:03:30,080
Speaker 1: Heather Duplessy Alan Drive, listen live to news Talks. It'd

77
00:03:30,080 --> 00:03:33,240
Speaker 1: be from four pm weekdays, or follow the podcast on

78
00:03:33,360 --> 00:03:34,160
Speaker 1: iHeartRadio