WEBVTT - Is this how we reignite the economy? 0:00:04.440 --> 0:00:05.080 Go to Koto. 0:00:05.200 --> 0:00:06.280 Welcome to Shared Lunch. 0:00:06.360 --> 0:00:07.200 I'm Garth Bray. 0:00:07.280 --> 0:00:10.000 Well, the Reserve Banks made another call on the official 0:00:10.240 --> 0:00:14.040 cash rate and that has implications for our whole economy. 0:00:14.400 --> 0:00:17.000 Will it provide the stimulus that we need. One of 0:00:17.079 --> 0:00:20.800 the earliest voices calling for stimulus to get things running again? 0:00:21.079 --> 0:00:24.880 Here we Banks chief economist Jared Kerr. He takes us 0:00:24.880 --> 0:00:27.840 through why he sees the need for this right now. 0:00:28.120 --> 0:00:31.880 But first, some important information you should always consider when investing. 0:00:32.159 --> 0:00:34.760 Investing involves the risk you might lose the money you 0:00:34.800 --> 0:00:38.080 start with. We recommend talking to a licensed financial advisor. 0:00:38.800 --> 0:00:42.640 We also recommend reading product disclosure documents before deciding to invest. 0:00:42.880 --> 0:00:45.279 Everything you're about to see and here is current at 0:00:45.280 --> 0:00:46.159 the time of recording. 0:00:46.200 --> 0:00:48.680 Here is a man who thinks that stimulus might just 0:00:48.720 --> 0:00:50.680 be the answer. Would that be fair to say? Oh? 0:00:50.720 --> 0:00:53.840 Absolutely. I think it's pretty clear that the economy needs 0:00:54.280 --> 0:00:57.320 a little bit of encouragement right now and we're just 0:00:57.360 --> 0:01:02.200 not getting it. I think interest rates haven't reached that level. Well, 0:01:02.200 --> 0:01:04.520 I know they haven't reached that level where you know, 0:01:04.640 --> 0:01:09.160 investors and businesses feel like they want to take a 0:01:09.160 --> 0:01:10.080 punt on something. 0:01:11.040 --> 0:01:13.679 We've launched straight into without even saying welcome to Charesis 0:01:13.680 --> 0:01:17.920 and thanks for being that's all right, no mucking around, 0:01:17.959 --> 0:01:21.160 and straight into it. So what is it that makes 0:01:21.200 --> 0:01:24.240 you think that there needs to be a stimilatory track 0:01:25.000 --> 0:01:28.720 to monetary policy? And for someone who just wants to 0:01:28.760 --> 0:01:31.080 speak in single syllables, what does that even mean? 0:01:31.800 --> 0:01:34.640 It means that interst rates have not yet reached a 0:01:34.720 --> 0:01:39.080 level that are exciting people or are that encouraging businesses. 0:01:39.160 --> 0:01:42.600 So we have this theoretical rate called the neutral rate, right, 0:01:42.760 --> 0:01:45.880 and we think it's around three. It's a Goldilocks rate. 0:01:45.920 --> 0:01:47.880 It's not too hot, it's not too cold. Right. We 0:01:48.080 --> 0:01:50.120 know that the cash rate at five and a half 0:01:50.160 --> 0:01:54.880 percent last year was way way too restrictive, right, and 0:01:54.920 --> 0:01:58.480 that drove the economy into a recession. They've cut the 0:01:58.520 --> 0:02:02.600 cash rate from five and a half to three and 0:02:03.040 --> 0:02:07.520 we haven't seen that, you know, inspire anyone. What it 0:02:07.560 --> 0:02:11.040 has done is it's given relief to people, but it 0:02:11.080 --> 0:02:14.639 hasn't really triggered them. We think it needs to go 0:02:14.720 --> 0:02:16.960 down to at least two and a half and just 0:02:17.080 --> 0:02:18.800 to give people that incentive. 0:02:19.160 --> 0:02:22.080 So much to unpacking there. I guess some would say 0:02:22.400 --> 0:02:24.800 your head for the neutral rate will get you to 0:02:24.880 --> 0:02:27.440 the place where it's up to you to make the 0:02:27.480 --> 0:02:29.800 decisions to take the risks, all that sort of stuff. 0:02:29.880 --> 0:02:32.840 Why are we relying on a central bank and a 0:02:32.840 --> 0:02:36.240 monetary policy to try and fire things up if they 0:02:36.320 --> 0:02:37.600 aren't already ready to go. 0:02:38.000 --> 0:02:40.440 Yeah, well, I mean that's their job, right, so they 0:02:41.280 --> 0:02:46.040 let's go through it. They overstimulated during COVID. They you know, 0:02:46.320 --> 0:02:48.600 they purchased a lot of government bonds, so they printed 0:02:48.639 --> 0:02:51.880 a lot of cash. Central banks around the world printed 0:02:51.960 --> 0:02:54.960 trillions of dollars, and we came out of it firing 0:02:55.040 --> 0:02:58.040 on all cylinders right because governments were spending central banks 0:02:58.040 --> 0:03:01.919 were printing cash. Next minute, we had an inflation rate 0:03:01.919 --> 0:03:05.000 of over seven percent. Okay, they overdid it. They had 0:03:05.040 --> 0:03:07.680 to get that back down to two. So they lifted 0:03:07.720 --> 0:03:14.040 into shraps from their zero settings to quite aggressively high settings, 0:03:14.480 --> 0:03:18.239 and that really hurt households and businesses, drove us back 0:03:18.240 --> 0:03:22.200 into recession. And we haven't gotten out of that recession yet. 0:03:22.200 --> 0:03:25.919 We're still like crawling out of this hole that the 0:03:25.919 --> 0:03:30.040 central bank poured us into last year. And I think 0:03:30.320 --> 0:03:35.440 you know, just using the car, you know, example, you've 0:03:35.520 --> 0:03:38.120 had your foot on the heavy on the break, you've 0:03:38.160 --> 0:03:40.360 taken it off, You've put the car in neutral. It's 0:03:40.400 --> 0:03:43.800 just idling. We're saying, just put your foot on the accelerator, 0:03:43.840 --> 0:03:47.240 not hard, just get the economy gone. 0:03:47.720 --> 0:03:50.960 Is that a consensus view? Are you guys? Are you 0:03:51.240 --> 0:03:52.120 on the outer on that? 0:03:53.160 --> 0:03:56.480 We were? I mean we were calling this a year 0:03:56.520 --> 0:04:00.400 and a half ago. We were well outside of the 0:04:00.480 --> 0:04:03.560 consensus calling for a two and a half percent cash row. 0:04:03.960 --> 0:04:07.040 Now there are a few more. Most economists are around 0:04:07.080 --> 0:04:11.200 that sort of two seventy five three level, so we're 0:04:11.200 --> 0:04:12.920 only arguing over fifty basis points. 0:04:12.960 --> 0:04:15.920 There was a sort of a split decision back in May, 0:04:16.000 --> 0:04:21.200 although there was a consensus around holding steady in Wellington. 0:04:21.480 --> 0:04:23.479 On the most recent one you had I think that 0:04:23.600 --> 0:04:26.599 in the US the first time in about thirty something 0:04:26.680 --> 0:04:29.320 years that two governors said we want to express our 0:04:29.320 --> 0:04:31.040 descent with the rest of what you guys are coming 0:04:31.120 --> 0:04:33.479 up with the Bank of England. I'm just telling this 0:04:33.520 --> 0:04:35.240 for the people that haven't been paying attention, you know 0:04:35.320 --> 0:04:38.480 this is it getting harder to work out what's going 0:04:38.480 --> 0:04:41.880 on in that room, what they're deciding and how they'll pick. 0:04:42.040 --> 0:04:44.040 Is this just part of the cycle. 0:04:44.360 --> 0:04:46.640 Yeah, I think it does get a little harder when 0:04:46.680 --> 0:04:49.320 you're towards the end for starters. So from the Reserve 0:04:49.360 --> 0:04:52.080 Bank of New Zealand's point of view, they've gone from 0:04:52.120 --> 0:04:54.560 five and a half to three. You know, there's not 0:04:54.600 --> 0:04:56.800 a lot left and they're just kind of feeling their 0:04:56.839 --> 0:04:59.839 way down to the bottom, and the bottom's near right. 0:05:01.040 --> 0:05:03.239 You can say the same thing for other central banks 0:05:03.279 --> 0:05:05.839 around the world. But you know, let's not forget we've 0:05:05.880 --> 0:05:12.000 had this tariff war of sorts over this year that's 0:05:12.120 --> 0:05:14.360 really thrown a lot of things up in the year. 0:05:15.480 --> 0:05:18.320 We know it's inflationary for the United States, so that's 0:05:18.360 --> 0:05:21.520 why you're getting that sort of mixed feel from the 0:05:21.920 --> 0:05:26.039 from the Fed governors, and we think it's deflationary for us, 0:05:26.440 --> 0:05:29.640 but it's yet to feed through. So you know, there's 0:05:29.680 --> 0:05:31.000 a lot of balls in the year. There's a lot 0:05:31.040 --> 0:05:33.800 of volatility, there's a lot of question questions that need 0:05:33.880 --> 0:05:34.479 to be answered. 0:05:34.600 --> 0:05:36.960 And we've got another complication because we've got an acting 0:05:37.040 --> 0:05:40.880 governor at the moment and possibly a permanent replacement coming 0:05:40.920 --> 0:05:43.480 through sometime soon. Does that mean that the Bank's going 0:05:43.520 --> 0:05:47.479 to be saying, well, the Monetary Policy Committee are going 0:05:47.520 --> 0:05:49.200 to be saying we will leave it to the new boss. 0:05:49.400 --> 0:05:51.680 No, I don't think so. I don't think so. They've 0:05:51.680 --> 0:05:53.560 got a job to do. They know what the job is. 0:05:54.160 --> 0:05:56.680 It is a it is a committee now rather than 0:05:56.720 --> 0:06:00.680 a sole decision maker like it used to be. So 0:06:00.760 --> 0:06:03.200 you've kind of you've spread that a little bit. And 0:06:03.440 --> 0:06:06.599 Christian Christian knows what he's doing. Christian has been around 0:06:06.760 --> 0:06:07.280 long time. 0:06:07.360 --> 0:06:08.320 This is Christian Hawksby. 0:06:08.400 --> 0:06:12.120 Christian Hawksby who's acting governor at the moment. He's been 0:06:12.160 --> 0:06:14.080 at the Reserve Bank, I'm not sure about six or 0:06:14.120 --> 0:06:19.039 seven years himself. He was working for Harbor Asset Management, 0:06:19.120 --> 0:06:21.800 so he knows the markets very well. And he also 0:06:21.839 --> 0:06:23.479 worked at the Bank of England prior to that. So 0:06:23.520 --> 0:06:26.080 I'm going to talk about credentials. He knows what he's doing. 0:06:26.120 --> 0:06:28.839 So there's no excuse, Oh, we better wait for the 0:06:28.880 --> 0:06:32.599 next governor to come in. They just need to do 0:06:32.640 --> 0:06:33.440 what they need to do. 0:06:34.760 --> 0:06:36.520 A lot of people are saying it's not so much 0:06:36.560 --> 0:06:39.599 about whatever the decision has been, it's more about where 0:06:39.640 --> 0:06:42.719 we're headed from here. Absolutely, what the shape of that 0:06:42.839 --> 0:06:45.480 curve looks like when we're going to see rates start 0:06:45.560 --> 0:06:48.160 to rise again, where that bottom is. Do you have 0:06:48.240 --> 0:06:49.000 strong views there? 0:06:49.400 --> 0:06:51.680 Yeah, so our So, like I said, we're at two 0:06:51.720 --> 0:06:56.320 and a half. Market's kind of around two seventy five ish, 0:06:56.720 --> 0:06:59.279 So we're not arguing over a big difference. But from 0:06:59.279 --> 0:07:01.719 our point of view, that extra twenty five is meaningful, 0:07:02.880 --> 0:07:05.440 and it would just get mortgage rates, you know, that 0:07:05.560 --> 0:07:09.600 little bit, that little bit lower than where they are today. 0:07:10.240 --> 0:07:13.400 Whereas if we stop at two seventy five or three, 0:07:14.080 --> 0:07:17.080 then mortgage rates that that's them done, that's that's the bottom. 0:07:17.320 --> 0:07:19.960 And I just don't think that's stemmatry enough. 0:07:20.160 --> 0:07:23.360 All right, So we do get to two point seventy 0:07:23.400 --> 0:07:26.360 five or even two point five, what does that mean 0:07:26.640 --> 0:07:27.840 for a mortgage customer? 0:07:28.200 --> 0:07:31.840 So very simply, the cash rate is what the banks 0:07:31.880 --> 0:07:34.880 deal with the central bank, right, the central bank is 0:07:34.880 --> 0:07:38.200 the banker of the bank. So we're dealing at at 0:07:38.240 --> 0:07:41.720 say three percent, but that's not where we've fund ourselves at. 0:07:41.840 --> 0:07:45.320 Like we're all offer a term deposit rate. I think 0:07:45.360 --> 0:07:47.320 we've got one out there at like four point one 0:07:47.520 --> 0:07:49.400 at the moment, So that's quite a bit higher than 0:07:49.440 --> 0:07:51.840 the cash right. That's because we're trying to get money, 0:07:52.440 --> 0:07:54.600 you know, in the door, and then we lend it 0:07:54.640 --> 0:07:57.560 out right, and then we're and then we're charging you know, 0:07:57.720 --> 0:08:02.280 five percent on a on on a mortgage rate or above. 0:08:02.800 --> 0:08:07.680 So you're all these rates, but the cash rate influences 0:08:07.800 --> 0:08:11.040 everything above it. So you drop that cash rate from 0:08:11.120 --> 0:08:13.840 five and a half to three, and what you've seen 0:08:14.080 --> 0:08:17.400 is mortgage rates go from seven and a half to five. 0:08:17.840 --> 0:08:24.120 So roughly lockstep doesn't happen precisely, but it has over 0:08:24.160 --> 0:08:27.280 the over the year, we've seen that that whole lot 0:08:27.360 --> 0:08:32.080 being being passed on. What does another fifty basis points mean? 0:08:32.559 --> 0:08:36.640 Will those five percent rates or slightly above go into 0:08:36.640 --> 0:08:39.400 the mid floors and you get that little bit of 0:08:39.440 --> 0:08:42.760 extra a little bit of extra bang for buck and 0:08:42.800 --> 0:08:45.600 delivering that that extra fifty basis points in the in 0:08:45.640 --> 0:08:49.120 the cash rate term deposit rates four as well. So 0:08:49.160 --> 0:08:51.120 there's a lot of savers out there that go, oh, 0:08:51.160 --> 0:08:54.080 I didn't realize it so well. Actually, you know, we've 0:08:54.080 --> 0:08:57.280 been talking about rate cuts for over a year. You 0:08:57.360 --> 0:09:00.839 could have been preparing yourself on the way down. We 0:09:00.880 --> 0:09:04.080 always talk about the household with debt, you know, your 0:09:04.120 --> 0:09:08.280 mortgage rates falling. Actually, if you're if you're a retirement 0:09:09.360 --> 0:09:12.160 you know, if you're in retirement and you're getting less 0:09:12.200 --> 0:09:13.439 on you on your nest egg. 0:09:13.440 --> 0:09:15.800 And that fixed income suddenly isn't quite so attractive. You 0:09:15.800 --> 0:09:16.920 need to look at diversification. 0:09:18.280 --> 0:09:22.320 Do you do this is precisely so. Putting the cash 0:09:22.440 --> 0:09:25.760 rate at five and a half, you're trying to attract 0:09:26.360 --> 0:09:29.320 savings right dropping it down, you're trying to get savings 0:09:29.360 --> 0:09:32.800 to go out into more riskier assets. You want to 0:09:32.800 --> 0:09:37.680 get them out into either simply buying shares or getting 0:09:37.720 --> 0:09:42.320 businesses to put money out the door to buy you know, 0:09:42.760 --> 0:09:44.720 investment like tractors and stuff. 0:09:44.840 --> 0:09:46.679 I mean, if we look around, there's been a lot 0:09:46.720 --> 0:09:48.840 of worry about debt. I mean, there's been a lot 0:09:48.840 --> 0:09:50.559 of talk about debt this week. I think one of 0:09:50.559 --> 0:09:52.240 the major papers saying, look, we're on track to a 0:09:52.280 --> 0:09:56.560 trillion dollars worth of combined public and brother big number. 0:09:56.679 --> 0:09:58.560 Does a big number like that give you any pause, 0:09:58.679 --> 0:09:59.600 any concern? 0:10:00.040 --> 0:10:02.200 Well, the big number, you know, shows a lot of 0:10:02.200 --> 0:10:06.199 private debt, a lot of household debt right as a 0:10:06.240 --> 0:10:09.079 percentage of income, it's gone sideways for a while, but 0:10:09.120 --> 0:10:12.880 it's at a very high level, you know, comparatively speaking. 0:10:12.920 --> 0:10:15.360 So we've got a lot of debt on the private side, 0:10:15.360 --> 0:10:17.160 but we don't have a lot of public debt and 0:10:17.280 --> 0:10:20.680 this is something that we need to smash, smash wide 0:10:20.679 --> 0:10:21.920 open in the New Zealand public. 0:10:22.960 --> 0:10:24.720 Smashing it down, you look about smashing it up. 0:10:24.800 --> 0:10:27.760 I absolutely no smash the perception that we've got too 0:10:27.840 --> 0:10:29.760 much debt as a government. I don't think we do. 0:10:29.960 --> 0:10:31.720 I don't think we do it all. I think we 0:10:31.720 --> 0:10:33.920 can take on a lot more debt to tackle the 0:10:33.920 --> 0:10:37.400 infrastructure problems that we've got. That I would argue that 0:10:37.559 --> 0:10:41.480 we have not only disappointed the New Zealand public, but 0:10:41.920 --> 0:10:45.800 actually haven't fulfilled what we should have done as a 0:10:45.840 --> 0:10:49.920 government over the last thirty years. We have not kept 0:10:50.000 --> 0:10:54.440 up our infrastructure spending with our population. Right, that's just 0:10:54.480 --> 0:10:58.319 a simple, simple message to everyone. You know, it takes 0:10:58.400 --> 0:11:01.880 us forty minutes to drive tea case in Auckland. 0:11:02.000 --> 0:11:02.200 Right. 0:11:03.240 --> 0:11:06.000 Wellington looks more like Venice than it does anything else. 0:11:06.040 --> 0:11:08.120 With all the water running down the streets. I mean, 0:11:08.160 --> 0:11:11.720 you know, the burst pipes. There's so many examples, and 0:11:11.760 --> 0:11:14.439 then the good examples christ Church. Look what happens when 0:11:14.440 --> 0:11:18.280 you build back beautifully. It's a cool city. People are 0:11:18.280 --> 0:11:21.880 a lot more upbeat down there, and it's because you know, 0:11:21.960 --> 0:11:25.120 they've got the infrastructure, not. 0:11:25.040 --> 0:11:27.440 Just because the regional economy is strong and you've got 0:11:27.440 --> 0:11:29.199 a lot of farming and something happening there and that's 0:11:29.200 --> 0:11:30.360 supporting it, whereas other. 0:11:30.200 --> 0:11:36.240 Places Wykado and other areas not as upbeat as christ Church. Right, 0:11:36.240 --> 0:11:40.840 they've got that farming base, you know, that's that external 0:11:40.880 --> 0:11:43.920 sector that's doing well. You're getting high dairy price is 0:11:44.040 --> 0:11:49.360 high meat prices, tourisms bouncing back. But the South Island 0:11:49.360 --> 0:11:51.480 seems to be a lot more upbeat than the than 0:11:51.520 --> 0:11:54.160 the North, and you know there's something going on there. 0:11:54.360 --> 0:11:56.880 If you look at farming and agriculture in general. I 0:11:56.880 --> 0:12:00.480 think the total agricultural debt is down at the moment, 0:12:00.559 --> 0:12:04.040 So at a time where those prices are great, where 0:12:04.240 --> 0:12:09.840 farmers are making bank, they're choosing to retire that rather 0:12:09.920 --> 0:12:11.480 than to invest. What does that say? 0:12:11.640 --> 0:12:13.920 Yeah, And I think they've been asked to do that too, 0:12:14.080 --> 0:12:16.720 because they've taken on a little bit too much. So 0:12:16.800 --> 0:12:19.040 I think the couple of the major banks have been asking, 0:12:19.080 --> 0:12:21.160 you know, actually maybe you should repay a little bit, 0:12:21.200 --> 0:12:25.520 which is prudent. But what we're seeing and is that 0:12:25.679 --> 0:12:29.640 farmers are spending on the farm, so they may have 0:12:30.640 --> 0:12:33.680 sort of run down their maintenance a bit. Now they're 0:12:34.240 --> 0:12:36.520 back up to where it should be, spending more on 0:12:36.640 --> 0:12:40.600 animal welfare, spending more on the farm, but not past 0:12:40.640 --> 0:12:42.960 the farm gate. So they might be buying a tractor, 0:12:43.000 --> 0:12:45.280 for example, but they're not buying a use. They might 0:12:45.360 --> 0:12:49.679 be doing their fences, but they're not going on a holiday. 0:12:49.720 --> 0:12:52.880 And I think that just shows you how cautious they are, 0:12:52.960 --> 0:12:55.000 even though things are pretty good and they're getting a 0:12:55.120 --> 0:12:58.760 very high payout, they're spending on the farm, they're not 0:12:58.800 --> 0:12:59.880 spending outside of it. 0:13:00.000 --> 0:13:01.400 And then if we're looking at business, I think the 0:13:01.440 --> 0:13:04.880 business landing as well. You know, business borrowing in the 0:13:04.960 --> 0:13:07.600 UNA was sort of up just a fraction, not even 0:13:07.640 --> 0:13:11.160 a full percentage point. Again, that's you say, because it's 0:13:11.160 --> 0:13:15.160 not stimulatory enough or companies just don't see the reward 0:13:15.720 --> 0:13:16.640 justifying the risk. 0:13:16.960 --> 0:13:19.600 Same same thing, even with the investment boosts. 0:13:19.640 --> 0:13:21.840 What happened to the investment boost so right off a 0:13:21.920 --> 0:13:24.920 larger portion of a capital purchase, we're not seeing that 0:13:25.040 --> 0:13:25.520 play through. 0:13:25.840 --> 0:13:29.040 No, no, we're not, And that that just proves the 0:13:29.040 --> 0:13:31.760 fact that we're still in this recession, I believe. So 0:13:32.200 --> 0:13:36.920 we recorded quite a sharp contraction last year and we're 0:13:37.000 --> 0:13:39.360 going sideways, and it looks like in the current quarter 0:13:39.440 --> 0:13:42.360 where and now we might we might record another contraction. 0:13:42.559 --> 0:13:46.360 So it's pretty weak out there. Businesses aren't taking on 0:13:47.040 --> 0:13:51.200 debt because they are cautious that they're worried about what 0:13:51.240 --> 0:13:53.839 does all this tariffs mean for us? You know, the 0:13:53.880 --> 0:13:57.640 New Zealand households not spending yet. You know, you're very 0:13:57.640 --> 0:14:01.920 cautious as a business right now, and we're noticing that 0:14:02.000 --> 0:14:06.480 in in our lending. That investment boost helps, but it's 0:14:06.480 --> 0:14:09.800 not driving you to make the decision. And businesses aren't 0:14:09.840 --> 0:14:12.920 making that decision at the moment. You ask them are 0:14:12.960 --> 0:14:17.400 you investing? And you're getting quite a mixed response. Most 0:14:17.400 --> 0:14:20.320 of them are saying no. And you ask them, are 0:14:20.360 --> 0:14:23.440 you hiring people? Again, most of them will say I 0:14:23.480 --> 0:14:26.040 actually go through a bit of a restructure still, So 0:14:26.160 --> 0:14:29.960 until that turns and we see it going positive, and 0:14:30.000 --> 0:14:33.080 there's signs that it is, such. 0:14:32.840 --> 0:14:35.080 As sidelined, but there's signs there isn't. I mean, the 0:14:35.080 --> 0:14:37.680 Performance of Services index I think came out this week 0:14:37.720 --> 0:14:39.800 and it was the twentieth month in a row. 0:14:40.520 --> 0:14:42.000 Less negative but negative. 0:14:42.080 --> 0:14:45.320 Yeah, but the employer right that's been in the dumpster 0:14:45.440 --> 0:14:49.920 for twenty months now, twenty months, Yeah, that tells you, 0:14:49.960 --> 0:14:52.360 I suppose that if you're a services business, which is 0:14:52.400 --> 0:14:56.160 sort of what two thirds of the economy. Yeah, that's 0:14:56.400 --> 0:14:58.800 a lot of businesses out there that are weary about hiring. 0:14:59.320 --> 0:15:01.400 H landing. Who's getting hit by that? 0:15:01.880 --> 0:15:04.400 Oh well, you know, it depends what industry you're looking at. 0:15:04.480 --> 0:15:08.360 Like I said, the agriculture side's doing well and they're 0:15:08.360 --> 0:15:10.960 finding the workers that they need, so there's definitely not 0:15:11.080 --> 0:15:13.840 a shortage of workers anymore that we had just a 0:15:13.840 --> 0:15:16.239 couple of years ago. There's actually a bit of an oversupply. 0:15:17.120 --> 0:15:19.720 And then you go across, like you say, most of 0:15:19.760 --> 0:15:23.920 the services side, they're not hiring. I gave a few 0:15:23.960 --> 0:15:29.119 presentations to quite large groups recently. One was in Wellington 0:15:29.200 --> 0:15:31.160 and there were about two hundred people in the crowd 0:15:31.600 --> 0:15:34.600 and I said, are you investing? Are you hiring? And 0:15:34.720 --> 0:15:38.320 about eight people put their hands up. I counted them eight. 0:15:39.240 --> 0:15:41.560 And then I went to christ Church and at least 0:15:41.600 --> 0:15:44.920 a third, maybe forty percent put their hands up, So 0:15:45.120 --> 0:15:48.480 still less than fifty, but Jesus a massive difference between 0:15:48.480 --> 0:15:51.920 Wellington and christ Church and Auckland's kind of in the middle. 0:15:51.960 --> 0:15:54.880 About twenty percent people put their hand up. So when 0:15:54.920 --> 0:15:56.840 I do that and I sort of gauge a crowd. 0:15:57.240 --> 0:15:59.640 I sort of walk out going okay, that's you know, 0:16:00.080 --> 0:16:04.080 depending on where you are, it's worse. But overall it's 0:16:04.080 --> 0:16:07.600 still quite weak, even in the hot spots like christ Church. 0:16:07.720 --> 0:16:10.200 But then as cutting if there's that much gloom, as 0:16:10.280 --> 0:16:13.040 cutting interest rates really going to provide people with the 0:16:13.040 --> 0:16:16.120 stimulus because they're still going to be nervous about taking action. 0:16:16.400 --> 0:16:19.280 Right, better than doing nothing, It's better than leaving the 0:16:19.360 --> 0:16:24.120 cash rat restrictive or neutral, so you're effectively not not 0:16:24.160 --> 0:16:24.840 doing anything. 0:16:25.040 --> 0:16:26.760 We talked about tariffs there, and I would just want 0:16:26.760 --> 0:16:30.720 to ask you have we overbaked the concern around the 0:16:30.760 --> 0:16:32.400 trade war and the tariffs and that kind of thing. 0:16:32.600 --> 0:16:36.840 With US tariffs, I think US experts are about two 0:16:36.880 --> 0:16:39.600 percent of our GDP. There's plenty of other places we're 0:16:39.600 --> 0:16:40.520 doing business. 0:16:40.240 --> 0:16:43.920 Right, and talking to exporters, they'll say, you know, the 0:16:44.040 --> 0:16:46.600 US is actually one of the most profitable markets that 0:16:46.600 --> 0:16:50.080 we that we export into, so they can actually wear 0:16:50.120 --> 0:16:54.480 a bit of that tariff themselves. Kiwi dollars come down 0:16:54.760 --> 0:16:56.320 a little bit as well. I hope it goes a 0:16:56.360 --> 0:16:59.240 little bit further, and again that helps, you know, it 0:16:59.280 --> 0:17:02.240 helps from the the US side. There's fewer US dollars 0:17:02.280 --> 0:17:06.720 they need to buy Kiwi. So you know, we definitely 0:17:06.760 --> 0:17:10.080 got panicked at the start when Trump came out with 0:17:10.119 --> 0:17:12.600 these massive numbers, but we all turned to each other 0:17:12.640 --> 0:17:14.480 and said, that's a negotiating in tact. He's going to 0:17:14.680 --> 0:17:17.280 water it down. He warded it down a lot more 0:17:17.280 --> 0:17:19.600 than what we thought, and I think if we look 0:17:19.640 --> 0:17:21.359 at the impact, most of it's going to be on 0:17:21.400 --> 0:17:23.720 the US consumer. I would love New Zealand to get 0:17:23.720 --> 0:17:26.639 a ten percent tariff rather than a fifteen percent, but 0:17:27.400 --> 0:17:31.160 you know, it's not going to end the New Zealand story. 0:17:31.560 --> 0:17:36.400 They are a very very big export destination for US, 0:17:36.880 --> 0:17:39.800 but we export meat and they're not going to stop 0:17:40.000 --> 0:17:43.520 eating burgers, and they'll wash it down with a Kiwi 0:17:43.640 --> 0:17:47.000 wine as well, So I'm not too worried about that. 0:17:47.040 --> 0:17:49.399 To be fair, we thought, what does it mean for 0:17:49.440 --> 0:17:52.640 the rest of the world. It's a world that's slower 0:17:53.800 --> 0:17:56.639 and trading less with each other, but not to the 0:17:56.680 --> 0:18:00.720 extent we were worried about. In April. There's a slow 0:18:00.720 --> 0:18:05.240 down there. China is already diverting some of their exports 0:18:05.359 --> 0:18:09.040 into Europe and elsewhere. I think that's a bit deflationary, 0:18:09.480 --> 0:18:13.520 you know, that slower growth, that diversion of trade. So 0:18:13.600 --> 0:18:16.159 from our perspective, we actually think it's deflationary. It's going 0:18:16.200 --> 0:18:18.600 to add to inflation dropping below two percent. 0:18:18.600 --> 0:18:20.199 Of these people will worry that, like you said, it 0:18:20.240 --> 0:18:22.239 was going to be a widespread tip for tach kind 0:18:22.280 --> 0:18:26.080 of reciprocally, people haven't sort of done the tack right. 0:18:26.880 --> 0:18:30.360 Typical analysts like ourselves, you know, you go down these 0:18:30.480 --> 0:18:32.960 rabbit holes, you go, well, this is what we've seen. 0:18:33.040 --> 0:18:36.200 It could spiral off over here, or it could calm 0:18:36.320 --> 0:18:39.800 right down, and we were worried more about the spiraling 0:18:39.320 --> 0:18:43.520 into uncharted territory, whereas it just at the end of 0:18:43.560 --> 0:18:47.520 the day, the tariffs are a tax take. It's all 0:18:48.119 --> 0:18:51.600 mostly what it is. It's let's just, you know, take 0:18:51.680 --> 0:18:56.000 ten to fifteen percent, and when you model what the 0:18:56.080 --> 0:18:58.720 impacts of tariffs are going to be ten to fifteen percent, 0:18:58.800 --> 0:19:01.919 you actually generate quite a bit of revenue for the 0:19:01.960 --> 0:19:06.639 government thirty forty fifty percent. Tariffs don't generate much revenue 0:19:06.680 --> 0:19:10.960 because it smothers the trade exactly, people divert their trade elsewhere. 0:19:11.160 --> 0:19:14.119 It actually changes behavior. If you're a government and you 0:19:14.160 --> 0:19:16.120 want to take you want to generate revenue, you don't 0:19:16.119 --> 0:19:18.679 want to change behavior, and that's where we've ended up 0:19:18.680 --> 0:19:20.960 on most of these tariffs. So I'm looking at it 0:19:20.960 --> 0:19:23.000 and going, Okay, he's done a whole lot of negotiating, 0:19:23.040 --> 0:19:25.160 He's done a whole lot of things behind the scenes, 0:19:25.800 --> 0:19:29.320 but he's kind of he's just wanted to generate some revenue. 0:19:29.359 --> 0:19:31.000 I mean, he's got to pay for the tax cuts 0:19:31.000 --> 0:19:32.720 that he brought in in his first term. 0:19:33.920 --> 0:19:36.960 Someone asked to I mean we worry about this, I 0:19:37.000 --> 0:19:39.600 suppose as a nation, going back to what you said 0:19:39.800 --> 0:19:43.240 about our debt levels and whether we've serviced the needs 0:19:43.320 --> 0:19:47.000 of our society. Around economy, there's a lot of pressure 0:19:47.040 --> 0:19:50.320 on governments to return to surplus quickly, and a lot 0:19:50.359 --> 0:19:54.920 of scolding gets applied to whether it's national or labor holding. 0:19:54.960 --> 0:19:58.320 The Treasury ventures about that return. I think at the moment, 0:19:58.920 --> 0:20:02.520 even Fitch, one of the ratings agencies, when it reconfirmed 0:20:03.000 --> 0:20:04.639 that New Zealand's got a I think. 0:20:04.480 --> 0:20:06.080 It's a double a plus under them. 0:20:06.080 --> 0:20:08.760 I think, great credit school to have to borrow, but 0:20:08.800 --> 0:20:11.040 please don't do any borrowing instead of almost the thing. 0:20:11.119 --> 0:20:13.440 It's nice, but don't take it for a drive because 0:20:13.440 --> 0:20:16.240 they're saying you keep pushing down the road to the point 0:20:16.240 --> 0:20:19.399 at which you're returning to surplus. And they're saying that 0:20:19.440 --> 0:20:22.840 to worry. I mean, you've worked in international money markets 0:20:22.880 --> 0:20:25.639 and you know you've got to heed those people, haven't you. 0:20:25.800 --> 0:20:28.840 Yeah, yeah, oh absolutely, it's a it's a big deal. 0:20:28.880 --> 0:20:32.760 And New Zealand's got a triple A rating under under Movies, right, 0:20:32.760 --> 0:20:35.560 that's as high as it gets. I kind of wish 0:20:35.560 --> 0:20:37.040 we didn't have that, to be fair, and it was 0:20:37.160 --> 0:20:39.040 double A and that was all we were all we 0:20:39.040 --> 0:20:42.440 were going for. But yeah, no, there's there's a there's 0:20:42.440 --> 0:20:46.119 an op x versus capex thing here. So there's running 0:20:46.240 --> 0:20:49.159 a deficit because you're spending too much and you're not 0:20:49.200 --> 0:20:53.440