Speaker 1: Go to Koto.
Speaker 2: Welcome to Shared Lunch.
Speaker 1: I'm Garth Bray.
Speaker 2: Well, the Reserve Banks made another call on the official
Speaker 2: cash rate and that has implications for our whole economy.
Speaker 2: Will it provide the stimulus that we need. One of
Speaker 2: the earliest voices calling for stimulus to get things running again?
Speaker 2: Here we Banks chief economist Jared Kerr. He takes us
Speaker 2: through why he sees the need for this right now.
Speaker 2: But first, some important information you should always consider when investing.
Speaker 3: Investing involves the risk you might lose the money you
Speaker 3: start with. We recommend talking to a licensed financial advisor.
Speaker 3: We also recommend reading product disclosure documents before deciding to invest.
Speaker 3: Everything you're about to see and here is current at
Speaker 3: the time of recording.
Speaker 2: Here is a man who thinks that stimulus might just
Speaker 2: be the answer. Would that be fair to say? Oh?
Speaker 1: Absolutely. I think it's pretty clear that the economy needs
Speaker 1: a little bit of encouragement right now and we're just
Speaker 1: not getting it. I think interest rates haven't reached that level. Well,
Speaker 1: I know they haven't reached that level where you know,
Speaker 1: investors and businesses feel like they want to take a
Speaker 1: punt on something.
Speaker 2: We've launched straight into without even saying welcome to Charesis
Speaker 2: and thanks for being that's all right, no mucking around,
Speaker 2: and straight into it. So what is it that makes
Speaker 2: you think that there needs to be a stimilatory track
Speaker 2: to monetary policy? And for someone who just wants to
Speaker 2: speak in single syllables, what does that even mean?
Speaker 1: It means that interst rates have not yet reached a
Speaker 1: level that are exciting people or are that encouraging businesses.
Speaker 1: So we have this theoretical rate called the neutral rate, right,
Speaker 1: and we think it's around three. It's a Goldilocks rate.
Speaker 1: It's not too hot, it's not too cold. Right. We
Speaker 1: know that the cash rate at five and a half
Speaker 1: percent last year was way way too restrictive, right, and
Speaker 1: that drove the economy into a recession. They've cut the
Speaker 1: cash rate from five and a half to three and
Speaker 1: we haven't seen that, you know, inspire anyone. What it
Speaker 1: has done is it's given relief to people, but it
Speaker 1: hasn't really triggered them. We think it needs to go
Speaker 1: down to at least two and a half and just
Speaker 1: to give people that incentive.
Speaker 2: So much to unpacking there. I guess some would say
Speaker 2: your head for the neutral rate will get you to
Speaker 2: the place where it's up to you to make the
Speaker 2: decisions to take the risks, all that sort of stuff.
Speaker 2: Why are we relying on a central bank and a
Speaker 2: monetary policy to try and fire things up if they
Speaker 2: aren't already ready to go.
Speaker 1: Yeah, well, I mean that's their job, right, so they
Speaker 1: let's go through it. They overstimulated during COVID. They you know,
Speaker 1: they purchased a lot of government bonds, so they printed
Speaker 1: a lot of cash. Central banks around the world printed
Speaker 1: trillions of dollars, and we came out of it firing
Speaker 1: on all cylinders right because governments were spending central banks
Speaker 1: were printing cash. Next minute, we had an inflation rate
Speaker 1: of over seven percent. Okay, they overdid it. They had
Speaker 1: to get that back down to two. So they lifted
Speaker 1: into shraps from their zero settings to quite aggressively high settings,
Speaker 1: and that really hurt households and businesses, drove us back
Speaker 1: into recession. And we haven't gotten out of that recession yet.
Speaker 1: We're still like crawling out of this hole that the
Speaker 1: central bank poured us into last year. And I think
Speaker 1: you know, just using the car, you know, example, you've
Speaker 1: had your foot on the heavy on the break, you've
Speaker 1: taken it off, You've put the car in neutral. It's
Speaker 1: just idling. We're saying, just put your foot on the accelerator,
Speaker 1: not hard, just get the economy gone.
Speaker 2: Is that a consensus view? Are you guys? Are you
Speaker 2: on the outer on that?
Speaker 1: We were? I mean we were calling this a year
Speaker 1: and a half ago. We were well outside of the
Speaker 1: consensus calling for a two and a half percent cash row.
Speaker 1: Now there are a few more. Most economists are around
Speaker 1: that sort of two seventy five three level, so we're
Speaker 1: only arguing over fifty basis points.
Speaker 2: There was a sort of a split decision back in May,
Speaker 2: although there was a consensus around holding steady in Wellington.
Speaker 2: On the most recent one you had I think that
Speaker 2: in the US the first time in about thirty something
Speaker 2: years that two governors said we want to express our
Speaker 2: descent with the rest of what you guys are coming
Speaker 2: up with the Bank of England. I'm just telling this
Speaker 2: for the people that haven't been paying attention, you know
Speaker 2: this is it getting harder to work out what's going
Speaker 2: on in that room, what they're deciding and how they'll pick.
Speaker 2: Is this just part of the cycle.
Speaker 1: Yeah, I think it does get a little harder when
Speaker 1: you're towards the end for starters. So from the Reserve
Speaker 1: Bank of New Zealand's point of view, they've gone from
Speaker 1: five and a half to three. You know, there's not
Speaker 1: a lot left and they're just kind of feeling their
Speaker 1: way down to the bottom, and the bottom's near right.
Speaker 1: You can say the same thing for other central banks
Speaker 1: around the world. But you know, let's not forget we've
Speaker 1: had this tariff war of sorts over this year that's
Speaker 1: really thrown a lot of things up in the year.
Speaker 1: We know it's inflationary for the United States, so that's
Speaker 1: why you're getting that sort of mixed feel from the
Speaker 1: from the Fed governors, and we think it's deflationary for us,
Speaker 1: but it's yet to feed through. So you know, there's
Speaker 1: a lot of balls in the year. There's a lot
Speaker 1: of volatility, there's a lot of question questions that need
Speaker 1: to be answered.
Speaker 2: And we've got another complication because we've got an acting
Speaker 2: governor at the moment and possibly a permanent replacement coming
Speaker 2: through sometime soon. Does that mean that the Bank's going
Speaker 2: to be saying, well, the Monetary Policy Committee are going
Speaker 2: to be saying we will leave it to the new boss.
Speaker 1: No, I don't think so. I don't think so. They've
Speaker 1: got a job to do. They know what the job is.
Speaker 1: It is a it is a committee now rather than
Speaker 1: a sole decision maker like it used to be. So
Speaker 1: you've kind of you've spread that a little bit. And
Speaker 1: Christian Christian knows what he's doing. Christian has been around
Speaker 1: long time.
Speaker 2: This is Christian Hawksby.
Speaker 1: Christian Hawksby who's acting governor at the moment. He's been
Speaker 1: at the Reserve Bank, I'm not sure about six or
Speaker 1: seven years himself. He was working for Harbor Asset Management,
Speaker 1: so he knows the markets very well. And he also
Speaker 1: worked at the Bank of England prior to that. So
Speaker 1: I'm going to talk about credentials. He knows what he's doing.
Speaker 1: So there's no excuse, Oh, we better wait for the
Speaker 1: next governor to come in. They just need to do
Speaker 1: what they need to do.
Speaker 2: A lot of people are saying it's not so much
Speaker 2: about whatever the decision has been, it's more about where
Speaker 2: we're headed from here. Absolutely, what the shape of that
Speaker 2: curve looks like when we're going to see rates start
Speaker 2: to rise again, where that bottom is. Do you have
Speaker 2: strong views there?
Speaker 1: Yeah, so our So, like I said, we're at two
Speaker 1: and a half. Market's kind of around two seventy five ish,
Speaker 1: So we're not arguing over a big difference. But from
Speaker 1: our point of view, that extra twenty five is meaningful,
Speaker 1: and it would just get mortgage rates, you know, that
Speaker 1: little bit, that little bit lower than where they are today.
Speaker 1: Whereas if we stop at two seventy five or three,
Speaker 1: then mortgage rates that that's them done, that's that's the bottom.
Speaker 1: And I just don't think that's stemmatry enough.
Speaker 2: All right, So we do get to two point seventy
Speaker 2: five or even two point five, what does that mean
Speaker 2: for a mortgage customer?
Speaker 1: So very simply, the cash rate is what the banks
Speaker 1: deal with the central bank, right, the central bank is
Speaker 1: the banker of the bank. So we're dealing at at
Speaker 1: say three percent, but that's not where we've fund ourselves at.
Speaker 1: Like we're all offer a term deposit rate. I think
Speaker 1: we've got one out there at like four point one
Speaker 1: at the moment, So that's quite a bit higher than
Speaker 1: the cash right. That's because we're trying to get money,
Speaker 1: you know, in the door, and then we lend it
Speaker 1: out right, and then we're and then we're charging you know,
Speaker 1: five percent on a on on a mortgage rate or above.
Speaker 1: So you're all these rates, but the cash rate influences
Speaker 1: everything above it. So you drop that cash rate from
Speaker 1: five and a half to three, and what you've seen
Speaker 1: is mortgage rates go from seven and a half to five.
Speaker 1: So roughly lockstep doesn't happen precisely, but it has over
Speaker 1: the over the year, we've seen that that whole lot
Speaker 1: being being passed on. What does another fifty basis points mean?
Speaker 1: Will those five percent rates or slightly above go into
Speaker 1: the mid floors and you get that little bit of
Speaker 1: extra a little bit of extra bang for buck and
Speaker 1: delivering that that extra fifty basis points in the in
Speaker 1: the cash rate term deposit rates four as well. So
Speaker 1: there's a lot of savers out there that go, oh,
Speaker 1: I didn't realize it so well. Actually, you know, we've
Speaker 1: been talking about rate cuts for over a year. You
Speaker 1: could have been preparing yourself on the way down. We
Speaker 1: always talk about the household with debt, you know, your
Speaker 1: mortgage rates falling. Actually, if you're if you're a retirement
Speaker 1: you know, if you're in retirement and you're getting less
Speaker 1: on you on your nest egg.
Speaker 2: And that fixed income suddenly isn't quite so attractive. You
Speaker 2: need to look at diversification.
Speaker 1: Do you do this is precisely so. Putting the cash
Speaker 1: rate at five and a half, you're trying to attract
Speaker 1: savings right dropping it down, you're trying to get savings
Speaker 1: to go out into more riskier assets. You want to
Speaker 1: get them out into either simply buying shares or getting
Speaker 1: businesses to put money out the door to buy you know,
Speaker 1: investment like tractors and stuff.
Speaker 2: I mean, if we look around, there's been a lot
Speaker 2: of worry about debt. I mean, there's been a lot
Speaker 2: of talk about debt this week. I think one of
Speaker 2: the major papers saying, look, we're on track to a
Speaker 2: trillion dollars worth of combined public and brother big number.
Speaker 2: Does a big number like that give you any pause,
Speaker 2: any concern?
Speaker 1: Well, the big number, you know, shows a lot of
Speaker 1: private debt, a lot of household debt right as a
Speaker 1: percentage of income, it's gone sideways for a while, but
Speaker 1: it's at a very high level, you know, comparatively speaking.
Speaker 1: So we've got a lot of debt on the private side,
Speaker 1: but we don't have a lot of public debt and
Speaker 1: this is something that we need to smash, smash wide
Speaker 1: open in the New Zealand public.
Speaker 2: Smashing it down, you look about smashing it up.
Speaker 1: I absolutely no smash the perception that we've got too
Speaker 1: much debt as a government. I don't think we do.
Speaker 1: I don't think we do it all. I think we
Speaker 1: can take on a lot more debt to tackle the
Speaker 1: infrastructure problems that we've got. That I would argue that
Speaker 1: we have not only disappointed the New Zealand public, but
Speaker 1: actually haven't fulfilled what we should have done as a
Speaker 1: government over the last thirty years. We have not kept
Speaker 1: up our infrastructure spending with our population. Right, that's just
Speaker 1: a simple, simple message to everyone. You know, it takes
Speaker 1: us forty minutes to drive tea case in Auckland.
Speaker 2: Right.
Speaker 1: Wellington looks more like Venice than it does anything else.
Speaker 1: With all the water running down the streets. I mean,
Speaker 1: you know, the burst pipes. There's so many examples, and
Speaker 1: then the good examples christ Church. Look what happens when
Speaker 1: you build back beautifully. It's a cool city. People are
Speaker 1: a lot more upbeat down there, and it's because you know,
Speaker 1: they've got the infrastructure, not.
Speaker 2: Just because the regional economy is strong and you've got
Speaker 2: a lot of farming and something happening there and that's
Speaker 2: supporting it, whereas other.
Speaker 1: Places Wykado and other areas not as upbeat as christ Church. Right,
Speaker 1: they've got that farming base, you know, that's that external
Speaker 1: sector that's doing well. You're getting high dairy price is
Speaker 1: high meat prices, tourisms bouncing back. But the South Island
Speaker 1: seems to be a lot more upbeat than the than
Speaker 1: the North, and you know there's something going on there.
Speaker 2: If you look at farming and agriculture in general. I
Speaker 2: think the total agricultural debt is down at the moment,
Speaker 2: So at a time where those prices are great, where
Speaker 2: farmers are making bank, they're choosing to retire that rather
Speaker 2: than to invest. What does that say?
Speaker 1: Yeah, And I think they've been asked to do that too,
Speaker 1: because they've taken on a little bit too much. So
Speaker 1: I think the couple of the major banks have been asking,
Speaker 1: you know, actually maybe you should repay a little bit,
Speaker 1: which is prudent. But what we're seeing and is that
Speaker 1: farmers are spending on the farm, so they may have
Speaker 1: sort of run down their maintenance a bit. Now they're
Speaker 1: back up to where it should be, spending more on
Speaker 1: animal welfare, spending more on the farm, but not past
Speaker 1: the farm gate. So they might be buying a tractor,
Speaker 1: for example, but they're not buying a use. They might
Speaker 1: be doing their fences, but they're not going on a holiday.
Speaker 1: And I think that just shows you how cautious they are,
Speaker 1: even though things are pretty good and they're getting a
Speaker 1: very high payout, they're spending on the farm, they're not
Speaker 1: spending outside of it.
Speaker 2: And then if we're looking at business, I think the
Speaker 2: business landing as well. You know, business borrowing in the
Speaker 2: UNA was sort of up just a fraction, not even
Speaker 2: a full percentage point. Again, that's you say, because it's
Speaker 2: not stimulatory enough or companies just don't see the reward
Speaker 2: justifying the risk.
Speaker 1: Same same thing, even with the investment boosts.
Speaker 2: What happened to the investment boost so right off a
Speaker 2: larger portion of a capital purchase, we're not seeing that
Speaker 2: play through.
Speaker 1: No, no, we're not, And that that just proves the
Speaker 1: fact that we're still in this recession, I believe. So
Speaker 1: we recorded quite a sharp contraction last year and we're
Speaker 1: going sideways, and it looks like in the current quarter
Speaker 1: where and now we might we might record another contraction.
Speaker 1: So it's pretty weak out there. Businesses aren't taking on
Speaker 1: debt because they are cautious that they're worried about what
Speaker 1: does all this tariffs mean for us? You know, the
Speaker 1: New Zealand households not spending yet. You know, you're very
Speaker 1: cautious as a business right now, and we're noticing that
Speaker 1: in in our lending. That investment boost helps, but it's
Speaker 1: not driving you to make the decision. And businesses aren't
Speaker 1: making that decision at the moment. You ask them are
Speaker 1: you investing? And you're getting quite a mixed response. Most
Speaker 1: of them are saying no. And you ask them, are
Speaker 1: you hiring people? Again, most of them will say I
Speaker 1: actually go through a bit of a restructure still, So
Speaker 1: until that turns and we see it going positive, and
Speaker 1: there's signs that it is, such.
Speaker 2: As sidelined, but there's signs there isn't. I mean, the
Speaker 2: Performance of Services index I think came out this week
Speaker 2: and it was the twentieth month in a row.
Speaker 1: Less negative but negative.
Speaker 2: Yeah, but the employer right that's been in the dumpster
Speaker 2: for twenty months now, twenty months, Yeah, that tells you,
Speaker 2: I suppose that if you're a services business, which is
Speaker 2: sort of what two thirds of the economy. Yeah, that's
Speaker 2: a lot of businesses out there that are weary about hiring.
Speaker 2: H landing. Who's getting hit by that?
Speaker 1: Oh well, you know, it depends what industry you're looking at.
Speaker 1: Like I said, the agriculture side's doing well and they're
Speaker 1: finding the workers that they need, so there's definitely not
Speaker 1: a shortage of workers anymore that we had just a
Speaker 1: couple of years ago. There's actually a bit of an oversupply.
Speaker 1: And then you go across, like you say, most of
Speaker 1: the services side, they're not hiring. I gave a few
Speaker 1: presentations to quite large groups recently. One was in Wellington
Speaker 1: and there were about two hundred people in the crowd
Speaker 1: and I said, are you investing? Are you hiring? And
Speaker 1: about eight people put their hands up. I counted them eight.
Speaker 1: And then I went to christ Church and at least
Speaker 1: a third, maybe forty percent put their hands up, So
Speaker 1: still less than fifty, but Jesus a massive difference between
Speaker 1: Wellington and christ Church and Auckland's kind of in the middle.
Speaker 1: About twenty percent people put their hand up. So when
Speaker 1: I do that and I sort of gauge a crowd.
Speaker 1: I sort of walk out going okay, that's you know,
Speaker 1: depending on where you are, it's worse. But overall it's
Speaker 1: still quite weak, even in the hot spots like christ Church.
Speaker 2: But then as cutting if there's that much gloom, as
Speaker 2: cutting interest rates really going to provide people with the
Speaker 2: stimulus because they're still going to be nervous about taking action.
Speaker 1: Right, better than doing nothing, It's better than leaving the
Speaker 1: cash rat restrictive or neutral, so you're effectively not not
Speaker 1: doing anything.
Speaker 2: We talked about tariffs there, and I would just want
Speaker 2: to ask you have we overbaked the concern around the
Speaker 2: trade war and the tariffs and that kind of thing.
Speaker 2: With US tariffs, I think US experts are about two
Speaker 2: percent of our GDP. There's plenty of other places we're
Speaker 2: doing business.
Speaker 1: Right, and talking to exporters, they'll say, you know, the
Speaker 1: US is actually one of the most profitable markets that
Speaker 1: we that we export into, so they can actually wear
Speaker 1: a bit of that tariff themselves. Kiwi dollars come down
Speaker 1: a little bit as well. I hope it goes a
Speaker 1: little bit further, and again that helps, you know, it
Speaker 1: helps from the the US side. There's fewer US dollars
Speaker 1: they need to buy Kiwi. So you know, we definitely
Speaker 1: got panicked at the start when Trump came out with
Speaker 1: these massive numbers, but we all turned to each other
Speaker 1: and said, that's a negotiating in tact. He's going to
Speaker 1: water it down. He warded it down a lot more
Speaker 1: than what we thought, and I think if we look
Speaker 1: at the impact, most of it's going to be on
Speaker 1: the US consumer. I would love New Zealand to get
Speaker 1: a ten percent tariff rather than a fifteen percent, but
Speaker 1: you know, it's not going to end the New Zealand story.
Speaker 1: They are a very very big export destination for US,
Speaker 1: but we export meat and they're not going to stop
Speaker 1: eating burgers, and they'll wash it down with a Kiwi
Speaker 1: wine as well, So I'm not too worried about that.
Speaker 1: To be fair, we thought, what does it mean for
Speaker 1: the rest of the world. It's a world that's slower
Speaker 1: and trading less with each other, but not to the
Speaker 1: extent we were worried about. In April. There's a slow
Speaker 1: down there. China is already diverting some of their exports
Speaker 1: into Europe and elsewhere. I think that's a bit deflationary,
Speaker 1: you know, that slower growth, that diversion of trade. So
Speaker 1: from our perspective, we actually think it's deflationary. It's going
Speaker 1: to add to inflation dropping below two percent.
Speaker 2: Of these people will worry that, like you said, it
Speaker 2: was going to be a widespread tip for tach kind
Speaker 2: of reciprocally, people haven't sort of done the tack right.
Speaker 1: Typical analysts like ourselves, you know, you go down these
Speaker 1: rabbit holes, you go, well, this is what we've seen.
Speaker 1: It could spiral off over here, or it could calm
Speaker 1: right down, and we were worried more about the spiraling
Speaker 1: into uncharted territory, whereas it just at the end of
Speaker 1: the day, the tariffs are a tax take. It's all
Speaker 1: mostly what it is. It's let's just, you know, take
Speaker 1: ten to fifteen percent, and when you model what the
Speaker 1: impacts of tariffs are going to be ten to fifteen percent,
Speaker 1: you actually generate quite a bit of revenue for the
Speaker 1: government thirty forty fifty percent. Tariffs don't generate much revenue
Speaker 1: because it smothers the trade exactly, people divert their trade elsewhere.
Speaker 1: It actually changes behavior. If you're a government and you
Speaker 1: want to take you want to generate revenue, you don't
Speaker 1: want to change behavior, and that's where we've ended up
Speaker 1: on most of these tariffs. So I'm looking at it
Speaker 1: and going, Okay, he's done a whole lot of negotiating,
Speaker 1: He's done a whole lot of things behind the scenes,
Speaker 1: but he's kind of he's just wanted to generate some revenue.
Speaker 1: I mean, he's got to pay for the tax cuts
Speaker 1: that he brought in in his first term.
Speaker 2: Someone asked to I mean we worry about this, I
Speaker 2: suppose as a nation, going back to what you said
Speaker 2: about our debt levels and whether we've serviced the needs
Speaker 2: of our society. Around economy, there's a lot of pressure
Speaker 2: on governments to return to surplus quickly, and a lot
Speaker 2: of scolding gets applied to whether it's national or labor holding.
Speaker 2: The Treasury ventures about that return. I think at the moment,
Speaker 2: even Fitch, one of the ratings agencies, when it reconfirmed
Speaker 2: that New Zealand's got a I think.
Speaker 1: It's a double a plus under them.
Speaker 2: I think, great credit school to have to borrow, but
Speaker 2: please don't do any borrowing instead of almost the thing.
Speaker 2: It's nice, but don't take it for a drive because
Speaker 2: they're saying you keep pushing down the road to the point
Speaker 2: at which you're returning to surplus. And they're saying that
Speaker 2: to worry. I mean, you've worked in international money markets
Speaker 2: and you know you've got to heed those people, haven't you.
Speaker 1: Yeah, yeah, oh absolutely, it's a it's a big deal.
Speaker 1: And New Zealand's got a triple A rating under under Movies, right,
Speaker 1: that's as high as it gets. I kind of wish
Speaker 1: we didn't have that, to be fair, and it was
Speaker 1: double A and that was all we were all we
Speaker 1: were going for. But yeah, no, there's there's a there's
Speaker 1: an op x versus capex thing here. So there's running
Speaker 1: a deficit because you're spending too much and you're not
Speaker 1: collecting enough revenue and you need to think about your taxes.
Speaker 1: You need to think about your spending, and you know
Speaker 1: this government's doing doing that. But then there's the well,
Speaker 1: if we went out to the market and issued an
Speaker 1: infrastructure bond and said hey, we want fifty billion dollars
Speaker 1: and we're going to issue that and it's going to
Speaker 1: go towards infrastructure, then most people will turn around and
Speaker 1: go okay, fine.
Speaker 2: New Zealand.
Speaker 1: Good risk would put how money there Singapore going into
Speaker 1: building as sets people. There's going to be a return
Speaker 1: on it, hopefully, you know, it might be a toll road,
Speaker 1: it might be whatever. Get the private people involved, you know,
Speaker 1: do what you need to do to build the infrastructure.
Speaker 1: I don't think the rating agencies or investors would even blink.
Speaker 1: It's like, yeah, okay, you're finally playing catch up for
Speaker 1: thirty years of not doing enough, cutting taxes, spending more
Speaker 1: on on on beneficiaries or whatever. That's what gets the
Speaker 1: rating agent's more concerned building a bridge, building a road
Speaker 1: or whatever. That that's not a that's building in the
Speaker 1: productivity of your economy. And we sit here looking at
Speaker 1: these really disappointing productivity numbers for New Zealand and elsewhere,
Speaker 1: but for New Zealand in particular, and we just go,
Speaker 1: you know what, A lot of that's just the lack
Speaker 1: of infrastructure. We haven't invested in ourselves, and governments need
Speaker 1: to realize that if you think about the long game,
Speaker 1: and unfortunately they're only thinking about three year games, if
Speaker 1: you think about the long game, spending more on infrastructure today,
Speaker 1: we'll give you a harder, faster, stronger economy. Oh and
Speaker 1: that's a larger tax base tomorrow. We don't seem to
Speaker 1: be able to think in ten twenty fifty year chunks.
Speaker 1: We're only thinking in three yearly chunks. Look at this
Speaker 1: government now that they haven't been in there that long.
Speaker 1: They're kind of halfway through and they're already looking to
Speaker 1: next year, going jeez, we've got to deliver in order
Speaker 1: to get voted back in. It's not enough time, not
Speaker 1: enough time for either side of government.
Speaker 2: We might get to decide on a four year term
Speaker 2: at the next selection.
Speaker 1: But it's like you want to give them a four
Speaker 1: year term with the expectation to get in two almost
Speaker 1: like the US, you kind of expect them to get
Speaker 1: two terms and you've got them in there for a
Speaker 1: chunk of time and you can kind of get stuff
Speaker 1: done over that over that time frame. But three yearly
Speaker 1: and then and then the complications of coalitions, it's just,
Speaker 1: you know, it really inhibits their ability to get stuff done.
Speaker 2: Well. It provides ideas, yeah, possibly, but I mean you
Speaker 2: get ideas. You get minority parties like Act with the
Speaker 2: Greens that are living in sort of slightly saltier suggestions
Speaker 2: like we should run hard on that deficit or we should,
Speaker 2: you know, really pull the chucks out and go for
Speaker 2: an extremely simultary position and that what what function does
Speaker 2: that have?
Speaker 1: Well, I think you get you get these two centralist parties,
Speaker 1: and then you get some on either side recommending the
Speaker 1: more extreme, and a lot of odors will look at
Speaker 1: the two central parties and go, you know what, they're
Speaker 1: not really either size, not really giving me something. So
Speaker 1: I'll go to the ones that are a bit more extreme,
Speaker 1: and we and we see that. I just wish we
Speaker 1: would have a better debate about the type of debt
Speaker 1: that we could issue and what that money would be
Speaker 1: used for. If we went out to the investment community
Speaker 1: and said, give us fifty billion dollars we want to
Speaker 1: do these projects over the next ten years, will you
Speaker 1: fund us? Absolutely? They would absolutely. They are looking for
Speaker 1: ten twenty thirty year debt. ACC is a great example.
Speaker 1: Insurance companies. They want long term bonds to invest into,
Speaker 1: so they would be you know, itching to buy twenty
Speaker 1: thirty year bonds.
Speaker 2: Were the world champions of comparing ourselves straight to kicker,
Speaker 2: who's doing it better than us? Right now?
Speaker 1: I think Australia is definitely uperforming us at the moment.
Speaker 1: And that's because they are, and you know they're. Their
Speaker 1: central bank didn't go as hard on the rate hikes,
Speaker 1: so therefore the Ossie economy didn't slow down as much.
Speaker 1: They didn't record a technical recession. They've got a recession
Speaker 1: in per capita terms, but it's quite shallow compared to ours.
Speaker 1: So we just look at the Aussie economy and go,
Speaker 1: oh man, it's just growing nicer than ours. The labor
Speaker 1: markets tighter, wage growth is more. They're just more buoyant
Speaker 1: than we are at the moment, and that's why we've
Speaker 1: seen a net forty three thousand kiwis leave in the
Speaker 1: last year.
Speaker 2: People are heading there, mostly.
Speaker 1: Didn't going to Australia, so we've seen seventy odd thousand
Speaker 1: kiwis leave and then some coming back, but that net
Speaker 1: forty three is huge. That's a lot of kiwis leaving.
Speaker 1: It goes in cycles, and we saw it in twenty
Speaker 1: and twelve when the Aussie mining boom was really in
Speaker 1: full flight and people were going over driving a truck
Speaker 1: and per for like two hundred thousand dollars. Not so
Speaker 1: much of that these days, not so much of that,
Speaker 1: but definitely better prospects at the moment. Otherwise we wouldn't
Speaker 1: be seeing the numbers of kiwi are leaving to Australia.
Speaker 2: How much of it is off savings and just a stronger,
Speaker 2: you know, a better national superinnuation structure so that people
Speaker 2: are putting more money aside.
Speaker 1: Oh, I mean that's been a strength of Australia for
Speaker 1: a while. Now. They've got I think the fifth largest
Speaker 1: sovereign wealth fund on the planets for an economy, which
Speaker 1: is less than two percent of the global economy. To
Speaker 1: have that sort of savings there, and do you know what,
Speaker 1: they don't think they've got enough. They are still increasing
Speaker 1: their compulsory I think it's gone up to twelve percent now.
Speaker 1: It was nine percent when I was working there. I
Speaker 1: tell you what, working thirteen and a half years in Australia,
Speaker 1: I've actually got this nice little nest egg sitting there
Speaker 1: that I wouldn't have had Otherwise. There's no way I
Speaker 1: could afford to put nine percent away over that entire period.
Speaker 1: But it's sitting there and it's great. We're doing it
Speaker 1: here now. Should be compulsory should be a much higher rate.
Speaker 1: But you know, some things Australians just do do better
Speaker 1: than us. They dig holes better than us, I can
Speaker 1: tell you that much. But we grow stuff on top
Speaker 1: much better than them. One thing they are pretty good at,
Speaker 1: and particularly at the state level, is the big infrastructure stuff.
Speaker 1: You know, they just seem to get stuff done. And
Speaker 1: I use Sydney as a classic example, where you've got
Speaker 1: this bridge and it's got heaps lanes, it's got a
Speaker 1: train track gone both ways, so trains can go across,
Speaker 1: you can walk down one side, you can cycle across
Speaker 1: the other side of it. And that was built, you know,
Speaker 1: fifty years ago. That's not enough. Their cities grew and
Speaker 1: they've got a tunnel going underneath. Now you've got theories.
Speaker 1: You've got plenty of ways to get across the Sydney Harbor.
Speaker 1: Right here, You've got a bridge that was built in
Speaker 1: the sixties, I think, on the cheap. On the cheap,
Speaker 1: it reached capacity five years later, so we tacked on
Speaker 1: some clip ons and we've done nothing since. The only
Speaker 1: other way to get across is with maybe a fury
Speaker 1: if you're lucky, or a kayak' that's your option. Strong
Speaker 1: swimmers need strong swimmers exactly. I think it just highlights
Speaker 1: the difference between us. They can they can deliver these
Speaker 1: big projects in Australia and they can think a lot
Speaker 1: further ahead for some reason, and I just wish we
Speaker 1: would snap out of it.
Speaker 2: Let's look at we're in the middle of earning season
Speaker 2: at the moment. What are the economic themes, the macro themes,
Speaker 2: the big bits of or clues you're getting about the
Speaker 2: state of the world and the state of the economy
Speaker 2: from some of the results that we're starting to see through.
Speaker 2: We've had you know, like I think a two milk
Speaker 2: and a couple of the big gent Taylor's here, ass
Speaker 2: he's had the some of the resources reports in the
Speaker 2: last couple of days. Does that help color your understanding
Speaker 2: of what we're going through?
Speaker 1: Yeah, it does? It does you know, you get a
Speaker 1: flavor as the house. You know, certain certain businesses are
Speaker 1: fairing and you know it doesn't match the data yet
Speaker 1: kind of does There's certain external businesses that are exporting stuff,
Speaker 1: they're doing they're doing okay, tourism related stuff, some some
Speaker 1: other things are bouncing back. But generally looking across the
Speaker 1: whole economy, if you actually go beyond the listed companies
Speaker 1: and you look at say corporate tax that the government's collecting.
Speaker 1: It's very very weak, very soft. So you know it's
Speaker 1: still it's still you know, better than last year, but
Speaker 1: not good. And we're still sort of feeling our way
Speaker 1: out of this of this recession. You know, earnings overseas
Speaker 1: have been okay, but you know, I'm not shooting the
Speaker 1: lights out.
Speaker 2: And you've got a lot of I D based liquidations.
Speaker 2: They're already coming cracking down.
Speaker 1: They have just gone like that, and it's like, you know,
Speaker 1: we see we sit there and go, you know, I'm sorry,
Speaker 1: but that's exactly what you see in a recession. People
Speaker 1: hold on for as long as they can and then
Speaker 1: if the if you're not recovering quickly, which we're not,
Speaker 1: then unfortunately a lot of these businesses go bust. And
Speaker 1: we have seen quite a lift in receiverships, liquidations, you know,
Speaker 1: all that, all that horrible stuff that we don't want
Speaker 1: to see. And again we look at that and say, hey, yeah,
Speaker 1: there's a lot of pain out there. What are we
Speaker 1: doing as a country? Government's not stilatory, central banks not stilatory.
Speaker 1: We've been through this huge recession. Where's the where's the
Speaker 1: helping hand?
Speaker 2: You've been quite interested in understanding money and finance and
Speaker 2: the economy for quite some time. How did that spark start?
Speaker 1: Yeah, pretty much my my my whole sort of adult life.
Speaker 1: Like it started at school and like many students are
Speaker 1: completely useless at English Mass, you know, I was getting
Speaker 1: like you know b's and c's and stuff. And then
Speaker 1: I had this fantastic economics teacher who's now teaching at
Speaker 1: with Slate Girls, Dan Rennie, and he just brought it
Speaker 1: to life. He got me reading the monetary policy statements
Speaker 1: from the Reserve Bank at like the age thirteen fourteen,
Speaker 1: and I've been reading my whole life. That's my whole life.
Speaker 1: I've been reading these monetary policy statements. But my best
Speaker 1: mate he went on to be a lawyer, so he
Speaker 1: was dreaming about being a lawyer and I'm dreaming about
Speaker 1: being an economist. And we both get together these days
Speaker 1: and look back and laugh and you know we were
Speaker 1: we basically have done what we said we're going to
Speaker 1: do it, like age fifteen.
Speaker 2: How do we get people fired up about that interested
Speaker 2: in those things?
Speaker 1: Is it just or yeah, try it out. I Mean
Speaker 1: there's some cool things that I wish that I wish
Speaker 1: were around when I was at at school. There's a
Speaker 1: system or a program called Banker, which is so cool.
Speaker 1: They get students, you know, really involved in finance and
Speaker 1: making decisions as if they're adults and you know, running
Speaker 1: a home, running a business, buying shares, that sort of stuff,
Speaker 1: and they get them involved in it early. I think,
Speaker 1: you know, financial literacy is something where I don't think
Speaker 1: it requires a lot and I'm glad the government's tackled
Speaker 1: this and said, you know, we need to do this.
Speaker 1: I don't think it requires a lot of teaching to
Speaker 1: give you just a real basic understanding. I'm always saddened
Speaker 1: when I hear of people being so scared to walk
Speaker 1: into a bank. Oh, I don't want to talk to them.
Speaker 1: They're not going to approve my loan. It's like walk
Speaker 1: in there, slap it on the desk and say I
Speaker 1: want my loan, you know, and if they say no,
Speaker 1: go to the next one. Go to the next one.
Speaker 2: You know what.
Speaker 1: The bank's there. They want you as a customer. And
Speaker 1: it's that financial literacy. You know, if you if you're
Speaker 1: not there and you and you're you're not comfortable in
Speaker 1: your own understanding, you are going to be nervous walking
Speaker 1: into a bank. And that shouldn't be the case if
Speaker 1: they had had proper bit of training on on on
Speaker 1: just how to do simple things and putting money away
Speaker 1: into it into a shares your account I think is
Speaker 1: part of that.
Speaker 2: Right, money makes it matter.
Speaker 1: Yeah, yeah, they'll be scared of it. Just just start
Speaker 1: doing it right.
Speaker 2: Well, let's see if that attitude will infuse itself out
Speaker 2: after this podcast and we'll start to see those green shirts.
Speaker 2: Jared Kre thank you very much for your time here,
Speaker 2: and thanks very much for your attention for listening in.
Speaker 2: Whatever you made of that, let us know, let us
Speaker 2: know if there's something else that we should be covering
Speaker 2: here on the Shared Lunch. That's us for now,