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Speaker 1: Afternoon. The GDP number out today has come as something

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Speaker 1: of a shock. It was far worse than expected for

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Speaker 1: Q two, down zero point nine percent. That is three

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Speaker 1: times as bad as predicted by the Reserve Bank just

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Speaker 1: last month. Now, Nikola Willis is the Finance Minister to

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Speaker 1: High Nicholer, Hi, is this worse than you thought it

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Speaker 1: would be?

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Speaker 2: Yes, the consensus forecast was that we did have a

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Speaker 2: negative quarter, but the view was that it was more

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Speaker 2: like zero point three percent. So this is bigger than forecast.

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Speaker 1: Okay, Now you're putting this down to the tariffs, right,

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Speaker 1: and I think to some extent you are right, but

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Speaker 1: it is bigger than that as well. There is domestic

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Speaker 1: stuff going on here.

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Speaker 2: Well, what we know is in the first three months

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Speaker 2: of the year we grew at zero point nine percent positive,

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Speaker 2: which was far faster than anyone had been forecasting, three

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Speaker 2: times the rate Australia was growing at that time. And

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Speaker 2: we know that the Trump tariff announcement really knocked the

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Speaker 2: stuffing out of people's confidence. And we'd felt in the

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Speaker 2: economy that drawback on an investment in hiring intentions. And

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Speaker 2: I think this data reflects.

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Speaker 1: That there is also the manufacturing collapse, which feels like

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Speaker 1: it's related to the energy prices. Yeah.

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Speaker 2: Well, the manufacturing is also about the timing of when

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Speaker 2: farmers send stock to be processed. It's also about how

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Speaker 2: much inventory firms are stocking up for export. So I

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Speaker 2: think there are range of factors at play in that

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Speaker 2: manufacturing data. What we know now is that this is

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Speaker 2: a time to really be kicking off construction and activity.

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Speaker 2: So I'm pleased that today we've announced the first fast

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Speaker 2: track housing project that will see more than two thy

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Speaker 2: seven hundred jobs created in Nelson with hundreds of homes,

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Speaker 2: an uplift to GDP of three hundred and forty million.

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Speaker 2: We want to get more of those fast track projects underway,

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Speaker 2: more government construction underway. All of those will be tailwinds

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Speaker 2: for growth.

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Speaker 1: Are you worried that this is going to knock people's

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Speaker 1: confidence all over again?

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Speaker 2: Well, I don't think people should overread the data for

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Speaker 2: the second quarter. They need to remember that data and

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Speaker 2: forecasts do bounce around. In the first three months of

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Speaker 2: the year, as I said, we grew a lot faster

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Speaker 2: that anyone had predicted. We also know that we're now

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Speaker 2: in a different phase where growth by consensus is faster

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Speaker 2: than it was a few months ago. We've got those

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Speaker 2: bigger intrast rate reductions coming through, and I'm sure that

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Speaker 2: the Reserve Bank will look at this data and see

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Speaker 2: that that underestimated how slow the economy had been, and

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Speaker 2: they'll have to reflect on that as they make future

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Speaker 2: interest rate decisions.

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Speaker 1: What I think the problem is is that it's going

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Speaker 1: to knock people's confidence in the institutions. Don't you think

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Speaker 1: it is going to knock confidence in the Reserve Bank's

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Speaker 1: ability to see what is actually going on and do

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Speaker 1: the right thing with the ocr It is going to

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Speaker 1: knock people's confidence even in the government because you guys

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Speaker 1: have been saying for the longest time there are green shoots,

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Speaker 1: it's fine, we're on track, and then get this massive contraction,

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Speaker 1: maybe even in bank economists who haven't seen it. And

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Speaker 1: there's the problem, isn't it is that if you don't

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Speaker 1: know who to trust, you just keep your money in

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Speaker 1: your wallet.

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Speaker 2: Well, it's always the case that forecasts are crystal balls

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Speaker 2: and no one can ever be completely definitive. I think

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Speaker 2: you have seen the Reserve Bank pivot in August. They

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Speaker 2: really focused at that point on the downside risks to

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Speaker 2: growth and did price in that additional interest rate reduction.

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Speaker 2: For our part as a government, this reinforces why it

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Speaker 2: is not the time to be increasing taxes, Why we

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Speaker 2: should be doing the investment boost, tax deduction for businesses

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Speaker 2: making investments. Why we must fast track projects despite the

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Speaker 2: cries from environmentalists and others. We need to see that

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Speaker 2: activity happening. Why we must say yes to more overseas

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Speaker 2: investment and trade. We must get those spades in the

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Speaker 2: ground on the government's and own infrastructure projects. All of

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Speaker 2: the activity that we're doing is more needed than ever

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Speaker 2: and an alternative course of just simply borrowing more and

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Speaker 2: spending more would not have done anything to fix the

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Speaker 2: second quarter result.

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Speaker 1: It looks to me like we're going to get it.

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Speaker 1: I mean, it must at least be a serious possibility

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Speaker 1: that we get a fifty basis point cut next month.

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Speaker 2: Yeah, well, I've seen bank economists are predicting that others

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Speaker 2: are more cautious in their outloock. Ultimately will be for

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Speaker 2: the Reserve Bank to decide.

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Speaker 1: Nicholas, thank you for your time, Nichola Willa's Finance Minister.

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Speaker 2: For more from hither Duplessy Allen Drive listen live to

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Speaker 2: news talks.

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Speaker 1: on iHeartRadio