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Speaker 1: Infametris brad Olsen's outfit reckons we might be overcooking it

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Speaker 1: with interest straight cuts. They say, the cats have gone

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Speaker 1: so far that they've done their job. The effects won't

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Speaker 1: be felt until mid to late next year. Too much

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Speaker 1: stimulus and we get all too excited again and then

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Speaker 1: facing tickles up and then rate hikes from late next year.

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Speaker 1: Independent economist Cameron Bagriy with me this morning to chat

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Speaker 1: about it.

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Speaker 2: Good morning, Cameron, Well, good morning, Nice to see you back.

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Speaker 1: Yeah, good to be back. What's the situation here? Do

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Speaker 1: you agree with this?

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Speaker 2: You can argue both sides. If you look at the

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Speaker 2: gross side of the equation and the gross side of

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Speaker 2: the equation, the New Zealan at the moment are still

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Speaker 2: pretty ana. So the reserve ends well justified by looking

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Speaker 2: at the climbing it up to the defaibilated and giving

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Speaker 2: a little bit of a shock so to speak, of

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Speaker 2: the form of a law psial cashrop. The other side

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Speaker 2: is that given the economy, a little bit more juice

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Speaker 2: is not without risk, and head blind inflation is moving up.

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Speaker 2: Core inflation looks a lot more contained. But this is

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Speaker 2: the reserve bank that they just need to be a

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Speaker 2: little bit weary here because if this economy is kicking agear,

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Speaker 2: and I think it is going to kick in the

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Speaker 2: gear into twenty twenty six, you could hit some capacity

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Speaker 2: constraints pretty quickly. You hit capacity constraints pretty quickly, FLAC

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Speaker 2: starts to wear its ugly head again. And for a

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Speaker 2: lot of people out there, Brian, most people do not

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Speaker 2: think heed by inflation is two point because you're seeing

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Speaker 2: your electricity bill move up at a double digit clip,

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Speaker 2: your rates bills moving up at a double digit clip,

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Speaker 2: medical bills, they cost of food out there across the

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Speaker 2: country as well.

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Speaker 1: What's worse for the Reserve Bank going hard now and

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Speaker 1: risk reversing later, or you know, letting the pain drag

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Speaker 1: on and staying on one course.

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Speaker 2: It's a Clayton's choice. We're welcome to being a central

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Speaker 2: bank and they need a lot of it's about risk

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Speaker 2: risk management, and the Reserve Band obviously decided after getting

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Speaker 2: that week GDP number for Q two, but they needed

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Speaker 2: up the NTY a little bit. But if you go

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Speaker 2: through their document, you know their statement, their minutes now

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Speaker 2: they are still wary about some of those inflation risks

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Speaker 2: because as I said, yeah, headline inflation is moving up.

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Speaker 2: They're not focused on head by inflation. They're focused on

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Speaker 2: core inflation. That looks a lot more sedate. But there's

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Speaker 2: whole lot of things out there at the moment that

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Speaker 2: the reserve band can't control. You know, one of the

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Speaker 2: big problems for a central bank is that that they

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Speaker 2: sort of know where the economy is through a demand lens,

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Speaker 2: but they don't know where the economy is through a

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Speaker 2: supply lends. Yeah, this is how last the economy can grow,

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Speaker 2: the combination of immigration, capital, the combination in line with

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Speaker 2: productivity growth. And what we know is that that line

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Speaker 2: is a very weak number. And if that line is

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Speaker 2: even weaker than what the reserve band is estimating, we

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Speaker 2: get hit capacity constraints very early in twenty twenty six.

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Speaker 2: On the assumption that this eclonomy is going to kick

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Speaker 2: into gear, there's a whole lot more people roll of

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Speaker 2: those fixed mortgages, and we know there's a lot of

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Speaker 2: stimulus in the pipeline.

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Speaker 1: When it kicks into gear because it's been so long

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Speaker 1: and dragged out. When it kicks into gear, does it

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Speaker 1: kick in it third gear? Are we going to suddenly

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Speaker 1: bolt out the gates?

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Speaker 2: I'm not convinced to get a bolt out of the gate.

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Speaker 2: And one of the reasons I'm not convincing in a

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Speaker 2: bolt out of the gate is the economy is not

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Speaker 2: just driven by what's called the cyclical leaders and a

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Speaker 2: cyclical letters of things such as interest rates coming down,

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Speaker 2: how much money to get it's pumping in. It's how

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Speaker 2: much makeey the farmers have got. That's the giesel one dollar.

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Speaker 2: It's the likes of that three point two bidion that

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Speaker 2: could hurt farmers wallets in the form of their consumer business.

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Speaker 2: So we know there's a there's some pretty big checks

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Speaker 2: that they're going to come in. But to get the

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Speaker 2: economy ready kicking into gear, you need to see the

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Speaker 2: housing in a pretty pretty good space. Because the housing

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Speaker 2: market's got about three speeds for neutral and reverse. If

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Speaker 2: you've got a shortage of supply, you can't interstrates, then

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Speaker 2: you can have typically one hall of a construction boom.

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Speaker 2: You know what we got out there at the moment,

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Speaker 2: is it your population growth raout is to supply I

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Speaker 2: building consents. It's all looks like we're building too many

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Speaker 2: houses as opposed to not enough. Housing valuations are not

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Speaker 2: exactly what you're called cheap. There's a whole lot of

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Speaker 2: other economic fundamentals across this economy. If you look at

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Speaker 2: our infrastructure, you look at shortage of energy, if you

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Speaker 2: lot at what's going on in regard to the quality

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Speaker 2: of the routing system. These things just told the economy

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Speaker 2: back through a structural lens. And these are areas that

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Speaker 2: the Reserve Bank cannot fix by cunning interest rates. Only

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Speaker 2: time can through some good economic policy.

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Speaker 1: Cameron Bagri and lead economists at Bagery Economics appreciate your time.

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Speaker 1: This morning is always interesting stuff. For more from Earlily

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Speaker 1: Edition with Ryan Bridge, listen live to news Talks it'd

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