1 00:00:03,240 --> 00:00:05,520 Speaker 1: Good to Koto, Welcome to Shared Lunch, brought to you 2 00:00:05,600 --> 00:00:08,800 Speaker 1: by Chersi's I'm Garth Bray and this week I'm speaking 3 00:00:08,840 --> 00:00:12,360 Speaker 1: with Tony Alexander, the perfect person to get a forward 4 00:00:12,480 --> 00:00:15,520 Speaker 1: picture on interest rates, not just here but on the 5 00:00:15,520 --> 00:00:18,040 Speaker 1: other side of the Tasman in Australia, where the Reserve 6 00:00:18,120 --> 00:00:20,479 Speaker 1: Bank of Australia has just made a big call on 7 00:00:20,560 --> 00:00:23,560 Speaker 1: cash rates. Tony also has some pretty interesting reckons on 8 00:00:23,640 --> 00:00:26,319 Speaker 1: the property market. All of that, after you take note 9 00:00:26,320 --> 00:00:29,920 Speaker 1: of some important information, you should always consider it before investing. 10 00:00:30,400 --> 00:00:33,000 Speaker 2: Investing involves the risk you might lose the money you 11 00:00:33,040 --> 00:00:36,320 Speaker 2: start with. We recommend talking to a licensed financial advisor. 12 00:00:37,040 --> 00:00:40,879 Speaker 2: We also recommend reading product disclosure documents before deciding to invest. 13 00:00:41,120 --> 00:00:43,519 Speaker 2: Everything you're about to see and here is current at 14 00:00:43,520 --> 00:00:44,400 Speaker 2: the time of recording. 15 00:00:45,320 --> 00:00:48,199 Speaker 1: Good day, Tony. You're there at Broadbeach. You're making the 16 00:00:48,240 --> 00:00:49,280 Speaker 1: most of the Gold Coast. 17 00:00:49,720 --> 00:00:52,440 Speaker 3: I'm the Gold Coast. Yes heaa, it's not sunny today. 18 00:00:52,520 --> 00:00:55,120 Speaker 3: No point turning the camera around and showing you outside today. 19 00:00:55,640 --> 00:00:58,520 Speaker 1: You are best place, I would say to give us 20 00:00:58,640 --> 00:01:01,440 Speaker 1: a ringside seat, not into what's happening here, but into 21 00:01:01,480 --> 00:01:05,440 Speaker 1: the Australian economy. And we are at this position where 22 00:01:06,120 --> 00:01:09,160 Speaker 1: perhaps later today when we were recording this, certainly by 23 00:01:09,160 --> 00:01:12,120 Speaker 1: the time we're putting this out, we'll know whether one 24 00:01:12,120 --> 00:01:17,559 Speaker 1: of the first major central banks is increasing rates again 25 00:01:17,840 --> 00:01:19,679 Speaker 1: for the first time in a long time. Yeah. 26 00:01:20,040 --> 00:01:23,000 Speaker 3: Yeah, basically that's the case. I mean, if the Reserve 27 00:01:23,040 --> 00:01:25,560 Speaker 3: Bank of Australia hasn't increased interest rates by the time 28 00:01:25,640 --> 00:01:28,120 Speaker 3: people will know that this gets played out there in 29 00:01:28,440 --> 00:01:30,720 Speaker 3: the public, and then it's going to be next month 30 00:01:30,800 --> 00:01:33,280 Speaker 3: or the month after. Because what's happened in Australia is 31 00:01:33,319 --> 00:01:36,560 Speaker 3: that the economy's growth rate two point one percent. It's 32 00:01:36,640 --> 00:01:39,440 Speaker 3: not necessarily anything too major, unless you compare with New 33 00:01:39,560 --> 00:01:42,640 Speaker 3: Zealand it minus necessario point five percent. But it's the 34 00:01:42,680 --> 00:01:47,040 Speaker 3: Reserve Bank of Australia's assumptions about the availability of capacity, 35 00:01:47,319 --> 00:01:50,160 Speaker 3: especially in the labor market, which have proved wrong. They 36 00:01:50,200 --> 00:01:52,720 Speaker 3: thought the unemployment rate was going to be much higher 37 00:01:52,720 --> 00:01:55,520 Speaker 3: than it is. It's recently just declined to four point 38 00:01:55,560 --> 00:01:59,160 Speaker 3: one percent, and so that means extra wagre wages pressure 39 00:01:59,360 --> 00:02:01,960 Speaker 3: is likely to come through. And already we've seen the 40 00:02:01,960 --> 00:02:05,520 Speaker 3: inflation rate turning out higher than expected three point eight percent. 41 00:02:05,840 --> 00:02:09,080 Speaker 3: They're sitting at in Australia with an expectation of a 42 00:02:09,080 --> 00:02:13,600 Speaker 3: good economic outlook for here. Consumer spending looking pretty robust, 43 00:02:13,639 --> 00:02:17,359 Speaker 3: lots of residential construction activity, lots of investment in the 44 00:02:17,480 --> 00:02:22,960 Speaker 3: renewable sector, data centers of infrastructure generally out there. So 45 00:02:23,280 --> 00:02:26,520 Speaker 3: the general discussion is the Reserve Bank of Australia frankly 46 00:02:26,600 --> 00:02:29,799 Speaker 3: probably shouldn't have cut interest rates last year, and now 47 00:02:29,800 --> 00:02:32,200 Speaker 3: they're going to have to reverse that, and guessing the 48 00:02:32,240 --> 00:02:34,960 Speaker 3: speed is a bit of a dog's breakfast whenever you're 49 00:02:35,000 --> 00:02:38,119 Speaker 3: at this point with a central bank, but they're going up. 50 00:02:38,520 --> 00:02:42,560 Speaker 1: The three point eight inflation figure was a particular surprise. 51 00:02:43,040 --> 00:02:44,799 Speaker 1: And I guess the reason I say we're talking about 52 00:02:44,840 --> 00:02:47,240 Speaker 1: Australia so much is because there are two economies are 53 00:02:47,560 --> 00:02:49,880 Speaker 1: not just physically close, but you know, you could imagine 54 00:02:49,880 --> 00:02:51,920 Speaker 1: that there's some tandem movements there. I'll be interested in 55 00:02:51,960 --> 00:02:54,960 Speaker 1: your thoughts about how strong that correlation is and to 56 00:02:55,040 --> 00:02:57,960 Speaker 1: what degree what we're seeing there may be mirrored in here. 57 00:02:58,040 --> 00:02:59,920 Speaker 1: Certainly we're seeing a lot of that same sticky in FLA. 58 00:03:00,639 --> 00:03:03,760 Speaker 1: But that three point eight percent inflation at the last print, 59 00:03:04,360 --> 00:03:06,960 Speaker 1: really for Australia, that's almost the casting vote, isn't it. 60 00:03:07,000 --> 00:03:10,160 Speaker 1: In favor of an end of a start of a 61 00:03:10,200 --> 00:03:12,400 Speaker 1: new tightening cycle in interest rates. There. 62 00:03:13,120 --> 00:03:15,079 Speaker 3: Yeah, it's not just that, like I say, it's the 63 00:03:15,120 --> 00:03:17,960 Speaker 3: low unemployment rate, but it's also the intransigence of the 64 00:03:18,000 --> 00:03:22,120 Speaker 3: federal government with regard to ever increasing the US spending. 65 00:03:22,919 --> 00:03:25,600 Speaker 3: The Federal Treasure keeps saying no, no, no, the increase in 66 00:03:25,639 --> 00:03:27,519 Speaker 3: inflation et ceterral cost of living, nothing to do with 67 00:03:27,600 --> 00:03:30,360 Speaker 3: for government where we're allocating money, blah blah blah. But 68 00:03:30,400 --> 00:03:33,240 Speaker 3: the fact is they are increasing their spending pretty strongly, 69 00:03:33,320 --> 00:03:36,880 Speaker 3: and that is by definition adding to inflationary pressures and 70 00:03:36,880 --> 00:03:39,520 Speaker 3: making the job for the Reserve Bank relatively hard. And 71 00:03:39,640 --> 00:03:41,720 Speaker 3: people are thinking, well, maybe they sort of cut interest 72 00:03:41,760 --> 00:03:43,480 Speaker 3: rates last year when they shouldn't have because they were 73 00:03:43,480 --> 00:03:45,720 Speaker 3: sort of doing the government of favor and buying into 74 00:03:45,760 --> 00:03:47,800 Speaker 3: their line. But you know the problem is that they 75 00:03:47,840 --> 00:03:50,640 Speaker 3: are increasing government spending. And this is an area where 76 00:03:50,640 --> 00:03:52,840 Speaker 3: it does differ for New Zealand. I've already mentioned that 77 00:03:53,640 --> 00:03:56,040 Speaker 3: our growth rate will recently for New Zealand it's been 78 00:03:56,040 --> 00:03:59,440 Speaker 3: negative year on year versus the plus two point one 79 00:03:59,440 --> 00:04:02,560 Speaker 3: percent for Australia. Our unemployment rate is five point three 80 00:04:02,600 --> 00:04:05,400 Speaker 3: percent versus the four point one percent. We've got Minister 81 00:04:05,440 --> 00:04:08,160 Speaker 3: of Finance in New Zealand looking to Australian government spending 82 00:04:08,200 --> 00:04:11,280 Speaker 3: after six years a blowout under labor versus it's a 83 00:04:11,360 --> 00:04:14,320 Speaker 3: labor government in Australia, so they're actively blowing out. They're 84 00:04:14,320 --> 00:04:17,600 Speaker 3: spending at the moment, and so things are not marching 85 00:04:17,720 --> 00:04:20,440 Speaker 3: sort of one for one year in that regard. And 86 00:04:20,560 --> 00:04:24,600 Speaker 3: this manifests itself mainly in the exchange rate. We had 87 00:04:24,600 --> 00:04:27,680 Speaker 3: a period of about twelve years where the key way 88 00:04:27,720 --> 00:04:30,520 Speaker 3: against the Aussie dollar was pretty much always something like 89 00:04:30,680 --> 00:04:33,920 Speaker 3: ninety cents through to ninety six cents. Now we sit 90 00:04:34,000 --> 00:04:36,840 Speaker 3: down at around about eighty six point something, and that's 91 00:04:36,839 --> 00:04:39,719 Speaker 3: because we've had this divergent movement in interest rates where 92 00:04:39,720 --> 00:04:41,359 Speaker 3: the interest rates have gone down a long way. In 93 00:04:41,360 --> 00:04:44,280 Speaker 3: New Zealand the cash rate is two point twenty five 94 00:04:44,320 --> 00:04:47,880 Speaker 3: percent and Australia is at three point six percent, maybe 95 00:04:47,960 --> 00:04:51,000 Speaker 3: higher by now, and that is not the usual situation. 96 00:04:51,320 --> 00:04:55,760 Speaker 3: Usually New Zealand's rate is slightly above Australia's and so 97 00:04:55,920 --> 00:04:57,719 Speaker 3: now we might be looking at a very short term 98 00:04:57,880 --> 00:04:59,680 Speaker 3: and an extra widening of that. So there could be some 99 00:04:59,760 --> 00:05:03,240 Speaker 3: int resting Kiwiozi exchange rate movements in the very near future. 100 00:05:03,320 --> 00:05:05,320 Speaker 1: Yeah, we've been struggling to punch through sort of eighty 101 00:05:05,320 --> 00:05:07,039 Speaker 1: seven cents, and it doesn't like it's going to go 102 00:05:07,040 --> 00:05:08,120 Speaker 1: anywhere near that, does it. 103 00:05:08,960 --> 00:05:11,800 Speaker 3: No, In the short term, assuming the Australian interest rates 104 00:05:11,800 --> 00:05:14,400 Speaker 3: are going up, then that's the situation. The key we 105 00:05:14,480 --> 00:05:16,479 Speaker 3: dollar maybe for the next two years is going to 106 00:05:16,480 --> 00:05:20,080 Speaker 3: remain relatively low and returning to that old ninety to 107 00:05:20,160 --> 00:05:22,880 Speaker 3: ninety six range. It could be a wee while before 108 00:05:22,720 --> 00:05:25,440 Speaker 3: we'll get back there, but I think we will because 109 00:05:25,520 --> 00:05:28,280 Speaker 3: at some stage the monetary policies will be moving differently. 110 00:05:28,320 --> 00:05:30,479 Speaker 3: And this is where it gets interesting. You see, for 111 00:05:30,839 --> 00:05:34,440 Speaker 3: New Zealand, of course, the monetary policy framework pretty much 112 00:05:34,480 --> 00:05:37,240 Speaker 3: the same as Australia. They're aiming for something between you know, 113 00:05:37,640 --> 00:05:40,200 Speaker 3: lower than three percent and will they've failed at three 114 00:05:40,240 --> 00:05:43,719 Speaker 3: point one percent at the moment. But the tendency for 115 00:05:43,800 --> 00:05:46,640 Speaker 3: our central bank has been when it comes to seeing 116 00:05:46,680 --> 00:05:49,200 Speaker 3: what's happening in the economy and inflation and doing something 117 00:05:49,240 --> 00:05:53,400 Speaker 3: about it, they tighten too late, then they tighten too much, 118 00:05:54,000 --> 00:05:57,119 Speaker 3: then they ease too late, and they ease too much, 119 00:05:57,600 --> 00:06:00,279 Speaker 3: and they're into the oh they ease too much. I 120 00:06:00,320 --> 00:06:02,479 Speaker 3: thought our cash rate last year would bottom out at 121 00:06:02,520 --> 00:06:05,440 Speaker 3: three percent, not two point two five percent. They went 122 00:06:05,440 --> 00:06:07,360 Speaker 3: too low. We're going to see an increase from our 123 00:06:07,400 --> 00:06:10,839 Speaker 3: central bank sometime this year. What time, that's anyone's guess 124 00:06:10,880 --> 00:06:13,360 Speaker 3: at the moment. But what the Australians do in the 125 00:06:13,400 --> 00:06:16,560 Speaker 3: short term I think will have some relevance. It will 126 00:06:16,560 --> 00:06:19,520 Speaker 3: make our central bank go well. Actually, maybe we should 127 00:06:19,520 --> 00:06:21,440 Speaker 3: be a little bit cautious because look at what they're 128 00:06:21,440 --> 00:06:24,760 Speaker 3: having to do over there. Oh and we've won an 129 00:06:24,760 --> 00:06:27,320 Speaker 3: election year to stuff everything up and make extra uncertainty. 130 00:06:27,800 --> 00:06:29,279 Speaker 1: And I guess to the background that we've got a 131 00:06:29,320 --> 00:06:32,600 Speaker 1: new Reserve Bank governor here in Abreemen, coming from Sweden, 132 00:06:33,279 --> 00:06:37,040 Speaker 1: only one vote on a committee of six. But presumably 133 00:06:37,080 --> 00:06:39,040 Speaker 1: that'll bring some fresh thinking around this. I think in 134 00:06:39,040 --> 00:06:41,280 Speaker 1: interviews last year she was talking about how the point 135 00:06:41,279 --> 00:06:43,719 Speaker 1: of this is to have some kind of economic recovery 136 00:06:43,760 --> 00:06:48,320 Speaker 1: as well as to maintain control of inflation, and that 137 00:06:48,440 --> 00:06:50,000 Speaker 1: was sort of when she was talking about where the 138 00:06:50,040 --> 00:06:52,360 Speaker 1: banks should be moving on rates and so on. So 139 00:06:52,600 --> 00:06:56,680 Speaker 1: that'll muddy the picture too, won't it. Tony year two. 140 00:06:56,839 --> 00:07:01,000 Speaker 3: To certain extents, yes, will it break the tendency of, 141 00:07:01,120 --> 00:07:04,360 Speaker 3: like I say, ease too late then ees too much, 142 00:07:04,400 --> 00:07:07,880 Speaker 3: et cetera, and vice versa on the tightening. Don't know, 143 00:07:08,120 --> 00:07:10,920 Speaker 3: she's proved herself to be a little bit error prone 144 00:07:11,560 --> 00:07:14,800 Speaker 3: so far with someone for commentary. Nothing major, I feel, 145 00:07:14,840 --> 00:07:18,040 Speaker 3: but there's got that may make her just take a 146 00:07:18,040 --> 00:07:20,400 Speaker 3: slightly softer voice until she really gets a feel for 147 00:07:20,440 --> 00:07:23,160 Speaker 3: how the place functions. I think a key problem for 148 00:07:23,240 --> 00:07:25,840 Speaker 3: the Reserve Bank maybe is more in the Economics Department 149 00:07:25,960 --> 00:07:29,400 Speaker 3: rather than the Monetary Policy Committee, where the Economics Department, 150 00:07:29,400 --> 00:07:32,720 Speaker 3: I feel, might still be running on strong belief in 151 00:07:32,760 --> 00:07:36,480 Speaker 3: their macro econometric models of the New Zealand economy which 152 00:07:36,480 --> 00:07:39,400 Speaker 3: are turning out just to simply be wrong, quite frankly, 153 00:07:39,680 --> 00:07:41,880 Speaker 3: and then not picking what's happening in the economy, not 154 00:07:41,880 --> 00:07:45,360 Speaker 3: picking what's happening in inflation and the recent inflation rate 155 00:07:45,440 --> 00:07:48,080 Speaker 3: of three point one percent they had expected two point 156 00:07:48,120 --> 00:07:52,040 Speaker 3: seven percent. So you know, the decisions made by the 157 00:07:52,040 --> 00:07:54,920 Speaker 3: Monetary Policy Committee depending on the information supplied by the 158 00:07:54,960 --> 00:07:57,560 Speaker 3: Economics Department, and that I think is where there are 159 00:07:57,600 --> 00:08:01,280 Speaker 3: some issues. Frankly, the Reserve Bank of New Zealand will 160 00:08:01,320 --> 00:08:03,120 Speaker 3: be getting into the thick of it right now with 161 00:08:03,200 --> 00:08:06,200 Speaker 3: a decision sort of February eighteen presumably they're now I've 162 00:08:06,200 --> 00:08:08,800 Speaker 3: got the packs in front of them to indicate what 163 00:08:10,080 --> 00:08:12,840 Speaker 3: sort of decision they should be making. Probably, you know, 164 00:08:13,160 --> 00:08:15,480 Speaker 3: you imagine it's going to be a whole steady at 165 00:08:15,480 --> 00:08:18,240 Speaker 3: this point, but they'll be giving some forward commentary or 166 00:08:18,280 --> 00:08:19,960 Speaker 3: do you have a different view there based on what 167 00:08:20,000 --> 00:08:23,000 Speaker 3: you've said about where they should have been already. I 168 00:08:23,160 --> 00:08:26,720 Speaker 3: don't see them changing the cash rate. Come later this month. 169 00:08:26,800 --> 00:08:29,280 Speaker 3: I think they'll want to see a lot more information 170 00:08:29,600 --> 00:08:34,880 Speaker 3: regarding how quickly capacity availability is diminishing in New Zealand. 171 00:08:34,880 --> 00:08:36,920 Speaker 3: They are. Interestingly, by the time people get to see 172 00:08:36,960 --> 00:08:39,560 Speaker 3: our video, there's going to be some fresh information on this. 173 00:08:39,679 --> 00:08:44,240 Speaker 3: From the December quarter employment numbers in Australia, these things 174 00:08:44,280 --> 00:08:46,320 Speaker 3: have turned out to be a lot stronger than they expected, 175 00:08:46,600 --> 00:08:48,920 Speaker 3: and I've just got a feeling that in New Zealand 176 00:08:49,160 --> 00:08:52,679 Speaker 3: not so much yet in the December quarter numbers. But 177 00:08:52,720 --> 00:08:54,800 Speaker 3: as we go through the year, I think the labor 178 00:08:54,840 --> 00:08:57,320 Speaker 3: market in New Zealand could tighten up a lot more 179 00:08:57,360 --> 00:09:00,440 Speaker 3: quickly than people are thinking. I think businesses will do 180 00:09:00,520 --> 00:09:02,600 Speaker 3: some extra hiring and when we look at the A 181 00:09:02,720 --> 00:09:06,079 Speaker 3: and Z's Business Outlook Survey, on average over the past 182 00:09:06,080 --> 00:09:09,480 Speaker 3: three decades, A net six percent of businesses each month 183 00:09:09,520 --> 00:09:11,440 Speaker 3: have said I'm going to hire more people in the 184 00:09:11,440 --> 00:09:14,360 Speaker 3: coming year. That's running at twenty two percent at the moment. 185 00:09:14,720 --> 00:09:17,920 Speaker 3: A month ago was twenty eight percent. Businesses are looking 186 00:09:17,960 --> 00:09:20,400 Speaker 3: to hire people. And we already saw the number of 187 00:09:20,400 --> 00:09:22,840 Speaker 3: hours worked in the economy in the September quarter rise 188 00:09:22,880 --> 00:09:25,319 Speaker 3: Europe when nine percent, and maybe it did that again. 189 00:09:25,400 --> 00:09:29,160 Speaker 3: We'll know, you'll know by now ah as well. So 190 00:09:29,320 --> 00:09:31,680 Speaker 3: I certainly don't think the Receerve Bank will feel there's 191 00:09:31,720 --> 00:09:34,520 Speaker 3: enough ammunition to move as yet, and I don't even 192 00:09:34,559 --> 00:09:37,520 Speaker 3: think they'll feel that they need to start signaling that 193 00:09:37,800 --> 00:09:41,280 Speaker 3: a tightening is imminent as yet. I think they'll wait 194 00:09:41,360 --> 00:09:43,280 Speaker 3: until May when they do a whole new set of 195 00:09:43,280 --> 00:09:46,360 Speaker 3: economic forecasts, they do a whole new monetary policy statements. 196 00:09:46,720 --> 00:09:49,280 Speaker 3: That is when I think we should pay a little 197 00:09:49,280 --> 00:09:53,680 Speaker 3: bit more attention Before then. I fully expect the wholesale interstrates, however, 198 00:09:53,840 --> 00:09:57,280 Speaker 3: will be rising that will see further increases in basically 199 00:09:57,280 --> 00:10:01,440 Speaker 3: the one five ten year wholesale interrastrate, government bond yields, 200 00:10:01,640 --> 00:10:04,319 Speaker 3: the swap rates that banks borrowed, and so the story 201 00:10:04,360 --> 00:10:06,120 Speaker 3: for twenty twenty six is going to be what we've 202 00:10:06,120 --> 00:10:08,720 Speaker 3: already seen happening from one or two months ago, the 203 00:10:08,760 --> 00:10:13,400 Speaker 3: fixed mortgage rates rising, not necessarily jumping sharply, but rising 204 00:10:13,440 --> 00:10:15,640 Speaker 3: as the year goes by because the next change in 205 00:10:15,720 --> 00:10:18,199 Speaker 3: monashy policy in New Zealand is a tightening. 206 00:10:18,720 --> 00:10:21,280 Speaker 1: We just don't know when that was really a story 207 00:10:21,360 --> 00:10:24,400 Speaker 1: just before Christmas, wasn't it where you saw suddenly, off 208 00:10:24,440 --> 00:10:28,200 Speaker 1: the back of the last Reserve Bank decision, those longer 209 00:10:28,280 --> 00:10:31,840 Speaker 1: term rates actually took off quite quickly because of the 210 00:10:31,880 --> 00:10:34,400 Speaker 1: foreshadowing language that had come through from the bank about, 211 00:10:34,480 --> 00:10:36,920 Speaker 1: you know, when things were going to turn around. It's 212 00:10:36,920 --> 00:10:38,960 Speaker 1: not the only part of that story, though, isn't There's 213 00:10:39,000 --> 00:10:40,800 Speaker 1: some sort of you know, basically a bigger picture of 214 00:10:40,800 --> 00:10:43,360 Speaker 1: the world affairs, the state of the US economy, and 215 00:10:43,360 --> 00:10:45,559 Speaker 1: other things that impact on those wholesale rates, aren't they. 216 00:10:46,200 --> 00:10:48,480 Speaker 3: Yeah, that's right. I mean, we've seen increases in interest 217 00:10:48,520 --> 00:10:51,400 Speaker 3: rates in Japan, Australia obviously with their quick change in 218 00:10:51,440 --> 00:10:55,280 Speaker 3: monastry policy. View the United States to some extent as well, 219 00:10:55,280 --> 00:10:58,960 Speaker 3: concerns about US federal debt, about the role of the 220 00:10:59,080 --> 00:11:02,640 Speaker 3: USR currency the world economy as a reserve currency, for instance, 221 00:11:02,720 --> 00:11:07,400 Speaker 3: concerns of foreign investors selling USRR government bonds and it's 222 00:11:07,520 --> 00:11:10,640 Speaker 3: like our own domestic issues come on top of that, 223 00:11:11,280 --> 00:11:14,439 Speaker 3: and so it's not just whatever's happening in New Zealand 224 00:11:14,440 --> 00:11:17,160 Speaker 3: with monetary policy that is relevant to the It is 225 00:11:17,200 --> 00:11:20,280 Speaker 3: this other stuff overseas, which, as you go further out 226 00:11:20,280 --> 00:11:23,440 Speaker 3: the yield curve further out from one year to three 227 00:11:23,520 --> 00:11:25,880 Speaker 3: years and then five years, et cetera. When it really 228 00:11:25,960 --> 00:11:29,520 Speaker 3: kicks in, what's happening overseas becomes very important to what 229 00:11:29,559 --> 00:11:31,840 Speaker 3: happens with those longer term borrowing costs. 230 00:11:32,080 --> 00:11:34,640 Speaker 1: There's been a lot of data just recently about you know, 231 00:11:34,720 --> 00:11:38,640 Speaker 1: mortgage debt, home loans and activity there in the lead 232 00:11:38,679 --> 00:11:41,240 Speaker 1: up to Christmas because of the huge numbers we saw, 233 00:11:41,280 --> 00:11:43,280 Speaker 1: I think it was something like close to six billion, 234 00:11:43,280 --> 00:11:47,440 Speaker 1: five to eight billion worth of debt that swapped banks, 235 00:11:47,480 --> 00:11:50,800 Speaker 1: people looking for better options. It was about sort of 236 00:11:50,880 --> 00:11:53,000 Speaker 1: you know, close to fifty percent were on floating. It 237 00:11:53,040 --> 00:11:56,320 Speaker 1: did feel like a real sort of turning point. And 238 00:11:56,400 --> 00:11:59,520 Speaker 1: yet we're seeing a lot of people are still coming 239 00:11:59,559 --> 00:12:02,640 Speaker 1: off rates and the average rate is dropping, isn't it. 240 00:12:02,679 --> 00:12:04,640 Speaker 1: So how is that going to feed into the picture, 241 00:12:04,840 --> 00:12:06,760 Speaker 1: not just in the coming quarter but in the coming year. 242 00:12:07,520 --> 00:12:11,040 Speaker 3: Yes, it's two divergent things. With the average infrastrators falling 243 00:12:11,080 --> 00:12:14,080 Speaker 3: as people roll off something higher into something lower. That 244 00:12:14,160 --> 00:12:17,560 Speaker 3: has its positive impact mainly in terms of consumer spending 245 00:12:17,679 --> 00:12:20,520 Speaker 3: going down to the shops, to the cafes, restaurants, domestic 246 00:12:20,559 --> 00:12:23,360 Speaker 3: overseas travel. There's a positive stimulus going to run through 247 00:12:23,400 --> 00:12:26,920 Speaker 3: our economy this year from the average intustrate falling and 248 00:12:27,200 --> 00:12:31,120 Speaker 3: it will lift the pace of economic growth alongside business investment, infrastructure, 249 00:12:31,280 --> 00:12:35,440 Speaker 3: strong exports as well with the anticipation of higher inflation 250 00:12:35,559 --> 00:12:38,480 Speaker 3: maybe in New Zealand or the Reserve Bank tightening monetary policy. 251 00:12:38,679 --> 00:12:42,480 Speaker 3: That's mainly relevant for the new borrowing which people are 252 00:12:42,480 --> 00:12:45,640 Speaker 3: doing out there. For somebody looking to now go and 253 00:12:45,679 --> 00:12:47,800 Speaker 3: buy a house who didn't already have one with a 254 00:12:47,800 --> 00:12:50,760 Speaker 3: mortgage for them, the risk is the interest rate gets 255 00:12:50,840 --> 00:12:53,360 Speaker 3: higher as each month or two month period goes by 256 00:12:53,960 --> 00:12:56,840 Speaker 3: through twenty twenty six, and that's just one of the 257 00:12:56,840 --> 00:13:00,000 Speaker 3: factors which will restrain the speed of up to time 258 00:13:00,000 --> 00:13:01,880 Speaker 3: turn in the housing market this year. It's not going 259 00:13:01,960 --> 00:13:04,360 Speaker 3: to stop it. I've seen some commentary out there saying, oh, 260 00:13:04,400 --> 00:13:05,880 Speaker 3: it's up, going up, and now it's going to go 261 00:13:05,960 --> 00:13:08,640 Speaker 3: back down again. No, I don't buy into that. Not 262 00:13:08,760 --> 00:13:12,520 Speaker 3: with employment confidence picking up by people out there, but 263 00:13:12,559 --> 00:13:14,800 Speaker 3: it just means we're not going to have any sort 264 00:13:14,800 --> 00:13:17,280 Speaker 3: of housing boom. It's not going to be an exciting thing. 265 00:13:17,679 --> 00:13:20,560 Speaker 3: We've got to get something as quickly as humanly possible. 266 00:13:21,000 --> 00:13:23,959 Speaker 3: That's sort of gone for quite some time in New Zealand. 267 00:13:24,000 --> 00:13:28,560 Speaker 1: And with that, I guess no recovery to prices in 268 00:13:28,600 --> 00:13:31,000 Speaker 1: some of the areas where we've seen in real terms 269 00:13:31,080 --> 00:13:34,240 Speaker 1: or a twenty or a thirty percent drop since the 270 00:13:34,280 --> 00:13:35,920 Speaker 1: peak back in sort of twenty one to twenty two 271 00:13:36,000 --> 00:13:38,200 Speaker 1: kind of thing. Obviously that was maybe a little bit 272 00:13:38,200 --> 00:13:40,520 Speaker 1: of an asset bubble we can now sort of see. 273 00:13:40,640 --> 00:13:42,839 Speaker 1: But people are going to feel unless they're in the 274 00:13:43,160 --> 00:13:44,959 Speaker 1: right post code, they're not going to feel that rich, 275 00:13:45,000 --> 00:13:45,319 Speaker 1: are they. 276 00:13:46,240 --> 00:13:47,559 Speaker 3: That's right, there's not going to be all that much 277 00:13:47,600 --> 00:13:50,400 Speaker 3: of a positive wealth effect coming through to the economy 278 00:13:50,440 --> 00:13:52,959 Speaker 3: from by crikee. I'm worth two hundred thousand dollars more 279 00:13:52,960 --> 00:13:55,120 Speaker 3: than I thought I was. Let's buy a new car. 280 00:13:55,400 --> 00:13:58,479 Speaker 3: I mean that people do tend to overestimate the magnitude 281 00:13:58,480 --> 00:14:01,320 Speaker 3: of that, but it is a positive magnitude. So that'll 282 00:14:01,360 --> 00:14:03,760 Speaker 3: just be one source of restraint on the economy. So 283 00:14:03,840 --> 00:14:06,199 Speaker 3: you know, economy up, but it's not a boom. Real 284 00:14:06,280 --> 00:14:09,840 Speaker 3: estate market up, but definitely not a boom out there. 285 00:14:10,000 --> 00:14:12,960 Speaker 3: There are just many restraining factors. The election obviously is 286 00:14:12,960 --> 00:14:16,720 Speaker 3: going to be a restraining factor overall from some point, 287 00:14:16,840 --> 00:14:19,200 Speaker 3: maybe as late winter, people are going to go I'm 288 00:14:19,240 --> 00:14:21,680 Speaker 3: just going to wait and see what happens. What will 289 00:14:21,720 --> 00:14:24,280 Speaker 3: the new government be, what will the policy trade offfs be. 290 00:14:24,680 --> 00:14:27,160 Speaker 3: It will tend to stall some of the business investments, 291 00:14:27,240 --> 00:14:29,440 Speaker 3: and so the upturn in the economy will just be 292 00:14:29,520 --> 00:14:31,480 Speaker 3: damping a little bit at that time, and maybe a 293 00:14:31,520 --> 00:14:33,800 Speaker 3: little bit in the housing market as well, as people wonder. 294 00:14:33,880 --> 00:14:36,640 Speaker 3: I wonder if there's monetary policy implications from whoever comes 295 00:14:36,680 --> 00:14:39,640 Speaker 3: to power. Don't know, it's a usual thing happens every 296 00:14:39,640 --> 00:14:40,160 Speaker 3: three years. 297 00:14:40,280 --> 00:14:42,760 Speaker 1: But immigration as well, that's another one of those main 298 00:14:43,040 --> 00:14:46,400 Speaker 1: drivers in the past, or main indicators of how well 299 00:14:46,440 --> 00:14:49,360 Speaker 1: the housing market is doing. Obviously, if you're bringing larger 300 00:14:49,400 --> 00:14:51,440 Speaker 1: and larger numbers of people into the population, you're going 301 00:14:51,480 --> 00:14:53,280 Speaker 1: to need somewhere to put them. And we can see 302 00:14:53,280 --> 00:14:56,120 Speaker 1: that that's already quite a political football with the sort 303 00:14:56,160 --> 00:14:59,640 Speaker 1: of commentary that's emerging around the India New Zealand Free 304 00:14:59,680 --> 00:15:02,880 Speaker 1: Trade Deal and the pushback there. I mean, what have 305 00:15:02,920 --> 00:15:05,200 Speaker 1: you looked at immigration at all? Have you looked at 306 00:15:05,240 --> 00:15:06,920 Speaker 1: the sort of the trends there and how that's likely 307 00:15:07,200 --> 00:15:08,120 Speaker 1: to influence things. 308 00:15:08,640 --> 00:15:12,240 Speaker 3: Yeah, first point to note about immigration it is impossible 309 00:15:12,320 --> 00:15:17,320 Speaker 3: to forecasts with accuracy net migration flows. I've tried this 310 00:15:17,360 --> 00:15:20,000 Speaker 3: for three and a half decades. Cannot do it obviously, 311 00:15:20,040 --> 00:15:23,160 Speaker 3: and others try it come as badly unstuck as myself. 312 00:15:23,200 --> 00:15:25,920 Speaker 3: So it's going to do whatever it's going to do. However, 313 00:15:26,160 --> 00:15:28,120 Speaker 3: everyone likes a view. So when we look at the 314 00:15:28,120 --> 00:15:31,400 Speaker 3: most recent months, we see that the annual net migration 315 00:15:31,600 --> 00:15:34,240 Speaker 3: gain bottomed out. I don't know, six or so months 316 00:15:34,280 --> 00:15:38,040 Speaker 3: ago had eight eight hundred, eight and a half thousand. 317 00:15:38,200 --> 00:15:40,120 Speaker 3: Now it's running at about ten and a half thousand. 318 00:15:40,200 --> 00:15:42,000 Speaker 3: So if you squint your eyes and hold your tongue 319 00:15:42,040 --> 00:15:45,160 Speaker 3: just right, you could say, I think there's a slight 320 00:15:45,240 --> 00:15:49,440 Speaker 3: recovery in the net migration flows which is underway. Well, 321 00:15:49,920 --> 00:15:52,760 Speaker 3: it's not convincing me yet, especially not with the still 322 00:15:52,800 --> 00:15:57,000 Speaker 3: strong Australian economy, massive demand for labor in Australia as well, 323 00:15:57,200 --> 00:15:59,160 Speaker 3: netflo of keys across there I think is going to 324 00:15:59,160 --> 00:16:03,920 Speaker 3: remain relatively for a while and I think clearly the government, 325 00:16:04,040 --> 00:16:06,760 Speaker 3: outside of some slight easing on the with the trade 326 00:16:06,800 --> 00:16:09,880 Speaker 3: agreement India the year, you know, there's no biggie change 327 00:16:09,880 --> 00:16:12,240 Speaker 3: in the migration policies are running through. That's going to 328 00:16:12,280 --> 00:16:15,440 Speaker 3: have a big impact. The key thing maybe to notice 329 00:16:15,480 --> 00:16:18,520 Speaker 3: that on average in the past decade there has been 330 00:16:18,560 --> 00:16:22,600 Speaker 3: a net migration gain of fifty five thousand people a year. 331 00:16:22,800 --> 00:16:26,160 Speaker 3: We're running a ten thousand. It's well below average. So 332 00:16:26,200 --> 00:16:29,040 Speaker 3: we are going to have i'd say, through this year 333 00:16:29,200 --> 00:16:34,280 Speaker 3: and twenty twenty seven below average stimulus to the residential 334 00:16:34,320 --> 00:16:38,400 Speaker 3: real estate market and the economy from net migration flows 335 00:16:38,520 --> 00:16:39,400 Speaker 3: just below average. 336 00:16:39,400 --> 00:16:41,720 Speaker 1: That's all on for Bemerson, and presumably that's going to 337 00:16:41,720 --> 00:16:45,520 Speaker 1: flow through to the hiring conditions and available employment, and 338 00:16:45,560 --> 00:16:47,600 Speaker 1: that's going to put another dampener on the ability of 339 00:16:47,640 --> 00:16:49,480 Speaker 1: firms maybe to grow as quickly as they'd like to, 340 00:16:49,520 --> 00:16:50,840 Speaker 1: and then we could be back into sort of an 341 00:16:50,840 --> 00:16:53,240 Speaker 1: inflationary cycle as well as the sort of the wage 342 00:16:53,560 --> 00:16:56,800 Speaker 1: bills go up, right because there aren't the people there 343 00:16:56,960 --> 00:16:59,240 Speaker 1: to meet that capacity. Would you be fair there. 344 00:17:00,120 --> 00:17:02,520 Speaker 3: In a nutshell, I think the assumptions businesses might have 345 00:17:02,760 --> 00:17:04,479 Speaker 3: of okay, when we need to grow the people are 346 00:17:04,480 --> 00:17:06,520 Speaker 3: going to be there. I think those assumptions are going 347 00:17:06,560 --> 00:17:09,080 Speaker 3: to prove wrong, because we've got not only young people 348 00:17:09,320 --> 00:17:11,639 Speaker 3: with all their rea goodness and the ability of a 349 00:17:11,680 --> 00:17:14,639 Speaker 3: business to mold them, you know, possibly disappearing to Australia. 350 00:17:14,760 --> 00:17:16,800 Speaker 3: We do, of course have evidence of the appearance the 351 00:17:16,840 --> 00:17:19,720 Speaker 3: generation above them also being concerned about what they see 352 00:17:19,720 --> 00:17:21,960 Speaker 3: around them and going across to Australia or maybe somewhere 353 00:17:21,960 --> 00:17:26,440 Speaker 3: else as well. And economies move in cycles, and when 354 00:17:26,480 --> 00:17:29,639 Speaker 3: businesses see the cycle is upward, there is not massive, 355 00:17:29,640 --> 00:17:33,320 Speaker 3: but it's upward. Let's start catching up on our hiring. 356 00:17:34,080 --> 00:17:36,800 Speaker 3: Let's not lay off the people we're going to lay off. 357 00:17:36,920 --> 00:17:38,879 Speaker 3: And yet I do think the market could try up 358 00:17:38,920 --> 00:17:41,680 Speaker 3: relatively quickly. And the issue here from the Reserve Banks 359 00:17:41,720 --> 00:17:44,439 Speaker 3: point of view is that wages growth is still above average. 360 00:17:44,600 --> 00:17:49,480 Speaker 3: So since nineteen ninety two, on average, ordinary time average 361 00:17:49,480 --> 00:17:52,520 Speaker 3: hourly earnings have grown three point three percent per year 362 00:17:52,560 --> 00:17:55,240 Speaker 3: in the New Zealand economy. Three point nine percent is 363 00:17:55,280 --> 00:17:58,239 Speaker 3: the latest growth rate. So even with the unemployment rate 364 00:17:58,320 --> 00:18:00,720 Speaker 3: going recently from three point three percent to five point 365 00:18:00,800 --> 00:18:04,359 Speaker 3: three percent approximately, and with all the woe in the economy, 366 00:18:04,440 --> 00:18:07,960 Speaker 3: wageous growth has still been above average wageous growth has 367 00:18:08,000 --> 00:18:10,639 Speaker 3: still exceeded increasing the cost of living over the past 368 00:18:10,640 --> 00:18:13,879 Speaker 3: five and six six years. So that will mean some 369 00:18:13,920 --> 00:18:16,600 Speaker 3: extra inflationary pressure is going to come along unless we 370 00:18:16,640 --> 00:18:21,720 Speaker 3: get surging productivity. Everyone embraces AI and productivity surges. Well, 371 00:18:21,720 --> 00:18:23,960 Speaker 3: the evidence there is a little bit dubious, shall we say, 372 00:18:24,680 --> 00:18:27,639 Speaker 3: so far and for three years in a row, the 373 00:18:27,800 --> 00:18:29,680 Speaker 3: data is so far available in New Zealand for the 374 00:18:29,720 --> 00:18:33,080 Speaker 3: past three years, the level, not the rate of growth, 375 00:18:33,520 --> 00:18:37,560 Speaker 3: the level of productivity in New Zealand has fallen. That's 376 00:18:37,680 --> 00:18:41,520 Speaker 3: really bad for inflation. It says that for any given 377 00:18:41,680 --> 00:18:44,119 Speaker 3: rate of growth in your economy you see coming along, 378 00:18:44,240 --> 00:18:46,960 Speaker 3: you've got to allow for higher inflation than if you 379 00:18:47,000 --> 00:18:50,439 Speaker 3: were increasingly productive in your economy. Oh unless throw in 380 00:18:50,480 --> 00:18:52,520 Speaker 3: there just from the inflation worries point of view, if 381 00:18:52,520 --> 00:18:55,240 Speaker 3: people aren't scared enough already about interest rates rising at 382 00:18:55,560 --> 00:18:59,160 Speaker 3: unknown speed this year. We are a country of many 383 00:18:59,240 --> 00:19:05,600 Speaker 3: oligopoly and monopolies. Monopoly, un saler, oligopoly two three, maybe 384 00:19:05,680 --> 00:19:08,440 Speaker 3: up to five sellers, and so you look at sectors 385 00:19:08,560 --> 00:19:14,919 Speaker 3: like electricity, insurance, aviation, monopolies, councils. The only way you 386 00:19:14,920 --> 00:19:17,480 Speaker 3: can escape your monopoly council and what they do with 387 00:19:17,520 --> 00:19:21,879 Speaker 3: your rates is go live in another monopoly council's area. 388 00:19:22,359 --> 00:19:25,040 Speaker 3: And this is an unfortunate dynamic for New Zealand. It 389 00:19:25,080 --> 00:19:28,360 Speaker 3: means inflation can get relatively entrenched out there. 390 00:19:28,640 --> 00:19:30,920 Speaker 1: It's I mean, that's the structural part that really a 391 00:19:31,000 --> 00:19:33,920 Speaker 1: rate cut doesn't do much to fix, right, It's beyond 392 00:19:34,000 --> 00:19:37,720 Speaker 1: the reach because that stuff is usually moving at a 393 00:19:37,800 --> 00:19:42,520 Speaker 1: much greater level, and it's it's not susceptible to a 394 00:19:42,600 --> 00:19:43,200 Speaker 1: change in rates. 395 00:19:43,240 --> 00:19:46,359 Speaker 3: Yeah, yep, they try it. In fact, even if we 396 00:19:46,359 --> 00:19:48,040 Speaker 3: look at it, I think from a slightly different point 397 00:19:48,040 --> 00:19:50,520 Speaker 3: of view, I think about forty percent of the six 398 00:19:50,640 --> 00:19:52,760 Speaker 3: hundred and forty nine items that make up the consumer's 399 00:19:52,800 --> 00:19:57,080 Speaker 3: price index priced overseas, or their prices are determined by 400 00:19:57,119 --> 00:20:00,120 Speaker 3: what's happening overseas, So only sixty percent of the item 401 00:20:00,320 --> 00:20:03,159 Speaker 3: are really susceptible to monetary policy changes in New Zealand. 402 00:20:03,400 --> 00:20:05,640 Speaker 3: And then of course a lot of them are determined 403 00:20:05,640 --> 00:20:09,400 Speaker 3: by these large businesses. So the monetary policy really struggles 404 00:20:09,400 --> 00:20:11,960 Speaker 3: to get things going. And there's one thing I haven't 405 00:20:12,000 --> 00:20:15,520 Speaker 3: even mentioned yet, and this is actually a key thing 406 00:20:15,560 --> 00:20:18,560 Speaker 3: I've been hammering since about August of twenty twenty four, 407 00:20:18,880 --> 00:20:21,760 Speaker 3: So maybe some people remember in August twenty twenty four, 408 00:20:22,040 --> 00:20:24,480 Speaker 3: I jumped up and down like an idiot, saying, don't 409 00:20:24,480 --> 00:20:26,440 Speaker 3: think twenty twenty five is going to be a rock 410 00:20:26,480 --> 00:20:29,560 Speaker 3: star economist, like some journalists just said. And I hammered that, 411 00:20:29,640 --> 00:20:32,320 Speaker 3: and I hammered that. I had a second message, which 412 00:20:32,320 --> 00:20:35,080 Speaker 3: I'd play every now and then. But I've been strengthening 413 00:20:35,080 --> 00:20:37,119 Speaker 3: ever since about the middle of last year, and that 414 00:20:37,280 --> 00:20:41,080 Speaker 3: was about underlying inflationary precious And what I repeatedly did 415 00:20:41,200 --> 00:20:43,919 Speaker 3: was refer people to the A and Z Business Outlook Survey, 416 00:20:44,280 --> 00:20:47,280 Speaker 3: where one of the questions they ask businesses is what 417 00:20:47,400 --> 00:20:50,320 Speaker 3: do you plan doing with your selling prices for your 418 00:20:50,320 --> 00:20:54,679 Speaker 3: products over the next twelve months. On average, since nineteen 419 00:20:54,760 --> 00:20:58,359 Speaker 3: ninety two, A met twenty six percent of businesses each 420 00:20:58,480 --> 00:21:00,800 Speaker 3: each month have said I'm going to raise my prices. 421 00:21:00,840 --> 00:21:03,440 Speaker 3: So that's a normal, okay, twenty six percent net saying 422 00:21:03,480 --> 00:21:05,680 Speaker 3: I'm going to put my prices up. Three or four 423 00:21:05,760 --> 00:21:08,399 Speaker 3: years ago. That peaked at eighty one percent, fell to 424 00:21:08,520 --> 00:21:11,080 Speaker 3: a net thirty five percent in mid twenty twenty four. 425 00:21:11,359 --> 00:21:13,600 Speaker 3: Then it's gone up and the past two months has 426 00:21:13,600 --> 00:21:16,560 Speaker 3: gone up to fifty one percent, and now fifty seven percent, 427 00:21:16,920 --> 00:21:19,160 Speaker 3: and a way to interpret that is basically a net 428 00:21:19,160 --> 00:21:21,560 Speaker 3: fifty seven percent. The businesses are saying, as soon as 429 00:21:21,560 --> 00:21:24,639 Speaker 3: i get extra customers coming through my door, I'm rebuilding 430 00:21:24,680 --> 00:21:28,080 Speaker 3: these margins which have got crunched by higher costs in 431 00:21:28,119 --> 00:21:30,840 Speaker 3: the past three to four years. That is where the 432 00:21:30,880 --> 00:21:33,760 Speaker 3: Reserve Bank is also going to get some strong inflationary 433 00:21:33,760 --> 00:21:37,320 Speaker 3: pressures coming through businesses rebuilding their margins. 434 00:21:37,720 --> 00:21:40,600 Speaker 1: So that seems like if you are in the happy 435 00:21:40,640 --> 00:21:42,639 Speaker 1: position of being one of those I think it's sixty 436 00:21:42,680 --> 00:21:44,600 Speaker 1: something percent sixty eight percent of people that are coming 437 00:21:44,640 --> 00:21:46,960 Speaker 1: off some kind of a fixed rate in the next year, 438 00:21:47,359 --> 00:21:49,679 Speaker 1: and you're looking at in what are some of the 439 00:21:49,720 --> 00:21:51,680 Speaker 1: things that you have to bear in mind when you're 440 00:21:51,720 --> 00:21:54,240 Speaker 1: trying to pick the term and structure that line. Obviously, 441 00:21:54,280 --> 00:21:57,359 Speaker 1: there as always there will be individual circumstances, and people 442 00:21:57,400 --> 00:22:00,560 Speaker 1: should not take this as personal advice. They always get 443 00:22:00,600 --> 00:22:04,040 Speaker 1: professional advice to tailor to their situations. But what are 444 00:22:04,040 --> 00:22:07,240 Speaker 1: some of those big things or big trends that you 445 00:22:07,280 --> 00:22:11,200 Speaker 1: would maybe say, hey, do not disregard this that influence 446 00:22:11,359 --> 00:22:13,479 Speaker 1: what sort of term, what sort of structure you might 447 00:22:13,480 --> 00:22:14,480 Speaker 1: want to put around things? 448 00:22:15,320 --> 00:22:19,120 Speaker 3: Yeah, that sort of common tree only I think has 449 00:22:19,520 --> 00:22:23,840 Speaker 3: stolidity at certain points in the cycle, as in only 450 00:22:23,840 --> 00:22:27,720 Speaker 3: in about ten maybe maximum maybe fifteen percent of the 451 00:22:27,760 --> 00:22:30,600 Speaker 3: time of a time period, let's say five or ten years, 452 00:22:31,160 --> 00:22:34,439 Speaker 3: would I say you should really pay attention and this 453 00:22:34,560 --> 00:22:36,879 Speaker 3: is what you have. Maybe you want to consider structuring things. 454 00:22:37,040 --> 00:22:39,640 Speaker 3: The rest of the time is just personal circumstances, your 455 00:22:39,640 --> 00:22:42,360 Speaker 3: cash flows, this sort of thing. But for some times 456 00:22:42,680 --> 00:22:45,919 Speaker 3: I would jump out and say, you don't want to 457 00:22:45,920 --> 00:22:48,879 Speaker 3: touch the long term the rates with a barge poll. 458 00:22:48,920 --> 00:22:51,520 Speaker 3: I first wrote that in nineteen ninety eight, just because 459 00:22:51,560 --> 00:22:53,880 Speaker 3: the five year fixed rates here and the one year's 460 00:22:53,960 --> 00:22:56,480 Speaker 3: up here. There's a reason the curve is like that 461 00:22:56,800 --> 00:22:58,720 Speaker 3: is because the interest rates are going to plummet. The 462 00:22:58,760 --> 00:23:01,640 Speaker 3: economy is headed into receive pay the high one year 463 00:23:01,800 --> 00:23:05,119 Speaker 3: and then look to maybe fix lower sometimes else. I'ven't 464 00:23:05,119 --> 00:23:07,760 Speaker 3: had to say that for a while. My messogismstead have 465 00:23:07,840 --> 00:23:10,359 Speaker 3: been the other way around. For an eleven month period 466 00:23:10,480 --> 00:23:14,040 Speaker 3: over twenty twenty twenty one, I was saying to people, well, 467 00:23:14,080 --> 00:23:16,400 Speaker 3: you can fix one year at two point two nine 468 00:23:16,440 --> 00:23:19,280 Speaker 3: percent or five years at two point nine nine percent. 469 00:23:19,600 --> 00:23:22,080 Speaker 3: Hardly anyone went five years. But the reason I seed 470 00:23:22,119 --> 00:23:24,120 Speaker 3: five years was because we're not going to stay down 471 00:23:24,160 --> 00:23:27,600 Speaker 3: at that level. Pandemic deflation worries, et cetera. And of 472 00:23:27,600 --> 00:23:31,560 Speaker 3: course rates are skyrocketed. And what I've been saying recently 473 00:23:32,080 --> 00:23:35,320 Speaker 3: from Mauguesst. Late last year was, if I were a borrower, 474 00:23:35,600 --> 00:23:37,720 Speaker 3: I personally would have been fixing five years at four 475 00:23:37,760 --> 00:23:40,199 Speaker 3: point nine to nine percent because the inflation risks. I 476 00:23:40,240 --> 00:23:43,840 Speaker 3: see the five year rates are now around four sorry, 477 00:23:43,880 --> 00:23:46,760 Speaker 3: five point two nine percent and rising, and the one 478 00:23:46,840 --> 00:23:49,560 Speaker 3: year rates are four and a half percent. For most people, 479 00:23:49,640 --> 00:23:52,119 Speaker 3: that's too big a jump to make. I'd find it 480 00:23:52,119 --> 00:23:54,879 Speaker 3: difficult to recommend a friend or relative fixed five years 481 00:23:55,119 --> 00:23:57,400 Speaker 3: and sacrifice, you know, three quarters of a percent there. 482 00:23:57,640 --> 00:23:59,399 Speaker 3: But if I were borrowing at the moment, I'd probably 483 00:23:59,440 --> 00:24:02,840 Speaker 3: look at fixed three years and take me beyond through 484 00:24:02,840 --> 00:24:05,159 Speaker 3: this period. I think of when the Reserve Bank is 485 00:24:05,200 --> 00:24:07,600 Speaker 3: going to have a problem late twenty six and twenty 486 00:24:07,640 --> 00:24:10,560 Speaker 3: twenty seven, I personally would look for some security against that. 487 00:24:10,960 --> 00:24:14,280 Speaker 3: The further we get through twenty twenty six, the closer 488 00:24:14,280 --> 00:24:15,600 Speaker 3: we get to the point, and we're going to get 489 00:24:15,600 --> 00:24:18,440 Speaker 3: there probably before the middle of the year, when there's 490 00:24:18,480 --> 00:24:20,600 Speaker 3: no point trying to be clever about this whole thing. 491 00:24:20,880 --> 00:24:22,760 Speaker 3: Just look for whatever rate is the lower and you're 492 00:24:22,800 --> 00:24:25,160 Speaker 3: in for the ride. We're not yet at the point 493 00:24:25,160 --> 00:24:27,840 Speaker 3: where I'm saying you missed the opportunity, you're in for 494 00:24:27,880 --> 00:24:29,680 Speaker 3: the ride. I think there is still a wind of 495 00:24:29,720 --> 00:24:33,440 Speaker 3: opportunity to lock in some reasonable insurance against what the 496 00:24:33,520 --> 00:24:35,880 Speaker 3: rates are going to do. But they could have gone 497 00:24:35,920 --> 00:24:38,639 Speaker 3: before the middle of the year, with increases in those 498 00:24:38,960 --> 00:24:41,119 Speaker 3: three to five year rates further coming along. 499 00:24:41,240 --> 00:24:43,119 Speaker 1: But given what you were saying about prices and what 500 00:24:43,119 --> 00:24:45,439 Speaker 1: we're sort of know, you're not the only person obviously 501 00:24:45,440 --> 00:24:47,040 Speaker 1: think A and Z this week was sort of saying, well, 502 00:24:47,080 --> 00:24:49,240 Speaker 1: last week saying, hey, we see two percent house price 503 00:24:49,320 --> 00:24:51,240 Speaker 1: growth in the next year. Maybe I think someone was 504 00:24:51,240 --> 00:24:54,879 Speaker 1: saying five the following year. It's pretty flat. So really 505 00:24:54,960 --> 00:24:58,440 Speaker 1: a lot of the pressure price pressure has gone out 506 00:24:58,440 --> 00:25:00,600 Speaker 1: of the market, right, So it's really around cost of 507 00:25:00,640 --> 00:25:03,919 Speaker 1: finance if you're looking to buy or treat property as 508 00:25:03,920 --> 00:25:04,399 Speaker 1: an investment. 509 00:25:04,440 --> 00:25:06,840 Speaker 3: Yeah, yeah, First and first of all, if we're talked 510 00:25:06,840 --> 00:25:09,879 Speaker 3: about inflation, housing is a red hearing. It's a contributor, 511 00:25:10,000 --> 00:25:12,399 Speaker 3: but there's all this other stuff going into inflation. So 512 00:25:12,720 --> 00:25:15,040 Speaker 3: even though we're going to have weak house prices growth, 513 00:25:15,119 --> 00:25:18,240 Speaker 3: it doesn't change a single thing of my warning about 514 00:25:18,240 --> 00:25:23,240 Speaker 3: an overall inflation, wages, profit margins for businesses, overseas inflation, 515 00:25:23,359 --> 00:25:25,119 Speaker 3: all that sort of thing. When we're looking at the 516 00:25:25,160 --> 00:25:29,760 Speaker 3: housing market, what there are two key forces going in 517 00:25:29,800 --> 00:25:33,119 Speaker 3: opposite directions this year, and I could already see it 518 00:25:33,160 --> 00:25:36,280 Speaker 3: in the monthly survey I do of real estate agents, 519 00:25:36,600 --> 00:25:40,560 Speaker 3: and those forces are job confidence and finance and costs. 520 00:25:41,000 --> 00:25:42,880 Speaker 3: And what we've got at the moment. In my most 521 00:25:42,880 --> 00:25:46,200 Speaker 3: recent survey, I've got a big increase in the proportion 522 00:25:46,280 --> 00:25:49,320 Speaker 3: of agents saying people are worried about interest rates going up. 523 00:25:49,359 --> 00:25:52,040 Speaker 3: So I think in early December only I think two 524 00:25:52,080 --> 00:25:54,600 Speaker 3: percent or so of agents that we're saying, oh, people 525 00:25:54,600 --> 00:25:57,040 Speaker 3: are worried about interest rates going up. Now is twenty 526 00:25:57,080 --> 00:26:00,879 Speaker 3: something percent. But at the same time we'll go to 527 00:26:00,880 --> 00:26:04,480 Speaker 3: September was the peak. In September, fifty five percent of 528 00:26:04,520 --> 00:26:07,200 Speaker 3: realist agent said or people are worried about their jobs, 529 00:26:07,240 --> 00:26:10,280 Speaker 3: about their incomes. That's now down at thirty three percent. 530 00:26:10,640 --> 00:26:12,520 Speaker 3: So one of these key things is going up, the 531 00:26:12,560 --> 00:26:16,719 Speaker 3: interest rate restraint, but the job security thing worries are 532 00:26:16,760 --> 00:26:19,720 Speaker 3: going down. The sort of crossing, and what that says 533 00:26:19,720 --> 00:26:22,000 Speaker 3: to me is that, well, it's not going to stop 534 00:26:22,040 --> 00:26:24,840 Speaker 3: the housing market going up this year. Just because interest 535 00:26:24,880 --> 00:26:27,119 Speaker 3: rates edge up a little bit, people are going to 536 00:26:27,119 --> 00:26:29,600 Speaker 3: be increasingly happy about their jobs. The wages growth is 537 00:26:29,640 --> 00:26:33,639 Speaker 3: still going to be reasonable out there. The issue, I 538 00:26:33,640 --> 00:26:36,560 Speaker 3: think more maybe for the housing market is supply. There's 539 00:26:36,600 --> 00:26:39,399 Speaker 3: a lot of supply coming forward. We've just seen the 540 00:26:39,480 --> 00:26:43,040 Speaker 3: number of consensusue for new houses rising again. If we 541 00:26:43,080 --> 00:26:46,119 Speaker 3: go back about six months, the annual number of consents 542 00:26:46,280 --> 00:26:49,280 Speaker 3: was thirty three thousand, six hundred or so, We're up 543 00:26:49,320 --> 00:26:52,600 Speaker 3: to thirty six thousand, six hundred and so there has 544 00:26:52,640 --> 00:26:56,320 Speaker 3: been a structural shift in the rate of growth of 545 00:26:56,520 --> 00:27:00,240 Speaker 3: new house supply in New Zealand, which is great. It's 546 00:27:00,280 --> 00:27:03,640 Speaker 3: great for young buyers in particular. They're not all townhouses 547 00:27:03,640 --> 00:27:06,040 Speaker 3: by any means. But this is a structural shift which 548 00:27:06,520 --> 00:27:09,280 Speaker 3: the government is like looking to accelerate further with extra 549 00:27:09,359 --> 00:27:12,320 Speaker 3: rule changes. What it add up to, It adds up 550 00:27:12,320 --> 00:27:14,600 Speaker 3: to I think house prices still rise this year, but 551 00:27:14,960 --> 00:27:17,399 Speaker 3: the increases are going to be relatively small, That's what 552 00:27:17,440 --> 00:27:18,000 Speaker 3: i'd say. 553 00:27:18,240 --> 00:27:20,159 Speaker 1: So look, if we're trying to sum all of this up, 554 00:27:20,200 --> 00:27:24,000 Speaker 1: then what I'm hearing is obviously that there's a real 555 00:27:24,359 --> 00:27:26,240 Speaker 1: turn of the tide coming there in Australia, but the 556 00:27:26,280 --> 00:27:29,760 Speaker 1: forces that are pushing those tides are playing out differently 557 00:27:29,840 --> 00:27:33,040 Speaker 1: here and that we obviously, you know, people need to 558 00:27:33,040 --> 00:27:37,120 Speaker 1: pay close attention maybe to our own local picture more 559 00:27:37,160 --> 00:27:39,760 Speaker 1: so than just you know, checking whatever the RBA is 560 00:27:39,840 --> 00:27:40,159 Speaker 1: up to you. 561 00:27:41,160 --> 00:27:43,560 Speaker 3: Yeah, yeah, that's right. I don't look for lockstep movements 562 00:27:43,560 --> 00:27:45,400 Speaker 3: between the Reserve Bank of Australia and the Reserve Bank 563 00:27:45,440 --> 00:27:47,639 Speaker 3: of New Zealand. I mean, we saw interest rates be 564 00:27:47,720 --> 00:27:51,560 Speaker 3: cut in New Zealand from August twenty twenty four. The 565 00:27:51,680 --> 00:27:53,960 Speaker 3: RBA didn't move until I think it was February of 566 00:27:54,000 --> 00:27:58,280 Speaker 3: twenty twenty twenty five. There's a broad correlation in the cycle, 567 00:27:58,480 --> 00:28:01,320 Speaker 3: but it's not going lockstep call month, month or quarter 568 00:28:01,400 --> 00:28:04,080 Speaker 3: quarter there. And if we're looking at the economies overall, 569 00:28:04,080 --> 00:28:06,479 Speaker 3: there's a good outlook still for Australia's economy. There are 570 00:28:06,520 --> 00:28:10,000 Speaker 3: a lot of forces underpinning growth across in the country there, 571 00:28:10,240 --> 00:28:12,840 Speaker 3: but in New Zealand we have also good underpinning for 572 00:28:12,880 --> 00:28:15,439 Speaker 3: growth over twenty six to twenty seven from the average 573 00:28:15,480 --> 00:28:20,480 Speaker 3: interstrates at lower levels, farm incomes, higher residential construction, rising 574 00:28:20,720 --> 00:28:25,200 Speaker 3: infrastructure spending from the government, increasing forage, students coming through 575 00:28:25,200 --> 00:28:27,639 Speaker 3: it into the country as well. There's a lot of 576 00:28:27,640 --> 00:28:29,879 Speaker 3: stuff coming together, but it won't be a boom in 577 00:28:29,960 --> 00:28:34,040 Speaker 3: the economy. There will be restraint from new borrowing, interst 578 00:28:34,080 --> 00:28:36,919 Speaker 3: rates slightly rising as the year goes by. The election 579 00:28:37,080 --> 00:28:39,480 Speaker 3: year is going to maybe cause some businesses et cetera 580 00:28:39,600 --> 00:28:41,400 Speaker 3: to just go year and R and wait to see 581 00:28:41,440 --> 00:28:45,800 Speaker 3: the outcome. And of course the international situation is very uncertain, 582 00:28:46,200 --> 00:28:48,840 Speaker 3: and so some businesses just at the edge may go, 583 00:28:49,280 --> 00:28:51,000 Speaker 3: I'll just wait a little bit longer and see exactly 584 00:28:51,080 --> 00:28:54,240 Speaker 3: what happens with the global tariff situation. It's et cetera. 585 00:28:54,520 --> 00:28:58,320 Speaker 3: And for the housing market, turnover definitely improving throughout the year, 586 00:28:58,320 --> 00:29:00,480 Speaker 3: but not much action of course on you're on the 587 00:29:00,520 --> 00:29:04,040 Speaker 3: prices front. And a continuation of something I've been talking 588 00:29:04,080 --> 00:29:07,959 Speaker 3: about for a while, and that is the growing absence 589 00:29:08,400 --> 00:29:11,640 Speaker 3: of as many investors or people looking to invest in 590 00:29:11,680 --> 00:29:16,360 Speaker 3: residential property as in the past. The people maybe you've 591 00:29:16,400 --> 00:29:18,280 Speaker 3: never done it before, who might have thought about it 592 00:29:18,320 --> 00:29:20,680 Speaker 3: in the past now will not be thinking about it, 593 00:29:20,760 --> 00:29:23,080 Speaker 3: and there's going to increasingly be people looking at other 594 00:29:23,160 --> 00:29:25,240 Speaker 3: rassets to invest in. They're not all going to be 595 00:29:25,320 --> 00:29:27,760 Speaker 3: running off to gold and bitcoin or well or silver 596 00:29:27,880 --> 00:29:30,560 Speaker 3: or something like that, whatever is the flavor of the moment. 597 00:29:30,720 --> 00:29:33,480 Speaker 3: But I do think with a change in the generations, 598 00:29:33,520 --> 00:29:36,040 Speaker 3: the baby boomers et cetera, found the property was working 599 00:29:36,080 --> 00:29:38,960 Speaker 3: pretty well for them. Well, now they're becoming met sellers 600 00:29:38,960 --> 00:29:42,080 Speaker 3: of course to fund expensive retirements. But for the younger people, 601 00:29:42,240 --> 00:29:44,000 Speaker 3: they're going to be looking for I think a lot 602 00:29:44,040 --> 00:29:46,160 Speaker 3: of other rassets instead out there. 603 00:29:46,240 --> 00:29:48,680 Speaker 1: Tony Alexander, thanks for your time and your insights, and 604 00:29:48,720 --> 00:29:50,920 Speaker 1: thanks to all of you for your attention catching this 605 00:29:51,000 --> 00:29:53,280 Speaker 1: on YouTube or Spotify or I heart or on the 606 00:29:53,320 --> 00:29:56,600 Speaker 1: ches is that wherever you're getting the shared lunch kromit. 607 00:29:56,960 --> 00:30:05,200 Speaker 1: We're done for this week.