1 00:00:00,080 --> 00:00:02,279 Speaker 1: Money matters. We like the kind of Michelle Bullock's Gibshi 2 00:00:02,360 --> 00:00:04,400 Speaker 1: is the reservank governor. Of course, who latest is that 3 00:00:04,440 --> 00:00:07,720 Speaker 1: the cost of living crisis is here to stay? Are 4 00:00:07,760 --> 00:00:09,520 Speaker 1: the vulnerable are set to be at the brunt part 5 00:00:09,520 --> 00:00:11,720 Speaker 1: of the advice is to stop comparing prices to pre 6 00:00:11,800 --> 00:00:14,600 Speaker 1: pandemic levels because it's never going to change. Brad Olsen's 7 00:00:14,600 --> 00:00:17,280 Speaker 1: Inpometrics principal economist to and as well as Bradley. 8 00:00:17,000 --> 00:00:18,760 Speaker 2: Good morning, good morning. 9 00:00:18,840 --> 00:00:21,200 Speaker 1: Didn't we sort of know that because I mean outside 10 00:00:21,200 --> 00:00:24,279 Speaker 1: of fruit and vegetables and seasonality and stuff, once a 11 00:00:24,320 --> 00:00:26,440 Speaker 1: price goes up, no one's bringing it down, are they? 12 00:00:27,480 --> 00:00:29,760 Speaker 2: Well? Generally, and I think most people have got that, 13 00:00:29,880 --> 00:00:32,879 Speaker 2: although I think if you don't, and particularly this applies 14 00:00:32,920 --> 00:00:35,040 Speaker 2: to businesses. If you've got a business out there and 15 00:00:35,080 --> 00:00:37,440 Speaker 2: you're waiting for your cost structure and similar to get 16 00:00:37,440 --> 00:00:39,440 Speaker 2: back to twenty nineteen levels, you're probably going to go 17 00:00:39,440 --> 00:00:42,199 Speaker 2: broke before that happens, because you're right, things just generally 18 00:00:42,520 --> 00:00:46,280 Speaker 2: don't go back down. And importantly, if your inflationary pressures 19 00:00:46,280 --> 00:00:49,480 Speaker 2: are going negative, if you've got people that are having 20 00:00:49,479 --> 00:00:52,400 Speaker 2: to cut prices, one of course you're not expecting your 21 00:00:52,440 --> 00:00:54,960 Speaker 2: own wages to be cut back to twenty nineteen levels. 22 00:00:55,000 --> 00:00:58,040 Speaker 2: And two if a business is having to cut prices 23 00:00:58,040 --> 00:01:01,680 Speaker 2: that steeply to stimulate sales, that are really in the 24 00:01:01,720 --> 00:01:04,480 Speaker 2: thick of it. So generally speaking, although I'm sure everyone 25 00:01:04,560 --> 00:01:07,440 Speaker 2: goes I'd love to have cheaper prices, normally, the reason 26 00:01:07,480 --> 00:01:10,559 Speaker 2: that you get cheaper prices is pretty dark economic times. 27 00:01:10,680 --> 00:01:12,160 Speaker 1: Tell you. The other thing she said that I thought 28 00:01:12,200 --> 00:01:14,280 Speaker 1: was interesting monetary policy, and this is part of a 29 00:01:14,280 --> 00:01:15,959 Speaker 1: growing debate, and I see it a little bit here 30 00:01:16,000 --> 00:01:19,600 Speaker 1: as well. Monetary policy isn't the driver of the housing boom. 31 00:01:19,640 --> 00:01:21,839 Speaker 1: Not that we have a housing boom, but their housing boom, 32 00:01:22,120 --> 00:01:25,560 Speaker 1: which counteracts what our RBU say is doesn't it in 33 00:01:25,600 --> 00:01:27,240 Speaker 1: the sense that they're saying. But look at the lower 34 00:01:27,240 --> 00:01:29,720 Speaker 1: interest rates. Look at lower interest rates. That's money, money 35 00:01:29,760 --> 00:01:31,440 Speaker 1: in your pocket, You spend the money, and off we go. 36 00:01:31,840 --> 00:01:32,520 Speaker 1: So who's right? 37 00:01:32,640 --> 00:01:35,640 Speaker 2: Well, well, I mean this is the fascinating thing looking 38 00:01:35,680 --> 00:01:37,920 Speaker 2: at the two housing markets. I mean, Australia is hitting 39 00:01:37,920 --> 00:01:40,440 Speaker 2: a new record just about every day. New Zealand house 40 00:01:40,440 --> 00:01:42,880 Speaker 2: prices are sixteen percent below the peak, even though we've 41 00:01:42,920 --> 00:01:45,120 Speaker 2: cut interest rates a whole lot more. I think what 42 00:01:45,120 --> 00:01:47,080 Speaker 2: it goes to show is that when you've got quite 43 00:01:47,760 --> 00:01:50,480 Speaker 2: constrained supply, and that's what we're both New Zealand and 44 00:01:50,560 --> 00:01:54,360 Speaker 2: Australia were before the pandemic, then when you move interstrates 45 00:01:54,400 --> 00:01:56,760 Speaker 2: you're able to see such a bigger spark up in 46 00:01:57,240 --> 00:02:00,480 Speaker 2: the housing market. But New Zealand had the high levels 47 00:02:00,480 --> 00:02:02,960 Speaker 2: of building consents in half a century, going back a 48 00:02:03,000 --> 00:02:05,960 Speaker 2: couple of years, so we really expanded supply, which means 49 00:02:05,960 --> 00:02:08,680 Speaker 2: that we're seeing much less of an interest rate impact 50 00:02:08,720 --> 00:02:11,320 Speaker 2: at the moment. In Australia, last year they hit the 51 00:02:11,360 --> 00:02:13,799 Speaker 2: lowest number of building consents in a decade, so thus 52 00:02:13,840 --> 00:02:16,240 Speaker 2: struggling on the supply front. It sort of goes to 53 00:02:16,280 --> 00:02:18,960 Speaker 2: show that, yeah, interest rates are pretty important, but so 54 00:02:19,160 --> 00:02:21,720 Speaker 2: is figuring out how you build the damn things. 55 00:02:21,880 --> 00:02:24,040 Speaker 1: And this is what I'm reading more and more of 56 00:02:24,120 --> 00:02:26,760 Speaker 1: in this side of the economy, and this suggesting that 57 00:02:26,919 --> 00:02:30,440 Speaker 1: maybe the role, or the value or the weight of 58 00:02:30,480 --> 00:02:33,119 Speaker 1: these interest rate cuts from the Reserve Bank have been 59 00:02:33,240 --> 00:02:35,840 Speaker 1: overstated generally. Do you think that's true. 60 00:02:36,760 --> 00:02:39,160 Speaker 2: To a degree? I worry though, that part of this 61 00:02:39,440 --> 00:02:41,960 Speaker 2: is sort of feeding into this idea that you know, 62 00:02:42,000 --> 00:02:44,640 Speaker 2: there's a really strong wealth effect from the housing market, 63 00:02:44,840 --> 00:02:47,080 Speaker 2: if only house prices would start to pack up a 64 00:02:47,080 --> 00:02:49,720 Speaker 2: whole lot more, we would start to see stronger consumer 65 00:02:49,760 --> 00:02:52,880 Speaker 2: spending because households feel better. And I really worry about 66 00:02:52,919 --> 00:02:55,040 Speaker 2: that as a concept, like do we really as an 67 00:02:55,040 --> 00:02:57,840 Speaker 2: economy want to sit there and go, Look, we're willing 68 00:02:57,880 --> 00:03:00,640 Speaker 2: to see better economic times, but at the expense of 69 00:03:00,680 --> 00:03:03,120 Speaker 2: the housing market and k locking people out. So as 70 00:03:03,240 --> 00:03:05,639 Speaker 2: uncomfortable as it is, and trust me, we're seeing that. 71 00:03:05,919 --> 00:03:09,680 Speaker 2: I'm actually happy that we're decoupling housing growth from economic growth. 72 00:03:09,800 --> 00:03:14,360 Speaker 2: And importantly, households are still spending. That rubbish GDP result 73 00:03:14,440 --> 00:03:17,440 Speaker 2: we got last week actually still showed that underlying spending 74 00:03:17,480 --> 00:03:21,000 Speaker 2: activity by households was rising. It was that business investment 75 00:03:21,080 --> 00:03:24,800 Speaker 2: had pulled back, so on the whole again, deeply uncomfortable, 76 00:03:24,800 --> 00:03:26,400 Speaker 2: but I think we're probably going to be in a 77 00:03:26,400 --> 00:03:30,800 Speaker 2: better place long term from decoupling those two major economic drivers. 78 00:03:30,919 --> 00:03:33,840 Speaker 1: Always a pleasure might go well Brad Olson, who's inflementric's 79 00:03:33,880 --> 00:03:34,840 Speaker 1: principal economist. 80 00:03:35,240 --> 00:03:38,120 Speaker 2: For more from the Mic Asking Breakfast, listen live to 81 00:03:38,240 --> 00:03:41,320 Speaker 2: news talks that'd be from six am weekdays, or follow 82 00:03:41,360 --> 00:03:42,920 Speaker 2: the podcast on iHeartRadio.