1 00:00:00,280 --> 00:00:02,639 Speaker 1: Now we've got some good news for the economy today. 2 00:00:03,000 --> 00:00:05,080 Speaker 1: Stat's New Zealand has come out with its latest trade 3 00:00:05,120 --> 00:00:07,880 Speaker 1: data for New Zealand, and our exporters have been going gangbusters. 4 00:00:08,039 --> 00:00:10,200 Speaker 1: Exports were up nine point nine percent in the year 5 00:00:10,240 --> 00:00:12,640 Speaker 1: to June, imports up three point two percent. Paul Blocksham 6 00:00:12,640 --> 00:00:15,800 Speaker 1: as ahspci's chief economist and with us A Paul god A, 7 00:00:16,079 --> 00:00:16,760 Speaker 1: how good is that? 8 00:00:17,640 --> 00:00:20,120 Speaker 2: It is good? It is a good story, and this 9 00:00:20,200 --> 00:00:22,159 Speaker 2: is one we've you know, we've known about, but I 10 00:00:22,160 --> 00:00:25,079 Speaker 2: think the numbers today were even stronger than was expected 11 00:00:25,680 --> 00:00:28,800 Speaker 2: in terms of the rise in dairy prices and the 12 00:00:29,120 --> 00:00:32,000 Speaker 2: boost that that's giving to incomes. Also not just the 13 00:00:32,040 --> 00:00:34,560 Speaker 2: price rises, but also that the volumes were reasonably solid. 14 00:00:34,640 --> 00:00:37,760 Speaker 2: So this is one of the two elements of why 15 00:00:37,840 --> 00:00:40,360 Speaker 2: we have thought that the New Zealand economy is going 16 00:00:40,360 --> 00:00:42,800 Speaker 2: to be in an upswing. One is the dairy price 17 00:00:42,880 --> 00:00:44,640 Speaker 2: is a high and that's giving you a lift in 18 00:00:44,640 --> 00:00:47,040 Speaker 2: the economy. And the second is that interest rates have 19 00:00:47,080 --> 00:00:49,640 Speaker 2: come down a long way. It's not yet quite fed 20 00:00:49,680 --> 00:00:52,640 Speaker 2: through to a recovery in consumption that's been really strong, 21 00:00:52,880 --> 00:00:55,200 Speaker 2: but we think it's coming. And so this is one 22 00:00:55,200 --> 00:00:57,280 Speaker 2: element and the other one is as interest rates have 23 00:00:57,360 --> 00:00:58,280 Speaker 2: come down a long way. 24 00:00:58,280 --> 00:01:01,480 Speaker 1: So can we say that the terms of have beat expectations. 25 00:01:02,320 --> 00:01:05,080 Speaker 2: Yes, I think that's fair and I certainly on today's 26 00:01:05,120 --> 00:01:07,360 Speaker 2: print it was stronger than the market had expected. And 27 00:01:07,440 --> 00:01:11,360 Speaker 2: so I think the terms of trade is a very 28 00:01:11,400 --> 00:01:15,720 Speaker 2: positive story for New Zealand. You've had a consistent boost 29 00:01:15,840 --> 00:01:19,160 Speaker 2: to incomes in the agricultural sector from the fact that 30 00:01:19,240 --> 00:01:22,440 Speaker 2: deairry prices are and meat prices actually are high, and 31 00:01:22,600 --> 00:01:24,759 Speaker 2: volumes have been fairly solid as well. And I think that's, 32 00:01:25,120 --> 00:01:27,400 Speaker 2: as I say, driving that sector. Now, it's only one 33 00:01:27,440 --> 00:01:29,640 Speaker 2: sector and it hasn't really flowed over to the rest 34 00:01:29,640 --> 00:01:32,160 Speaker 2: of the economy as yet, but I think most of 35 00:01:32,200 --> 00:01:34,160 Speaker 2: that it's a lag story. It takes time for it 36 00:01:34,200 --> 00:01:36,320 Speaker 2: to flow through, but I think it will get there. 37 00:01:36,600 --> 00:01:39,040 Speaker 1: I mean, it's three days ago we had more consumer 38 00:01:39,080 --> 00:01:41,520 Speaker 1: confidence numbers out that were down to a ten month low. 39 00:01:41,640 --> 00:01:44,000 Speaker 1: How long before consumers actually start to read this stuff, 40 00:01:44,120 --> 00:01:45,720 Speaker 1: feel good about it and feel confident again. 41 00:01:46,600 --> 00:01:49,520 Speaker 2: Well, we also had the week before retail figures that 42 00:01:49,560 --> 00:01:51,800 Speaker 2: actually were a bit on the stronger side than the 43 00:01:51,800 --> 00:01:54,120 Speaker 2: market had expected. So I mean, I'm always a little 44 00:01:54,160 --> 00:01:58,040 Speaker 2: bit cautious about reading too much into sentiment indicators. You know, 45 00:01:58,400 --> 00:02:02,680 Speaker 2: you're effectively asking consumers how they feel. I tend to 46 00:02:02,680 --> 00:02:06,000 Speaker 2: put a bit more weight on actual spending indicators. And 47 00:02:06,040 --> 00:02:08,880 Speaker 2: the spending indicators have actually they have been they have 48 00:02:08,960 --> 00:02:11,480 Speaker 2: been okay, they have been solid. So I think that's 49 00:02:11,560 --> 00:02:13,000 Speaker 2: part of it. I think the other part of it 50 00:02:13,040 --> 00:02:15,600 Speaker 2: is that it's taking time. You know, this is the thing. 51 00:02:15,639 --> 00:02:19,480 Speaker 2: It takes monetary policy. Interest rates act with a lag 52 00:02:19,680 --> 00:02:21,960 Speaker 2: on the economy. It takes time for it to start 53 00:02:22,000 --> 00:02:24,799 Speaker 2: to feed through and support the economy. And I think 54 00:02:24,800 --> 00:02:26,600 Speaker 2: it's perhaps the lags are a little bit longer this 55 00:02:26,639 --> 00:02:28,640 Speaker 2: time around, but I think it's still likely to flow 56 00:02:28,639 --> 00:02:30,320 Speaker 2: through to an upswing over time. 57 00:02:30,560 --> 00:02:32,920 Speaker 1: What are you expecting from Australian GDP tomorrow? 58 00:02:34,080 --> 00:02:37,080 Speaker 2: We think GDP growth will print in the quarter at 59 00:02:37,080 --> 00:02:39,440 Speaker 2: a point six so point six quarter on quarter. That 60 00:02:39,440 --> 00:02:41,959 Speaker 2: would be a one point seven percent growth rate over 61 00:02:42,000 --> 00:02:44,239 Speaker 2: the year. And that's a pick up in pace from 62 00:02:44,240 --> 00:02:47,079 Speaker 2: the past couple of quarters. So last year, the economy 63 00:02:47,120 --> 00:02:49,680 Speaker 2: in twenty four grew by about one percent, and now 64 00:02:49,720 --> 00:02:52,280 Speaker 2: we're growing we think at something like one point seven. 65 00:02:52,639 --> 00:02:56,400 Speaker 2: So that's an upswing, but only really a modest one. 66 00:02:56,760 --> 00:02:58,600 Speaker 2: And I think the main thing we're pointing out is 67 00:02:58,639 --> 00:03:02,040 Speaker 2: that really because productivity is so weak in Australia at 68 00:03:02,080 --> 00:03:04,440 Speaker 2: the moment, and the supply side there of the economy 69 00:03:04,480 --> 00:03:07,400 Speaker 2: is therefore so constrained. This is more, this is the 70 00:03:07,440 --> 00:03:09,639 Speaker 2: new normal, that we can't really grow a whole lot 71 00:03:09,720 --> 00:03:12,639 Speaker 2: faster than this rate of growth unless we see a 72 00:03:12,680 --> 00:03:15,640 Speaker 2: pickup in productivity. The economy is already operating at its 73 00:03:15,680 --> 00:03:19,760 Speaker 2: full capacity. We're fully employed, and inflation is coming down, 74 00:03:19,760 --> 00:03:21,680 Speaker 2: but it's not quite at the midpoint of the RBA's 75 00:03:21,720 --> 00:03:23,880 Speaker 2: target band, and we're in a modest upswing. This is 76 00:03:24,520 --> 00:03:25,680 Speaker 2: perhaps as good as it gets. 77 00:03:25,880 --> 00:03:29,079 Speaker 1: Yeah. Interesting, Hey, Paul, thank you very much. And it's 78 00:03:29,120 --> 00:03:31,359 Speaker 1: interesting that everything that you've told us and predicted is 79 00:03:31,720 --> 00:03:33,280 Speaker 1: bearing out. So there we go. We should listen to 80 00:03:33,320 --> 00:03:37,360 Speaker 1: you more often. That's Paul Bloxam, HSBC's chief economist. For 81 00:03:37,480 --> 00:03:40,760 Speaker 1: more from Hither Duplessy Allen Drive. 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