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Speaker 1: So the banks are now lining up with the renewed

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Speaker 1: economic forecast for the year. Now that the furies up

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Speaker 1: end of the equation, ASB is cut GST, we're down

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Speaker 1: to about not GST, GDP down to about one point three.

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Speaker 1: Recovery is now twenty twenty seven. Q two is going

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Speaker 1: to go backwards. Inflation could hit four. Nick Toughly is

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Speaker 1: the ASP's chief economists back with us. Nick, morning to you,

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Speaker 1: good morning. How much of a rolling mall is this?

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Speaker 1: And we can I could get you back tomorrow and

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Speaker 1: you could say something completely different.

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Speaker 2: Well, I think we're going to be dealing with uncertainty

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Speaker 2: for a while. So yes, whilst we've put out forecasts

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Speaker 2: at the moment, the thing I think people need to

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Speaker 2: be focusing a lot on is scenario analysis and contingency

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Speaker 2: planning to just get a better idea of how different

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Speaker 2: outcomes could impact on their business so they can just

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Speaker 2: get ready for it.

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Speaker 1: Is Q two definitely a miss for us.

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Speaker 2: We do have a slight negative. It's just really when

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Speaker 2: the I guess like the peak impacts of the shocks

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Speaker 2: are sort of really hitting. That's the sort of first

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Speaker 2: quarter we're getting the sort of full impact of all

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Speaker 2: these higher prices at pump that will be sort of

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Speaker 2: rippling through and having an impact, particularly on consumer's ability

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Speaker 2: to spend over that quarter.

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Speaker 1: And what you read on the psychology of all of this,

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Speaker 1: will we freak out? And if we do, is that material.

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Speaker 2: We do run the risk as we always do when

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Speaker 2: you have a shock like this or that period of

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Speaker 2: just uncertainty and people heading the pause button. I think

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Speaker 2: the challenge with this is until we get some resolution

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Speaker 2: over oil supplies, it leaves everybody a little bit up

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Speaker 2: in the air. So it makes it very hard for

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Speaker 2: people to pay for the longer term at a time

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Speaker 2: like this.

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Speaker 1: Can I say that glass half fall if you're right,

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Speaker 1: If you're spot on, and we get GDP at one

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Speaker 1: point three not what it was, but not the end

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Speaker 1: of the world. It's still growth and inflation at for

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Speaker 1: once again not the end of the world. That's not

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Speaker 1: the end of the world at all.

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Speaker 2: Is it's it's not the end of the world, but

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Speaker 2: it is sort of really delaying that recovery. Again, look

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Speaker 2: on the scenario that we've got there, we'd still be growing,

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Speaker 2: it would be will be slowly. It's sort of really

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Speaker 2: pushed out the recovery until late this year and stead

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Speaker 2: of it continuing over the course of the year, and

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Speaker 2: we've had inflation higher than four percent before were not

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Speaker 2: just a few years ago, but even just right before

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Speaker 2: the financial crisis, when all prices were high, we were

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Speaker 2: hitting five percent. Still could conceivably hit that this year.

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Speaker 2: But we're in an environment where the reserve banks does

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Speaker 2: have just time to wait, given that the recovery was

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Speaker 2: still relatively in the early stages and we went exactly overheating.

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Speaker 1: But what about places like Australia who come out yesterday,

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Speaker 1: they're they're going to stoke inflation. If they stoke inflation,

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Speaker 1: they're going to kill growth. If they kill growth, one

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Speaker 1: of their big trading partners is going to stub Do

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Speaker 1: you take all that stuff into account as well?

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Speaker 2: We do that best. And the thing is is what

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Speaker 2: we're going to find is that there's going to be

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Speaker 2: different countries doing different things in response to this and

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Speaker 2: not You're right in Australia where they have tried to

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Speaker 2: take the edge off the impact for consumers a bit

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Speaker 2: more with a lot more fiscal spending, right at a

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Speaker 2: time when the Reserve bank over there has already lifted

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Speaker 2: rates a couple of times. It does mean you end

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Speaker 2: up with this pushmi pullyu tug of war?

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Speaker 1: Do you reckon people? Get that?

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Speaker 2: Now?

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Speaker 1: Do you reckon our big lesson out of COVID? And

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Speaker 1: this goes to the government. I don't want to drag

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Speaker 1: you into politics, but do you reckon people? Get it that? Yes,

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Speaker 1: they could cut anything tomorrow, they could fill your pockets

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Speaker 1: with cash. But we've been there, done that, learnt that lesson,

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Speaker 1: and we understand that or not.

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Speaker 2: Perhaps we do a little bit better. I think when

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Speaker 2: you look back since the financial crisis, through the Cannibury earthquakes, COVID, Look,

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Speaker 2: we've gone through a number of periods. Now we've responded

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Speaker 2: to what we thought as one off crisis and we've

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Speaker 2: ended up running deficits most of that time. And we're

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Speaker 2: just getting less I guess prepared or less resilient fiscally

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Speaker 2: to be able to respond to things. And so we

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Speaker 2: just we have very limited options and think everybody does. Really,

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Speaker 2: you can't just wave a magic wine and make all

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Speaker 2: this go away.

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Speaker 1: Exactly. Nice talk to you because always Nick Tumpley, who's

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Speaker 1: the ASP chief Economist. For more from the Mic Asking Breakfast,

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Speaker 1: listen live to news talks. It'd be from six am weekdays,

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