1 00:00:05,519 --> 00:00:05,920 Speaker 1: Kyota. 2 00:00:06,000 --> 00:00:09,079 Speaker 2: I'm Chelsea Daniels and this is the Front Page, a 3 00:00:09,200 --> 00:00:16,480 Speaker 2: daily podcast presented by the New Zealand Herald. The Reserve 4 00:00:16,560 --> 00:00:20,280 Speaker 2: Bank has revealed the annual inflation rate for twenty twenty 5 00:00:20,280 --> 00:00:24,759 Speaker 2: five was three point one percent. It puts the inflation 6 00:00:24,920 --> 00:00:29,600 Speaker 2: rate outside the Bank's target band of one to three percent. 7 00:00:30,160 --> 00:00:33,760 Speaker 2: While it slowed significantly since the most recent peak of 8 00:00:33,880 --> 00:00:36,880 Speaker 2: seven point three percent in the June quarter of twenty 9 00:00:36,960 --> 00:00:42,160 Speaker 2: twenty two, it has risen every quarter since December twenty 10 00:00:42,200 --> 00:00:46,000 Speaker 2: twenty four. And while economists expect it to sit around 11 00:00:46,040 --> 00:00:49,839 Speaker 2: three to three point one, the Reserve Bank's November prediction 12 00:00:50,159 --> 00:00:53,360 Speaker 2: had it at two point seven. But what does that 13 00:00:53,400 --> 00:00:57,160 Speaker 2: all actually mean? And our dreams of a quick fix 14 00:00:57,200 --> 00:01:00,200 Speaker 2: in twenty twenty six in the Rearview Mirror to Day 15 00:01:00,240 --> 00:01:03,360 Speaker 2: on the front page and Zaid Harold, Business Editor at Large, 16 00:01:03,400 --> 00:01:05,800 Speaker 2: Liam Dan Is with us to break it all down. 17 00:01:09,200 --> 00:01:12,240 Speaker 2: First off, Liam, was this a surprise at all? 18 00:01:12,600 --> 00:01:17,319 Speaker 3: Well, it was slightly worse than the expectations, But the 19 00:01:17,360 --> 00:01:22,280 Speaker 3: economists have been picking mostly a three percent figure, and 20 00:01:22,319 --> 00:01:26,199 Speaker 3: I think one of the economists at ASB had said 21 00:01:26,319 --> 00:01:29,240 Speaker 3: three point one percent, so they got it right. We 22 00:01:29,319 --> 00:01:31,720 Speaker 3: knew it was going to be at the upper end, 23 00:01:31,800 --> 00:01:32,920 Speaker 3: which is not great. 24 00:01:32,959 --> 00:01:36,640 Speaker 2: Obviously, I saw the Reserve banks November prediction had it 25 00:01:36,680 --> 00:01:40,080 Speaker 2: at about two point seven. Were they just being overly optimistic? 26 00:01:40,560 --> 00:01:43,240 Speaker 3: I guess a little bit. But you know, the tough 27 00:01:43,280 --> 00:01:46,399 Speaker 3: thing for the Reserve Bank is that they only make 28 00:01:46,480 --> 00:01:51,200 Speaker 3: forecasts at these sets points in time. You see the 29 00:01:51,240 --> 00:01:54,800 Speaker 3: bank economists will kind of shift their outlook and they're 30 00:01:54,840 --> 00:01:56,680 Speaker 3: sort of picking it a week before it happened, so 31 00:01:56,680 --> 00:01:59,640 Speaker 3: they've seen what's happened to a whole bunch of other 32 00:01:59,680 --> 00:02:04,640 Speaker 3: prices on a monthly basis. Yeah, I mean it's fair 33 00:02:04,680 --> 00:02:07,880 Speaker 3: to say that its inflation is basically being more stubborn 34 00:02:08,560 --> 00:02:11,600 Speaker 3: and more sort of annoying than the Reserve Bank would 35 00:02:11,600 --> 00:02:13,639 Speaker 3: have hoped, and it's gonna be a little bit of 36 00:02:13,639 --> 00:02:17,760 Speaker 3: a problem for the economic recovery in the year ahead. 37 00:02:17,800 --> 00:02:21,640 Speaker 2: I guess what were the main drivers of this increase? 38 00:02:22,240 --> 00:02:25,120 Speaker 3: Yeah, well, if you look at it across the whole year, 39 00:02:25,440 --> 00:02:28,239 Speaker 3: so the whole year giving us the three point one figure. 40 00:02:29,160 --> 00:02:32,240 Speaker 3: The big contributors are still those things that we were 41 00:02:32,280 --> 00:02:35,880 Speaker 3: complaining about last year, what they call household utilities, but 42 00:02:36,000 --> 00:02:39,359 Speaker 3: it's power and rates were the big ones. Big energy 43 00:02:40,160 --> 00:02:44,320 Speaker 3: price rises and rate rises for that December quarter, for 44 00:02:44,360 --> 00:02:47,680 Speaker 3: those three months that we've just had, there was some 45 00:02:48,520 --> 00:02:52,600 Speaker 3: big increases and things like international airfares, which you know, 46 00:02:53,280 --> 00:02:55,919 Speaker 3: a pretty narrow thing, like you either traveled or you didn't, 47 00:02:56,200 --> 00:02:59,680 Speaker 3: so that's kind of a volatile figure. There was some 48 00:02:59,720 --> 00:03:03,040 Speaker 3: increase and petrol prices, that's a volatile figure. And the 49 00:03:03,080 --> 00:03:05,520 Speaker 3: Reserve Bank is allowed to look through some of those 50 00:03:05,840 --> 00:03:08,639 Speaker 3: volatile figures and focus on what it calls core inflation, 51 00:03:09,000 --> 00:03:13,320 Speaker 3: the more solid, steady, steady numbers. But even there, there 52 00:03:13,360 --> 00:03:17,280 Speaker 3: are some signs that they are staying more prices are 53 00:03:17,280 --> 00:03:19,040 Speaker 3: staying more elevated than they'd like to see. 54 00:03:19,320 --> 00:03:22,000 Speaker 2: What does all of this mean for interest rates? 55 00:03:22,400 --> 00:03:27,080 Speaker 3: Basically means that it's more likely, well it's certain that 56 00:03:27,880 --> 00:03:30,359 Speaker 3: they're not going to be cutting interest rates with inflation 57 00:03:30,520 --> 00:03:34,680 Speaker 3: up at these levels, and depending on what happens next, 58 00:03:34,760 --> 00:03:38,480 Speaker 3: but you know, it looks increasingly like we'll see interest 59 00:03:38,560 --> 00:03:43,560 Speaker 3: rates rising this year. So markets are already sort of 60 00:03:43,880 --> 00:03:48,680 Speaker 3: quite aggressively pricing in a rate hike by September and 61 00:03:48,720 --> 00:03:50,720 Speaker 3: by the end and saying that there'll be two hikes 62 00:03:50,720 --> 00:03:53,240 Speaker 3: by the end of the year. They were pricing it 63 00:03:53,280 --> 00:03:55,280 Speaker 3: in before today's number so I could guess, I guess 64 00:03:55,280 --> 00:03:59,960 Speaker 3: you could say there isn't too much surprise for them there. 65 00:04:00,000 --> 00:04:02,120 Speaker 3: Economists have been a bit more cautious, but they're starting 66 00:04:02,160 --> 00:04:05,400 Speaker 3: to move their forecasts and they're sort of saying, well, 67 00:04:05,480 --> 00:04:09,640 Speaker 3: we think we'll see at least one rate rise this year. 68 00:04:09,760 --> 00:04:11,600 Speaker 3: So you know, it's something for people to think about 69 00:04:11,640 --> 00:04:14,120 Speaker 3: when they're looking at their fixed terms over the next 70 00:04:14,760 --> 00:04:19,039 Speaker 3: few months, that you know, it's kind of this as 71 00:04:19,040 --> 00:04:21,479 Speaker 3: good as it gets in terms of lower insustrates, and 72 00:04:22,120 --> 00:04:24,000 Speaker 3: you've got to be careful. You blink and you might 73 00:04:24,040 --> 00:04:25,400 Speaker 3: miss it there on their way up again. 74 00:04:26,520 --> 00:04:29,839 Speaker 2: Well, usually slow and steady wins the race by it, right, 75 00:04:29,920 --> 00:04:34,320 Speaker 2: but we're going slow and steady in terms of rises 76 00:04:34,720 --> 00:04:38,800 Speaker 2: in inflation. What is it going to? What is going 77 00:04:38,839 --> 00:04:40,960 Speaker 2: to be the secret source? Do you think to actually 78 00:04:40,960 --> 00:04:43,960 Speaker 2: get this under control and within that one to three 79 00:04:44,080 --> 00:04:45,560 Speaker 2: band that we're hoping for. 80 00:04:46,760 --> 00:04:49,880 Speaker 3: Yeah, it's a difficult thing because you know, and it's 81 00:04:49,920 --> 00:04:51,919 Speaker 3: been talked about a lot and all this stuff like 82 00:04:51,960 --> 00:04:55,560 Speaker 3: productivity and all the structural problems with the economy, but 83 00:04:56,400 --> 00:04:59,880 Speaker 3: our economy doesn't have a lot of capacity to grow 84 00:05:00,120 --> 00:05:03,599 Speaker 3: very fast before inflation becomes a problem. Again. So there 85 00:05:03,600 --> 00:05:06,080 Speaker 3: were hopes that you know, one of the only upsides 86 00:05:06,120 --> 00:05:11,360 Speaker 3: really from an economic downturn or recession is that prices 87 00:05:11,400 --> 00:05:13,920 Speaker 3: come down and businesses can't afford to put prices up 88 00:05:14,040 --> 00:05:18,359 Speaker 3: or they discount, and so that domestic inflation that you know, 89 00:05:18,400 --> 00:05:20,760 Speaker 3: the price we pay for services in the economy and 90 00:05:21,680 --> 00:05:24,200 Speaker 3: you know, tradees and all that sort of thing that 91 00:05:24,240 --> 00:05:28,719 Speaker 3: comes down. That's non tradable inflation. And it has come down, 92 00:05:28,720 --> 00:05:32,760 Speaker 3: but it's coming down much slower than the economists and 93 00:05:32,760 --> 00:05:35,200 Speaker 3: the Reserve Bank had thought it would, and there's a 94 00:05:35,320 --> 00:05:38,679 Speaker 3: risk that it doesn't have much further to fall because 95 00:05:39,360 --> 00:05:42,880 Speaker 3: as the recovery takes hold, things start picking up again. 96 00:05:42,960 --> 00:05:45,840 Speaker 3: So you know, if that stays where it is, then 97 00:05:45,880 --> 00:05:48,919 Speaker 3: you start having to look at international prices, which we 98 00:05:48,960 --> 00:05:52,040 Speaker 3: don't have any control over, and that's you know, we're 99 00:05:52,040 --> 00:05:56,240 Speaker 3: at risk of all this geopolitical craziness affecting things. Oil 100 00:05:56,279 --> 00:05:58,680 Speaker 3: prices go up or down depending on what's happening in 101 00:05:58,680 --> 00:06:02,080 Speaker 3: the Middle East or what Donald Trump saying. So things 102 00:06:02,120 --> 00:06:06,920 Speaker 3: like oil prices and global commodity prices. You know, it's 103 00:06:06,920 --> 00:06:08,800 Speaker 3: a good it's a good news story for New Zealand 104 00:06:08,800 --> 00:06:11,839 Speaker 3: that beef prices and dairy prices are so strong the 105 00:06:11,880 --> 00:06:17,080 Speaker 3: export dollars are coming in, but that's keeping sort of food. 106 00:06:17,200 --> 00:06:19,960 Speaker 3: You know, the grocery bills high for New Zealanders, especially 107 00:06:20,279 --> 00:06:24,640 Speaker 3: around things like yeah, dairy and meat are still elevated. 108 00:06:24,720 --> 00:06:29,400 Speaker 3: So you know, if commodity prices around the world stay high, 109 00:06:29,600 --> 00:06:32,839 Speaker 3: then you know, there's not much we can do. Really that. 110 00:06:32,920 --> 00:06:35,719 Speaker 3: The mechanism for dealing with it is putting the interest 111 00:06:35,800 --> 00:06:39,040 Speaker 3: rate up, and that unfortunately slows the economy. So it's like, 112 00:06:39,120 --> 00:06:43,279 Speaker 3: how much recovery can we actually sustain before we have 113 00:06:43,360 --> 00:06:45,359 Speaker 3: to sort of put a lid on it. And the 114 00:06:45,400 --> 00:06:49,680 Speaker 3: only way to solve solve that is with real structural change, 115 00:06:49,680 --> 00:06:54,599 Speaker 3: you know, making the economy more efficient and probably leaner 116 00:06:54,640 --> 00:06:58,360 Speaker 3: and meaner. And the government you know, is aware of that. 117 00:06:58,440 --> 00:07:01,760 Speaker 3: I heard Christopa Luxeen talking about that in the State 118 00:07:01,760 --> 00:07:04,520 Speaker 3: of the Nation speech. You know, they sort of talk 119 00:07:04,520 --> 00:07:07,800 Speaker 3: about it in terms of having done the sort of 120 00:07:08,040 --> 00:07:10,520 Speaker 3: patch up job on the economy, the first aid that's 121 00:07:10,560 --> 00:07:13,720 Speaker 3: required on the patient to get it into recovery, and 122 00:07:13,800 --> 00:07:16,760 Speaker 3: now they're starting to look at sort of structural things 123 00:07:16,760 --> 00:07:19,640 Speaker 3: for the future, like adjusting KEW saver to have New 124 00:07:19,720 --> 00:07:22,040 Speaker 3: Zealand is saving more money and all that sort of stuff, 125 00:07:22,320 --> 00:07:25,160 Speaker 3: but that takes time, you know, you know, so just 126 00:07:25,240 --> 00:07:30,240 Speaker 3: relying on this this turn of the economic cycle to 127 00:07:30,360 --> 00:07:32,480 Speaker 3: sort of isn't going to be enough for New Zealand 128 00:07:32,480 --> 00:07:34,600 Speaker 3: to actually get rich. It's just going to provide a 129 00:07:34,600 --> 00:07:36,160 Speaker 3: bit of a stable platform, I think. 130 00:07:42,760 --> 00:07:44,680 Speaker 1: But to all of you, can I say welcome to 131 00:07:44,760 --> 00:07:48,280 Speaker 1: twenty twenty six. It's going to be a truly great year. 132 00:07:48,840 --> 00:07:51,640 Speaker 1: The economy is growing, the kids are almost back at 133 00:07:51,640 --> 00:07:55,240 Speaker 1: school again, and after a great Kiwi summer break, and 134 00:07:55,360 --> 00:07:57,320 Speaker 1: just like Kew's up and down the country, I can 135 00:07:57,360 --> 00:07:59,840 Speaker 1: tell you the National Party is nothing down and getting 136 00:08:00,200 --> 00:08:03,480 Speaker 1: to work. And I guess I have one very very 137 00:08:03,520 --> 00:08:06,840 Speaker 1: simple message for you today, and that is that National 138 00:08:07,000 --> 00:08:09,720 Speaker 1: is fixing the basics and building the future. 139 00:08:12,040 --> 00:08:14,640 Speaker 2: I noticed that in Christopher Luxen's State of the Nation's 140 00:08:14,640 --> 00:08:17,720 Speaker 2: speech as well. It was very much a control what 141 00:08:17,920 --> 00:08:24,000 Speaker 2: you can control narrative, very optimistic but disciplined, realistic, responsible. 142 00:08:24,160 --> 00:08:26,440 Speaker 2: But on the other end, you know, Hipkin said that 143 00:08:26,520 --> 00:08:30,080 Speaker 2: it's all a bunch of mumbo jumbo management speech. But 144 00:08:30,200 --> 00:08:33,600 Speaker 2: in terms of something like this, I think that they're 145 00:08:33,600 --> 00:08:37,040 Speaker 2: going to go out swinging and say, look, with National 146 00:08:37,160 --> 00:08:41,320 Speaker 2: the economy is going to be in safe, mature hands. 147 00:08:41,960 --> 00:08:43,960 Speaker 2: And he's already kind of said, look, there's not going 148 00:08:44,000 --> 00:08:47,440 Speaker 2: to be any smoking gun election promises that cost a 149 00:08:47,440 --> 00:08:51,840 Speaker 2: lot of money. How do you think that will relate 150 00:08:51,880 --> 00:08:53,680 Speaker 2: to what the economy needs at the moment. 151 00:08:53,920 --> 00:08:56,920 Speaker 3: Yeah, I mean, there isn't really time. If they were 152 00:08:56,920 --> 00:08:59,000 Speaker 3: going to do more radical stuff, they needed to do 153 00:08:59,040 --> 00:09:01,960 Speaker 3: more radical stuff in that first year or so if 154 00:09:01,960 --> 00:09:04,320 Speaker 3: they wanted to. So so anything more radical in terms 155 00:09:04,320 --> 00:09:07,880 Speaker 3: of structural changes is going to be really just have 156 00:09:08,000 --> 00:09:10,800 Speaker 3: to be on the policy promises for the next you know, 157 00:09:11,040 --> 00:09:14,480 Speaker 3: the campaign and for the next term. I think they're 158 00:09:15,040 --> 00:09:18,280 Speaker 3: effectively trying to simplify their message. I think they're talking 159 00:09:18,320 --> 00:09:21,959 Speaker 3: about doing the basics and building for the future or 160 00:09:22,000 --> 00:09:24,280 Speaker 3: something like that is the new mantra he's kind of 161 00:09:24,280 --> 00:09:26,880 Speaker 3: picked up. Luxon has picked up on the idea that, look, 162 00:09:27,720 --> 00:09:29,800 Speaker 3: this recovery isn't going to be good enough to solve 163 00:09:29,800 --> 00:09:32,720 Speaker 3: all New Zealand's problems, but it could be a window 164 00:09:32,760 --> 00:09:37,560 Speaker 3: of economic stability and we've got to seize that moment 165 00:09:37,640 --> 00:09:40,920 Speaker 3: to sort of make these changes. And I guess that's 166 00:09:40,960 --> 00:09:43,600 Speaker 3: what they'll be campaigning on. But you know that there 167 00:09:43,640 --> 00:09:46,440 Speaker 3: is those couple of elephants in the room for the 168 00:09:46,440 --> 00:09:51,079 Speaker 3: Prime Minister. One is Donald Trump and the craziness of 169 00:09:51,120 --> 00:09:53,640 Speaker 3: what can happen in the world, because as we saw 170 00:09:53,760 --> 00:09:58,240 Speaker 3: Tariff's last year, that can really derail things for New Zealand. 171 00:09:58,480 --> 00:10:02,040 Speaker 3: I suppose the other one is more on the local front, 172 00:10:02,040 --> 00:10:05,560 Speaker 3: his own coalition partners. In order to win an election. 173 00:10:05,679 --> 00:10:09,120 Speaker 3: Looking at current polling, he's very much needs Winston Peters, 174 00:10:09,120 --> 00:10:12,480 Speaker 3: who's saying he's not voting for an India free trade deal. 175 00:10:13,559 --> 00:10:16,319 Speaker 3: He's going to be opposed to some of National's other 176 00:10:16,400 --> 00:10:22,160 Speaker 3: ideas like looking at selling any state assets so and 177 00:10:22,240 --> 00:10:24,920 Speaker 3: raising the retirement age, so some of the structural things 178 00:10:25,000 --> 00:10:27,080 Speaker 3: National wants to do. It's got a bit of a 179 00:10:27,080 --> 00:10:29,360 Speaker 3: problem there with its coalition partner as well. I think 180 00:10:29,400 --> 00:10:34,439 Speaker 3: so difficult position. I think that's you know why the 181 00:10:35,360 --> 00:10:37,480 Speaker 3: National and the Prime Minister have sort of tried to 182 00:10:37,559 --> 00:10:40,760 Speaker 3: narrow their focus and their mantra. And it's from that 183 00:10:40,800 --> 00:10:47,160 Speaker 3: sort of keep it a simple, stupid school of political marketing, 184 00:10:47,200 --> 00:10:50,080 Speaker 3: which is just keep hammering this message. You know, we're 185 00:10:50,080 --> 00:10:53,640 Speaker 3: fixing the basics and we're slowly and steadily looking at 186 00:10:53,720 --> 00:10:56,240 Speaker 3: stuff for the future. But they're not going to be 187 00:10:56,640 --> 00:11:00,600 Speaker 3: really in a position to deal with that inflation problem 188 00:11:00,800 --> 00:11:04,160 Speaker 3: and the interest rates and the cap on growth this year. 189 00:11:04,240 --> 00:11:07,640 Speaker 3: So while you know, people talked about maybe picking November 190 00:11:07,679 --> 00:11:09,960 Speaker 3: seven was a chance for the economy to keep growing 191 00:11:11,120 --> 00:11:13,679 Speaker 3: and build up some momentum, and that would be good 192 00:11:13,720 --> 00:11:15,960 Speaker 3: for the government, there's also that risk that you get 193 00:11:16,000 --> 00:11:18,600 Speaker 3: your first interest rate rise before the election, which is 194 00:11:18,640 --> 00:11:23,440 Speaker 3: effectively a signal to voters that you know, that's sort 195 00:11:23,440 --> 00:11:24,480 Speaker 3: of as good as it gets. 196 00:11:24,920 --> 00:11:28,200 Speaker 2: People will be listening, are watching this podcast and saying, well, 197 00:11:28,520 --> 00:11:31,720 Speaker 2: three point one percent, Okay, it's outside of the one 198 00:11:31,800 --> 00:11:34,920 Speaker 2: to three percent bracket. I get that, but what does 199 00:11:34,960 --> 00:11:37,760 Speaker 2: that actually mean for their back pocket? 200 00:11:38,000 --> 00:11:39,720 Speaker 3: Yeah? Well, as I mentioned, you know, if you if 201 00:11:39,760 --> 00:11:42,720 Speaker 3: you're not if you weren't taking an international doing an 202 00:11:42,720 --> 00:11:46,199 Speaker 3: international trip, or going on holiday overseas in that fourth quarter, 203 00:11:46,240 --> 00:11:49,559 Speaker 3: then you know you didn't sort of that that didn't 204 00:11:49,559 --> 00:11:52,320 Speaker 3: affect you. Petrol prices were up a bit, but they'll 205 00:11:52,360 --> 00:11:54,400 Speaker 3: be down again. You know, we can see it with 206 00:11:54,440 --> 00:11:57,320 Speaker 3: the well it's happened already this year and oil prices 207 00:11:57,400 --> 00:11:59,959 Speaker 3: coming off, so that stuff moves around. So there is 208 00:12:00,000 --> 00:12:04,240 Speaker 3: serve bankle look through some of that volatility and it'll 209 00:12:04,240 --> 00:12:07,080 Speaker 3: have a core inflation measure, which will still be inside 210 00:12:07,480 --> 00:12:10,640 Speaker 3: the one to three percent band, and that means that 211 00:12:10,720 --> 00:12:13,800 Speaker 3: they probably won't be rushing to put the interest right up. 212 00:12:13,840 --> 00:12:17,360 Speaker 3: So you know, that's why that you're unlikely to see 213 00:12:17,360 --> 00:12:19,360 Speaker 3: any move or you almost certainly won't see any move 214 00:12:19,360 --> 00:12:24,000 Speaker 3: when they make their first call in February, and economists 215 00:12:24,000 --> 00:12:26,360 Speaker 3: are saying we'll probably no moves in the first half 216 00:12:26,400 --> 00:12:29,720 Speaker 3: of the year. But you know, it just does mean 217 00:12:29,720 --> 00:12:33,800 Speaker 3: that those hikes are coming. It also means really that 218 00:12:34,679 --> 00:12:36,600 Speaker 3: I don't think the cost of living, the idea that 219 00:12:36,600 --> 00:12:38,839 Speaker 3: there's a cost of living crisis and things isn't really 220 00:12:38,920 --> 00:12:40,679 Speaker 3: going to go away for a lot of New Zealanders. 221 00:12:40,679 --> 00:12:44,480 Speaker 3: So I think it's you know, it's there's going to 222 00:12:44,520 --> 00:12:46,600 Speaker 3: be a lot of good economic data as we start 223 00:12:46,640 --> 00:12:48,920 Speaker 3: to get back into growth. We're going to have figures 224 00:12:48,960 --> 00:12:53,240 Speaker 3: about manufacturing and you know, a lot of stuff's going 225 00:12:53,280 --> 00:12:55,600 Speaker 3: to look like it's improving. Hopefully that will flow through 226 00:12:55,640 --> 00:12:59,959 Speaker 3: to the jobs market and we'll see the unemployment rate 227 00:13:00,160 --> 00:13:03,560 Speaker 3: sort of peak and come down, and then you start 228 00:13:03,559 --> 00:13:07,640 Speaker 3: to see labor you know, prices like wages start to 229 00:13:07,640 --> 00:13:09,000 Speaker 3: go up at that point, which is sort of a 230 00:13:09,040 --> 00:13:11,000 Speaker 3: good thing. But then all of a sudden we hit 231 00:13:11,040 --> 00:13:15,000 Speaker 3: the capacity and they start contributing to inflation. So, you know, 232 00:13:15,080 --> 00:13:18,679 Speaker 3: and really the only way that most New Zealanders will 233 00:13:18,679 --> 00:13:20,960 Speaker 3: feel better off is when their wages start to get 234 00:13:21,000 --> 00:13:24,400 Speaker 3: ahead of the inflation rate. And that just doesn't look 235 00:13:24,440 --> 00:13:27,200 Speaker 3: like it's going to happen particularly soon. 236 00:13:33,160 --> 00:13:36,240 Speaker 4: This time last year, Christopher Luckxen confidently predicted that the 237 00:13:36,280 --> 00:13:40,040 Speaker 4: economy was in recovery, unemployment had peaked, and that things 238 00:13:40,040 --> 00:13:42,560 Speaker 4: were going to get better. Since then, we saw the 239 00:13:42,600 --> 00:13:46,680 Speaker 4: economy shrink, more people lose their jobs, the government's finances 240 00:13:46,720 --> 00:13:50,520 Speaker 4: deteriorate further, and the economic going get even harder for 241 00:13:50,640 --> 00:13:54,200 Speaker 4: New Zealand families. Christopher Luxean is out of touch with 242 00:13:54,280 --> 00:13:57,920 Speaker 4: New Zealanders. Holding on to the very very last possible 243 00:13:58,000 --> 00:14:01,000 Speaker 4: date he could have called the election shows how desper pretty. 244 00:14:03,040 --> 00:14:06,120 Speaker 2: I just want to know, Liam, how much of my 245 00:14:06,200 --> 00:14:08,800 Speaker 2: eggs and cheese and milk going to cost within the 246 00:14:08,920 --> 00:14:14,000 Speaker 2: next market? Is that what inflation effects? Yeah? 247 00:14:14,080 --> 00:14:18,480 Speaker 3: I think groceries and power prices and maybe rates are 248 00:14:18,520 --> 00:14:22,800 Speaker 3: some of the things that you know, everybody's everybody's dealing with. Certainly, 249 00:14:22,840 --> 00:14:29,400 Speaker 3: certainly groceries and power prices. Look, dairy prices have have 250 00:14:29,520 --> 00:14:33,360 Speaker 3: come off a bit internationally stabilized. I think we could 251 00:14:33,360 --> 00:14:37,640 Speaker 3: see butter and some other dairy things that the supermarket 252 00:14:37,680 --> 00:14:40,360 Speaker 3: come down a little bit, but not that much more. Unfortunately, 253 00:14:41,320 --> 00:14:44,400 Speaker 3: beef is still going great guns. There's just there's this 254 00:14:44,520 --> 00:14:46,920 Speaker 3: enormous demand for protein around the world, which is good 255 00:14:46,920 --> 00:14:49,960 Speaker 3: for New Zealand in terms of you know, the export prices, 256 00:14:50,760 --> 00:14:54,280 Speaker 3: all the weird you know stuff you see online with 257 00:14:54,400 --> 00:14:58,760 Speaker 3: the you know, workout bros and everything, and and and 258 00:14:58,560 --> 00:15:02,040 Speaker 3: and just consuming all this protein and protein being added 259 00:15:02,080 --> 00:15:04,240 Speaker 3: to everything is actually is. 260 00:15:04,240 --> 00:15:06,120 Speaker 2: That your twenty twenty six goal lam? 261 00:15:06,840 --> 00:15:12,480 Speaker 3: Yeah, now a Jim Bro more protein a little bit, 262 00:15:12,560 --> 00:15:14,720 Speaker 3: but as much as a middle aged old fella can be. 263 00:15:14,800 --> 00:15:18,680 Speaker 3: But you know, but that has driven up demand for protein. So, 264 00:15:19,880 --> 00:15:24,440 Speaker 3: you know, beef lamb are record levels, dairy has been 265 00:15:24,440 --> 00:15:27,600 Speaker 3: at record levels. It's come off a bit, but you know, 266 00:15:27,720 --> 00:15:30,520 Speaker 3: so there's not a lot of relief coming there other 267 00:15:30,560 --> 00:15:33,520 Speaker 3: than that that you know, will that money is flying 268 00:15:33,520 --> 00:15:37,200 Speaker 3: into the economy and so it sort of swings and roundabouts. 269 00:15:37,560 --> 00:15:42,160 Speaker 3: You'd hope that domestic inflation had come down, but you know, 270 00:15:42,800 --> 00:15:44,880 Speaker 3: if things pick up, it may be that we're in 271 00:15:45,320 --> 00:15:50,560 Speaker 3: an era of slightly elevated inflation. Which means that you know, 272 00:15:50,640 --> 00:15:52,800 Speaker 3: the Reserve Bank ultimately will have to act. 273 00:15:53,520 --> 00:15:56,720 Speaker 2: And what will the reserve bank do? What can can 274 00:15:56,760 --> 00:15:57,080 Speaker 2: it do? 275 00:15:57,600 --> 00:16:00,240 Speaker 3: Yeah, it really is just that monetary policy leader be 276 00:16:00,560 --> 00:16:04,560 Speaker 3: very unpopular if they start lifting rates already. But when 277 00:16:04,960 --> 00:16:08,600 Speaker 3: if inflation stays outside that target van for an extended period, 278 00:16:08,840 --> 00:16:10,880 Speaker 3: that's their mandate. They have to do that. You know, 279 00:16:10,920 --> 00:16:14,920 Speaker 3: they're legally required and they're only required to look at inflation, 280 00:16:15,040 --> 00:16:17,960 Speaker 3: you know, so unemployment is considered, but it's no longer 281 00:16:18,000 --> 00:16:22,000 Speaker 3: part of the mandate. They have a single mandate, which 282 00:16:22,040 --> 00:16:26,000 Speaker 3: means that you know, even if unemployment hasn't really come 283 00:16:26,040 --> 00:16:28,840 Speaker 3: down that much and the jobs market hasn't improved that much, 284 00:16:29,160 --> 00:16:34,080 Speaker 3: we could see interest rates rising, you know, before we 285 00:16:34,120 --> 00:16:36,200 Speaker 3: see the real results there, and that that would be 286 00:16:36,240 --> 00:16:39,080 Speaker 3: a shame. That just that just shows you how much 287 00:16:39,120 --> 00:16:43,440 Speaker 3: inflation can curtail a recovery and really just highlights again 288 00:16:43,600 --> 00:16:46,720 Speaker 3: that it's you know, you hear economists talk about capacity 289 00:16:46,760 --> 00:16:49,520 Speaker 3: in the economy and what the capacity is for the economy. 290 00:16:49,560 --> 00:16:51,400 Speaker 3: I like the term speed limit, and I've heard other 291 00:16:51,440 --> 00:16:53,560 Speaker 3: economists feel about it in terms of a speed limit. 292 00:16:54,440 --> 00:16:58,760 Speaker 3: You know, our economy has a relatively low speed limit. 293 00:16:58,760 --> 00:17:02,240 Speaker 3: It can only grow at about up two percent or around 294 00:17:02,320 --> 00:17:06,120 Speaker 3: that level before it overheats and inflation comes through. And 295 00:17:06,880 --> 00:17:11,200 Speaker 3: you know, we may be seeing that you know already 296 00:17:11,359 --> 00:17:15,600 Speaker 3: and that two percent isn't quite enough to be transformative 297 00:17:17,200 --> 00:17:19,919 Speaker 3: in terms of wealth creation, the kind of wealth creation 298 00:17:20,000 --> 00:17:22,320 Speaker 3: that the economy needs to get really in the right 299 00:17:22,359 --> 00:17:25,800 Speaker 3: shape and you know, get the treasury coffers into good 300 00:17:25,840 --> 00:17:28,920 Speaker 3: shape and get people's savings up and all that stuff. 301 00:17:28,960 --> 00:17:31,439 Speaker 3: So that's why you'll keep hearing people talk about the 302 00:17:31,480 --> 00:17:34,600 Speaker 3: need for structural change, and I expect you'll hear the 303 00:17:34,640 --> 00:17:36,280 Speaker 3: Prime Minister keep talking about it too. 304 00:17:36,440 --> 00:17:39,600 Speaker 2: And lastly, Liam, I know that we didn't quite thrive 305 00:17:39,720 --> 00:17:43,120 Speaker 2: in twenty twenty five, but do you have a nice 306 00:17:43,119 --> 00:17:46,040 Speaker 2: little catch phrase for twenty twenty six or is it 307 00:17:46,119 --> 00:17:49,000 Speaker 2: just like let's all keep our heads out of the 308 00:17:49,040 --> 00:17:51,000 Speaker 2: water or something for twenty twelve. 309 00:17:50,840 --> 00:17:53,359 Speaker 3: Or well, you know, my analogy is kind of like 310 00:17:54,640 --> 00:17:56,720 Speaker 3: twenty twenty six, there should be some relief, it should 311 00:17:56,760 --> 00:17:58,680 Speaker 3: still feel good. I'm gonna got one that rhymes. But 312 00:17:58,680 --> 00:18:00,879 Speaker 3: if you're talking about heads, it's kind of that idea 313 00:18:00,920 --> 00:18:03,240 Speaker 3: that happiness is banging your head against the wall and 314 00:18:03,280 --> 00:18:06,919 Speaker 3: then stopping. And so because we're no longer banging our 315 00:18:06,920 --> 00:18:08,960 Speaker 3: head against the wall. It will feel better. It's going 316 00:18:09,000 --> 00:18:11,480 Speaker 3: to feel better than last year, and. 317 00:18:12,040 --> 00:18:13,800 Speaker 2: That's you've still got a bit of a bruise. 318 00:18:14,680 --> 00:18:17,439 Speaker 3: Yeah, And it's not going to solve any of our 319 00:18:18,240 --> 00:18:22,600 Speaker 3: more existential problems, you know. So how long that relief 320 00:18:22,760 --> 00:18:28,600 Speaker 3: from things feeling better lasts will really determine, so things 321 00:18:28,680 --> 00:18:30,600 Speaker 3: like how the election goes. So you're going to see 322 00:18:31,520 --> 00:18:36,080 Speaker 3: business and consumer confidence looking good relative to where they were. 323 00:18:36,400 --> 00:18:41,680 Speaker 3: But at some point, if there's a cap on where 324 00:18:41,680 --> 00:18:44,960 Speaker 3: the recovery goes, that relief is going to sort of 325 00:18:45,840 --> 00:18:48,280 Speaker 3: wear out, I guess, and people are going to be thinking, 326 00:18:48,520 --> 00:18:49,600 Speaker 3: is that it. 327 00:18:49,240 --> 00:18:51,679 Speaker 2: So no quick fix for twenty twenty six. 328 00:18:52,560 --> 00:18:54,359 Speaker 3: Yeah, that's a good one. I should have thought of that. 329 00:18:55,560 --> 00:18:57,040 Speaker 2: Thanks for joining us, Liam. 330 00:18:57,560 --> 00:19:00,320 Speaker 3: Cheers, Chelsea. 331 00:19:01,480 --> 00:19:04,600 Speaker 2: That's it for this episode of the Front Page. You 332 00:19:04,640 --> 00:19:08,400 Speaker 2: can read more about today's stories and extensive news coverage 333 00:19:08,440 --> 00:19:12,080 Speaker 2: at enzidherld dot co dot nz. The Front Page is 334 00:19:12,119 --> 00:19:16,119 Speaker 2: hosted and produced by me Chelsea Daniels Kine. Dickie is 335 00:19:16,160 --> 00:19:20,280 Speaker 2: our studio operator, Richard Martin, our producer and editor, and 336 00:19:20,359 --> 00:19:24,280 Speaker 2: our executive producer is Jane Ye. Follow the Front Page 337 00:19:24,320 --> 00:19:27,720 Speaker 2: on the iheartapp or wherever you get your podcasts, and 338 00:19:27,840 --> 00:19:31,640 Speaker 2: join us next time for another look beyond the headlines.