1 00:00:05,480 --> 00:00:05,880 Speaker 1: Kielder. 2 00:00:06,000 --> 00:00:09,119 Speaker 2: I'm Chelsea Daniels and this is the Front Page, a 3 00:00:09,200 --> 00:00:10,920 Speaker 2: daily podcast. 4 00:00:10,480 --> 00:00:12,640 Speaker 3: Presented by the New Zealand Herald. 5 00:00:16,120 --> 00:00:19,760 Speaker 2: The Reserve Bank is expected to cut the official cash 6 00:00:19,880 --> 00:00:23,759 Speaker 2: rate today, but how deeply it will cut remains to 7 00:00:23,800 --> 00:00:27,480 Speaker 2: be seen. Markets are pricing in the cut as a certainty, 8 00:00:27,920 --> 00:00:30,680 Speaker 2: but the debate is now on how big. 9 00:00:30,520 --> 00:00:33,800 Speaker 4: It will be. So what could it mean for. 10 00:00:33,880 --> 00:00:36,159 Speaker 3: Mortgage holders and the average Kiwi? 11 00:00:36,600 --> 00:00:39,560 Speaker 4: Today on the Front Page ends at Herald Business Editor 12 00:00:39,560 --> 00:00:42,480 Speaker 4: at Large Liam dan Is with us to dive into 13 00:00:42,520 --> 00:00:46,640 Speaker 4: the Reserve Bank's upcoming decision and what's been happening behind 14 00:00:46,840 --> 00:00:50,280 Speaker 4: closed doors. 15 00:00:51,240 --> 00:00:54,000 Speaker 3: So Liam, the economists are split. 16 00:00:54,160 --> 00:00:57,680 Speaker 2: Should the bank act boldly with a fifty point cut 17 00:00:57,880 --> 00:01:00,440 Speaker 2: or play it safe with the twenty five Oh you. 18 00:01:00,400 --> 00:01:05,920 Speaker 5: Want me to guess? Yeah, well, I guess I'd probably 19 00:01:06,040 --> 00:01:08,880 Speaker 5: lean towards front ending it and going fifty basis points 20 00:01:08,959 --> 00:01:12,640 Speaker 5: get it done. That's an optimistic view on inflation that 21 00:01:12,720 --> 00:01:15,399 Speaker 5: we're not going to suddenly see inflation come back to 22 00:01:15,680 --> 00:01:20,520 Speaker 5: worrying levels. We've had this rough patch with food prices 23 00:01:20,560 --> 00:01:23,959 Speaker 5: and electrisity prices and that has pushed inflation up. And 24 00:01:24,440 --> 00:01:29,280 Speaker 5: so the Reserve Bank has this you know, single mandate 25 00:01:29,319 --> 00:01:33,720 Speaker 5: on inflation now, so the coalition government changed that from 26 00:01:33,920 --> 00:01:38,160 Speaker 5: unemployment inflation to just inflation. So when people look at 27 00:01:38,160 --> 00:01:40,759 Speaker 5: the decisions the Reserve Bank are making, and they look 28 00:01:40,760 --> 00:01:43,920 Speaker 5: at how bad retailer is downtown and all that sort 29 00:01:43,959 --> 00:01:47,560 Speaker 5: of stuff, that's really not what's driving them. 30 00:01:47,600 --> 00:01:48,320 Speaker 3: Their core. 31 00:01:50,400 --> 00:01:54,800 Speaker 5: Driver for all of their decision making is keeping inflation 32 00:01:54,920 --> 00:01:56,880 Speaker 5: between one and three percent, and so if it's starting 33 00:01:56,880 --> 00:01:59,760 Speaker 5: to get up towards three, that's a worry for them. 34 00:02:00,160 --> 00:02:03,440 Speaker 5: It is they believe, because the economy is so flat 35 00:02:03,480 --> 00:02:05,960 Speaker 5: that it must be going to start to ease away again. 36 00:02:06,480 --> 00:02:09,440 Speaker 5: But that would be creating pressure on them to only 37 00:02:09,520 --> 00:02:12,040 Speaker 5: cut by twenty five. So I'd like to see them 38 00:02:12,040 --> 00:02:14,519 Speaker 5: cut by fifty. I'd like to see the economy get 39 00:02:14,520 --> 00:02:17,240 Speaker 5: that sort of a little bit of stimulus that it 40 00:02:17,280 --> 00:02:21,040 Speaker 5: needs to get that recovery rolling. But I think it 41 00:02:21,200 --> 00:02:25,480 Speaker 5: really is finely balanced. They could well be more cautious 42 00:02:25,520 --> 00:02:27,920 Speaker 5: about inflation and go with twenty five. 43 00:02:28,560 --> 00:02:31,280 Speaker 3: What are the risks in holding back? Well, the risk in. 44 00:02:31,280 --> 00:02:35,320 Speaker 5: Holding back is that the downturn is just deeper than 45 00:02:35,840 --> 00:02:39,200 Speaker 5: we thought, So you know, if it gets too if 46 00:02:39,200 --> 00:02:42,160 Speaker 5: an economy just loses too much steam, it's very hard 47 00:02:42,200 --> 00:02:44,720 Speaker 5: to get it rolling again, and some people are arguing 48 00:02:44,720 --> 00:02:48,880 Speaker 5: that we're already there. But you know, we saw this 49 00:02:49,080 --> 00:02:53,480 Speaker 5: big fall in GDP growth in the second quarter. So 50 00:02:53,520 --> 00:02:55,240 Speaker 5: we had a couple of quarters the last quarter of 51 00:02:55,280 --> 00:02:58,520 Speaker 5: last year and the first quarter of this year we 52 00:02:58,639 --> 00:03:01,280 Speaker 5: had growth, and we thought, yeah, the recovery is happening. 53 00:03:01,360 --> 00:03:02,800 Speaker 5: That is what's supposed to happen. 54 00:03:02,639 --> 00:03:05,360 Speaker 2: Thrive for twenty five Yeah, yeah, yeah, finally happening. 55 00:03:05,520 --> 00:03:07,560 Speaker 5: Yeah, And it just absolutely fell off a cliff in 56 00:03:07,600 --> 00:03:10,680 Speaker 5: the second quarter. And some people, including the government, have 57 00:03:10,760 --> 00:03:15,320 Speaker 5: pointed to the US tariff policy is sort of spooking 58 00:03:15,360 --> 00:03:18,120 Speaker 5: everyone or hitting our economy. I don't think it has 59 00:03:18,200 --> 00:03:21,880 Speaker 5: hit our economy that hard. It may have hit confidence, 60 00:03:21,919 --> 00:03:26,320 Speaker 5: but our exporters of our primary products, so dairy, meat, 61 00:03:27,000 --> 00:03:30,720 Speaker 5: horticultural products, are doing so well that tariffs haven't really 62 00:03:30,720 --> 00:03:33,880 Speaker 5: touched the sides, So that hasn't hit the economy directly. 63 00:03:33,960 --> 00:03:37,520 Speaker 5: It may have hit confidence, but I think things like 64 00:03:37,600 --> 00:03:41,160 Speaker 5: the property market, the employment market, it's all just combined 65 00:03:41,200 --> 00:03:44,280 Speaker 5: a huge lack of confidence and it's spilled over a 66 00:03:44,280 --> 00:03:46,680 Speaker 5: bit as far as we can see into the third quarter. 67 00:03:46,840 --> 00:03:49,360 Speaker 5: So while the third quarter might be a bit better, 68 00:03:49,400 --> 00:03:53,320 Speaker 5: there's some signs of life and card spending and people 69 00:03:53,320 --> 00:03:56,800 Speaker 5: getting out and shopping a bit more, it still is 70 00:03:56,840 --> 00:03:59,200 Speaker 5: pretty gloomy and businesses are pretty down or that you know, 71 00:03:59,320 --> 00:04:03,400 Speaker 5: they were right that third quarter, So that will weigh 72 00:04:03,600 --> 00:04:06,280 Speaker 5: on the Reserve Bank too. Even though you know it's 73 00:04:06,360 --> 00:04:10,320 Speaker 5: mandate is inflation, it still considers the wider economy as 74 00:04:10,440 --> 00:04:15,240 Speaker 5: part of that and if anything, how flat and down 75 00:04:15,320 --> 00:04:20,400 Speaker 5: that is, should give them some confidence that inflation won't 76 00:04:20,680 --> 00:04:23,760 Speaker 5: stay and be persistent. Because when an economy is performing 77 00:04:23,800 --> 00:04:26,840 Speaker 5: so badly that they say that, the economists will say 78 00:04:26,880 --> 00:04:30,680 Speaker 5: excess there's excess capacity in the economy, which means that 79 00:04:31,360 --> 00:04:34,720 Speaker 5: it's just not running at full steam. So that is 80 00:04:34,800 --> 00:04:39,120 Speaker 5: kind of disinflationary or deflationary. So it should be putting 81 00:04:39,120 --> 00:04:43,240 Speaker 5: downward pressure on pricing. And so hopefully once we're through 82 00:04:43,279 --> 00:04:47,799 Speaker 5: the you know, the peak of the food price spikes 83 00:04:47,800 --> 00:04:50,480 Speaker 5: we've seen and power prices coming off with more rain 84 00:04:50,560 --> 00:04:55,320 Speaker 5: and things, you know, we'll see inflation either way. 85 00:04:56,320 --> 00:04:59,120 Speaker 2: What impact could a bigger cut, so maybe like a 86 00:04:59,240 --> 00:05:03,080 Speaker 2: point five have for the ordinary mortgage holder for examples, 87 00:05:03,160 --> 00:05:05,360 Speaker 2: and will banks actually pass that on? 88 00:05:06,120 --> 00:05:08,760 Speaker 5: Well, the banks have passed on a little bit and 89 00:05:09,040 --> 00:05:13,240 Speaker 5: ahead of this latest OCR announcement. If it's a fifty 90 00:05:13,279 --> 00:05:16,720 Speaker 5: basis point cut, that just gives them a bit more 91 00:05:16,800 --> 00:05:19,080 Speaker 5: leeway to cut a bit further. Now how far they go, 92 00:05:19,240 --> 00:05:22,880 Speaker 5: it's there's a lot of market conditions involved and competition 93 00:05:22,960 --> 00:05:25,560 Speaker 5: and all that sort of stuff. But what happens is 94 00:05:26,080 --> 00:05:30,599 Speaker 5: with the you know, the interest rates setting, they look 95 00:05:30,640 --> 00:05:33,279 Speaker 5: at what the OCR is predicted to do. The market 96 00:05:33,839 --> 00:05:39,880 Speaker 5: places all these bets about future prices for debt, and 97 00:05:39,920 --> 00:05:43,640 Speaker 5: that kind of can set the parameters for what the 98 00:05:43,680 --> 00:05:47,000 Speaker 5: banks can and can't afford to do with regards to 99 00:05:47,080 --> 00:05:51,640 Speaker 5: cuts or hikes, and so what's priced in is often 100 00:05:51,680 --> 00:05:54,560 Speaker 5: well ahead of the Reserve Bank actually moving itself. So 101 00:05:55,480 --> 00:05:58,000 Speaker 5: if the Reserve Bank just as twenty five basis points, 102 00:05:58,320 --> 00:06:02,360 Speaker 5: probably it's all priced in. If it does fifty, there 103 00:06:02,440 --> 00:06:04,240 Speaker 5: might be a little bit more room to move and 104 00:06:04,279 --> 00:06:07,839 Speaker 5: you might see rates come down. But also important will 105 00:06:07,839 --> 00:06:10,040 Speaker 5: be what the Reserve Bank says about. 106 00:06:09,760 --> 00:06:10,440 Speaker 2: The path ahead. 107 00:06:10,480 --> 00:06:15,680 Speaker 5: Now, there's not much coming with the announcement today. It's 108 00:06:17,080 --> 00:06:19,719 Speaker 5: just a monetary policy review, which just means it's a 109 00:06:19,760 --> 00:06:23,120 Speaker 5: shorter statement. It doesn't have all the forecasts, but the 110 00:06:23,240 --> 00:06:26,240 Speaker 5: tone will matter, and if there's an indication that they 111 00:06:26,279 --> 00:06:29,680 Speaker 5: still see more concern around the slowing economy than they 112 00:06:29,720 --> 00:06:33,440 Speaker 5: do around inflation. That might encourage the banks to pass 113 00:06:33,480 --> 00:06:35,400 Speaker 5: on a bit more in terms of rate cuts for 114 00:06:35,480 --> 00:06:36,200 Speaker 5: the average person. 115 00:06:36,440 --> 00:06:39,800 Speaker 2: How much can you read into the tone of those statements? 116 00:06:39,880 --> 00:06:41,080 Speaker 3: What are you looking out for? 117 00:06:41,480 --> 00:06:43,960 Speaker 5: Well, you can read a lot and I I don't 118 00:06:43,960 --> 00:06:46,200 Speaker 5: know whether it comes to passing it is all true 119 00:06:46,240 --> 00:06:47,960 Speaker 5: and everything, but we do read a lot into it 120 00:06:48,000 --> 00:06:50,240 Speaker 5: because often you've got a one if you've got like 121 00:06:50,240 --> 00:06:52,400 Speaker 5: a sort of a one page statement, you know, it's 122 00:06:52,400 --> 00:06:55,560 Speaker 5: a very finite number of words, and so people are 123 00:06:55,560 --> 00:06:58,520 Speaker 5: looking through to find any change in key words, you know, 124 00:06:58,600 --> 00:07:02,360 Speaker 5: sort of they might sort of see it move from 125 00:07:02,440 --> 00:07:05,680 Speaker 5: for the for some time to for the foreseeable future 126 00:07:05,800 --> 00:07:07,640 Speaker 5: or something as subtle as that, and see that that 127 00:07:07,800 --> 00:07:11,560 Speaker 5: is a change in tone. So, yeah, every word is 128 00:07:11,600 --> 00:07:15,920 Speaker 5: poured over to get a sense of how the Reserve 129 00:07:15,960 --> 00:07:18,880 Speaker 5: Bank is feeling. And it's a weird sort of game, 130 00:07:18,960 --> 00:07:20,840 Speaker 5: Like you wonder, why don't they just come out and 131 00:07:20,840 --> 00:07:25,680 Speaker 5: tell us exactly what they're feeling every time? And I'd 132 00:07:25,760 --> 00:07:28,119 Speaker 5: like to think they could do that a bit more, 133 00:07:28,640 --> 00:07:31,880 Speaker 5: but they also, you know, they're also very keen to 134 00:07:31,920 --> 00:07:34,200 Speaker 5: emphasize that this is only a point in time, and 135 00:07:34,240 --> 00:07:37,120 Speaker 5: their view can change anytime. So if the market's collapsed 136 00:07:37,440 --> 00:07:40,760 Speaker 5: next week, you know everything's changed. So does the. 137 00:07:40,800 --> 00:07:46,280 Speaker 2: Language depend on who's in charge? Though, like a director 138 00:07:46,320 --> 00:07:48,280 Speaker 2: in a movie, you can kind of gauge or the 139 00:07:48,400 --> 00:07:51,560 Speaker 2: ambiguous endings on who's directed a piece or something. 140 00:07:51,680 --> 00:07:54,920 Speaker 5: Yeah, probably a little bit. I mean who's in charge 141 00:07:54,960 --> 00:07:56,960 Speaker 5: as on the Reserve Bank governor has mattered less and 142 00:07:57,040 --> 00:07:59,200 Speaker 5: less in the past few years because we have a 143 00:07:59,240 --> 00:08:01,600 Speaker 5: committee struck sure, and the decision is made by the 144 00:08:02,160 --> 00:08:08,320 Speaker 5: Reserve Bank's Monetary Policy Committee and they only get the 145 00:08:08,360 --> 00:08:11,400 Speaker 5: Reserve Bank Governor involved to vote if it's sort of 146 00:08:11,920 --> 00:08:16,040 Speaker 5: a completely slit decision, if it's a tie. But the 147 00:08:16,080 --> 00:08:18,880 Speaker 5: Reserve Bank governor does tend to set some of the 148 00:08:18,920 --> 00:08:21,720 Speaker 5: culture and the tone. And I'm sure a strong Reserve 149 00:08:21,760 --> 00:08:25,600 Speaker 5: Bank governor like Adrian or was would have influence in 150 00:08:25,640 --> 00:08:29,280 Speaker 5: the meeting and also yeah, in the way that the 151 00:08:29,280 --> 00:08:32,600 Speaker 5: bank communicates, so that that is pretty key. And I 152 00:08:32,600 --> 00:08:34,440 Speaker 5: don't know that we've seen a huge difference in that 153 00:08:34,480 --> 00:08:37,720 Speaker 5: written language. I mean, Adrian Orr and Christian hawksby pretty 154 00:08:37,720 --> 00:08:41,920 Speaker 5: different personalities, not a massive shift in language in the 155 00:08:42,080 --> 00:08:45,760 Speaker 5: in the written takes. But yeah, I think over time 156 00:08:45,840 --> 00:08:48,120 Speaker 5: that that is where the Reserve Bank governor does. 157 00:08:47,920 --> 00:08:50,120 Speaker 3: Influence things the bank is seen. 158 00:08:50,280 --> 00:08:53,720 Speaker 2: Obviously a wave of executive exits. 159 00:08:53,800 --> 00:08:55,760 Speaker 3: Tell me about ores leaving payout. 160 00:08:56,120 --> 00:08:59,000 Speaker 5: Yeah, well, we found out earlier this week that Adrian 161 00:08:59,160 --> 00:09:02,400 Speaker 5: Orr got a restraint of trade payout for about four 162 00:09:02,480 --> 00:09:07,199 Speaker 5: hundred and sixteen thousand dollars, taking his annual pay for 163 00:09:07,320 --> 00:09:09,080 Speaker 5: what was paid for the nine months he was there 164 00:09:09,160 --> 00:09:10,959 Speaker 5: up above a million. Yeah, it was an interesting one. 165 00:09:11,080 --> 00:09:13,080 Speaker 5: It had people scratching their heads a bit because you know, 166 00:09:13,120 --> 00:09:15,640 Speaker 5: there isn't any other Reserve bank governor role in New Zealand. 167 00:09:16,160 --> 00:09:19,480 Speaker 5: Doesn't sort of seem like it would impinge upon the 168 00:09:21,120 --> 00:09:23,680 Speaker 5: Reserve Bank if he was to take a role elsewhere. 169 00:09:24,000 --> 00:09:26,960 Speaker 5: I sort of wondered whether you know that included as 170 00:09:27,480 --> 00:09:31,280 Speaker 5: encompassed a non disclosure agreement as and to not talk 171 00:09:31,320 --> 00:09:35,160 Speaker 5: about it until he had got through that period. I 172 00:09:35,160 --> 00:09:36,679 Speaker 5: don't know how they do that. I mean, it's all 173 00:09:36,679 --> 00:09:40,080 Speaker 5: how the contract's written. My experience with those sort of 174 00:09:40,120 --> 00:09:43,800 Speaker 5: contracts and restraintive trades as they're usually written into a 175 00:09:43,840 --> 00:09:46,680 Speaker 5: contract in advance, and you don't get paid for him 176 00:09:47,640 --> 00:09:49,640 Speaker 5: sticking to it or not. It's there in the contract 177 00:09:49,640 --> 00:09:50,160 Speaker 5: at the beginning. 178 00:09:50,280 --> 00:09:52,079 Speaker 3: Perhaps it might be in the next contract. 179 00:09:52,280 --> 00:09:55,160 Speaker 5: Well, yeah, some interesting questions there for the Reserve Bank, 180 00:09:55,200 --> 00:09:57,760 Speaker 5: which probably won't get answered because you hear the politicians 181 00:09:57,800 --> 00:09:59,760 Speaker 5: and all the you know, everyone says, oh, it's a 182 00:10:00,360 --> 00:10:02,960 Speaker 5: employment matter, so therefore no one's going to talk about it. 183 00:10:03,000 --> 00:10:06,840 Speaker 5: But yeah, it did raise a few eyebrows. 184 00:10:12,640 --> 00:10:16,040 Speaker 1: There are three main areas of responsibility for the Reserve Bank. 185 00:10:16,760 --> 00:10:22,120 Speaker 1: The first is price stability, and we will stay laser 186 00:10:22,240 --> 00:10:27,000 Speaker 1: focused on delivering on low and stable inflation. The second 187 00:10:27,360 --> 00:10:32,000 Speaker 1: is prudential supervision of the financial system that promotes financial 188 00:10:32,040 --> 00:10:35,720 Speaker 1: stability and that is important for healthy and growing economy. 189 00:10:36,679 --> 00:10:39,560 Speaker 1: And third, but not least, it's a safe and efficient 190 00:10:39,600 --> 00:10:44,400 Speaker 1: payments system and that includes issues of notes and coins. 191 00:10:45,240 --> 00:10:48,080 Speaker 1: So a key component to build trust and credibility for 192 00:10:48,160 --> 00:10:52,839 Speaker 1: the Reserve Bank is transparency and openness. 193 00:10:53,840 --> 00:10:56,640 Speaker 2: When is Anna Bremen meant to step into the row 194 00:10:57,520 --> 00:11:03,040 Speaker 2: a new Swedish Reserve Bank governor and starts in December one, so. 195 00:11:03,760 --> 00:11:07,199 Speaker 5: She will probably be inheriting a sort of a clean 196 00:11:07,400 --> 00:11:10,840 Speaker 5: slate in terms of monetary policy. Certainly the staff turnover 197 00:11:10,960 --> 00:11:12,640 Speaker 5: means that there'll be a lot of has been a 198 00:11:12,679 --> 00:11:16,560 Speaker 5: lot of change, but also the current forecasts are that 199 00:11:17,240 --> 00:11:20,079 Speaker 5: we get either our twenty five or fifty basis points 200 00:11:20,440 --> 00:11:25,439 Speaker 5: with this October cut, and then probably another one in November, 201 00:11:26,440 --> 00:11:29,679 Speaker 5: and then after that the Reserve Bank in theory would 202 00:11:29,679 --> 00:11:33,000 Speaker 5: have rates down as low as they need them, economy 203 00:11:33,000 --> 00:11:35,880 Speaker 5: would start moving again and it would be a more 204 00:11:35,920 --> 00:11:38,280 Speaker 5: stable period for the new governor coming in, and so 205 00:11:38,320 --> 00:11:40,920 Speaker 5: there might be a period of do nothing, do nothing, 206 00:11:40,960 --> 00:11:45,080 Speaker 5: do nothing. That'd be ideal, hopefully, hopefully that if things 207 00:11:45,120 --> 00:11:47,400 Speaker 5: go to plan, that's what we'd be hoping for. 208 00:11:47,720 --> 00:11:51,640 Speaker 2: What's going to be her main mandate when she comes in, Well, 209 00:11:51,720 --> 00:11:54,920 Speaker 2: she's already talked, you know, her mandate is inflation. 210 00:11:55,040 --> 00:11:59,280 Speaker 5: So again monetary Policy Committee is deciding which way the 211 00:11:59,360 --> 00:12:03,720 Speaker 5: rate goes. The single mandate is to keep inflation in 212 00:12:03,800 --> 00:12:07,720 Speaker 5: the band. But in her short speech, you know, when 213 00:12:07,720 --> 00:12:12,280 Speaker 5: she was introduced to the public last month, she did 214 00:12:12,400 --> 00:12:15,480 Speaker 5: hit a few key marks that probably land pretty well 215 00:12:15,480 --> 00:12:18,400 Speaker 5: with people who've been critical of the bank and with 216 00:12:18,440 --> 00:12:23,440 Speaker 5: the finance minister. She talked about transparency, which is a 217 00:12:23,440 --> 00:12:27,080 Speaker 5: big deal at the Swedish Reserve Bank. They have a 218 00:12:27,080 --> 00:12:30,600 Speaker 5: policy of publishing all the minutes from their Monetary policy 219 00:12:30,600 --> 00:12:33,720 Speaker 5: committee meetings and letting people know which way everyone voted, 220 00:12:33,760 --> 00:12:39,160 Speaker 5: which we don't do. She talked about, you know, clear 221 00:12:39,200 --> 00:12:46,160 Speaker 5: communication around forecasting, around modeling different scenarios and explaining that 222 00:12:46,200 --> 00:12:48,120 Speaker 5: to the public. Now, you know, to be fair, the 223 00:12:48,160 --> 00:12:53,440 Speaker 5: Reserve Bank has done some modeling. They've also they had 224 00:12:53,440 --> 00:12:56,920 Speaker 5: a bit of an issue with how they're forecasting was 225 00:12:56,960 --> 00:13:00,360 Speaker 5: being interpreted, and they've sort of proactively addressed that. They've 226 00:13:00,679 --> 00:13:03,160 Speaker 5: the chief economist there, Paul Conway's written quite a bit 227 00:13:04,240 --> 00:13:08,199 Speaker 5: about how we should view Reserve Bank forecasts. But still 228 00:13:08,200 --> 00:13:12,880 Speaker 5: I think you know, that focus on you know, communication, 229 00:13:13,000 --> 00:13:16,120 Speaker 5: transparency will be welcome. But she also emphasized very much 230 00:13:16,200 --> 00:13:18,760 Speaker 5: that you know, we've all learned if we didn't know beforehand, 231 00:13:18,800 --> 00:13:23,959 Speaker 5: inflation really really sucks. What we've been through since COVID 232 00:13:24,160 --> 00:13:27,640 Speaker 5: has reminded us of that, and she will stay very, 233 00:13:27,720 --> 00:13:30,600 Speaker 5: very focused on keeping inflation in the right place. 234 00:13:30,880 --> 00:13:34,440 Speaker 2: So as we know, New Zealand's GDP is down, business 235 00:13:34,480 --> 00:13:38,080 Speaker 2: sentiment remains fragile at best. If the mood of the 236 00:13:38,080 --> 00:13:41,280 Speaker 2: boardroom is anything to go by, and the future is 237 00:13:41,400 --> 00:13:45,079 Speaker 2: of course uncertain, how much faith do you have in 238 00:13:45,120 --> 00:13:48,559 Speaker 2: the Bank's ability to steer us back to that growth period. 239 00:13:49,880 --> 00:13:54,240 Speaker 5: Well, I still believe in monetary policy doing the job. 240 00:13:54,520 --> 00:13:59,520 Speaker 5: So in the end, we saw it in COVID, if 241 00:13:59,559 --> 00:14:03,600 Speaker 5: you drop interest rates low enough, you're effectively putting more 242 00:14:03,600 --> 00:14:06,839 Speaker 5: cash into the economy because people aren't having to pay 243 00:14:07,559 --> 00:14:10,400 Speaker 5: those rates to those mortgage rates, so you know, more 244 00:14:10,440 --> 00:14:14,240 Speaker 5: dollars in their pockets, and eventually that gets the economy going. Now, 245 00:14:14,280 --> 00:14:19,760 Speaker 5: it can also overstimulate an economy and create inflation, but 246 00:14:20,200 --> 00:14:23,040 Speaker 5: I think it will work. It's just it is taking 247 00:14:23,040 --> 00:14:26,000 Speaker 5: a lot longer than we are used to to transmit. 248 00:14:26,080 --> 00:14:30,360 Speaker 5: And there's probably a couple of ways of looking at it. 249 00:14:30,360 --> 00:14:33,840 Speaker 5: One is that the economy has just been worse than 250 00:14:33,880 --> 00:14:36,400 Speaker 5: we've expected all the way along, and people when they 251 00:14:36,400 --> 00:14:39,040 Speaker 5: do get a bit of money back from their mortgage, 252 00:14:39,240 --> 00:14:41,800 Speaker 5: that the savings on their mortgage, they're saving that or 253 00:14:41,840 --> 00:14:45,040 Speaker 5: putting it on the mortgage because they're worried about their 254 00:14:45,400 --> 00:14:48,680 Speaker 5: employment or their business. They just want to be secure, 255 00:14:48,760 --> 00:14:51,680 Speaker 5: so they're not going out and spending. And the other 256 00:14:51,720 --> 00:14:54,560 Speaker 5: one is this sort of idea that more people than 257 00:14:54,800 --> 00:14:57,640 Speaker 5: usual are trying to game the thing. So we've had 258 00:14:57,720 --> 00:15:01,760 Speaker 5: higher numbers of people on floating interest rates or very 259 00:15:01,760 --> 00:15:04,520 Speaker 5: short term fixed rates because nobody wants to lock in 260 00:15:04,560 --> 00:15:07,040 Speaker 5: for a long time and actually which would realize the 261 00:15:07,080 --> 00:15:09,600 Speaker 5: savings that the Reserve Bank's trying to give us. But 262 00:15:10,080 --> 00:15:12,200 Speaker 5: people don't want to do that until they sort of 263 00:15:12,400 --> 00:15:14,520 Speaker 5: get to the bottom of the cycle and everybody wants 264 00:15:14,560 --> 00:15:17,400 Speaker 5: to lock in at a lower rate, maybe the end 265 00:15:17,440 --> 00:15:19,040 Speaker 5: of this year, or you know, when we get to 266 00:15:19,120 --> 00:15:23,040 Speaker 5: the low end of this interest rates cycle. Which is 267 00:15:23,680 --> 00:15:26,600 Speaker 5: a nice idea, but it's actually working against what the 268 00:15:26,640 --> 00:15:29,320 Speaker 5: Reserve Bank's trying to achieve. It's keeping people on higher 269 00:15:29,440 --> 00:15:33,360 Speaker 5: rates for longer because they're not taking the lowest available rate. 270 00:15:33,760 --> 00:15:37,000 Speaker 2: When it comes to the economy correcting itself, you would 271 00:15:37,040 --> 00:15:39,720 Speaker 2: have been reporting around two thousand and eight, right, I 272 00:15:39,760 --> 00:15:43,080 Speaker 2: mean how long did the economy and GDP take to 273 00:15:43,280 --> 00:15:44,560 Speaker 2: correct itself after. 274 00:15:44,320 --> 00:15:47,440 Speaker 5: That, Well, it was a bit of a slow train 275 00:15:47,480 --> 00:15:52,120 Speaker 5: wreck the GFC, so it was pretty horrible through two 276 00:15:52,160 --> 00:15:57,400 Speaker 5: thousand and eight, two and nine. I think the government 277 00:15:57,480 --> 00:16:00,280 Speaker 5: books were hit pretty hard because we will we have 278 00:16:00,320 --> 00:16:02,280 Speaker 5: to remember we had an earthquake in twenty eleven, so 279 00:16:02,320 --> 00:16:05,720 Speaker 5: the government books are terrible from that period. But the 280 00:16:05,800 --> 00:16:10,920 Speaker 5: economy itself bounced back quite quickly. We didn't apart from 281 00:16:11,080 --> 00:16:13,520 Speaker 5: the obvious thing of the finance companies that all went over, 282 00:16:13,680 --> 00:16:17,200 Speaker 5: which was very specific. The broader economy wasn't hit so 283 00:16:17,400 --> 00:16:22,080 Speaker 5: badly like our sheer market bounced back reasonably well. We 284 00:16:22,120 --> 00:16:25,640 Speaker 5: did have after the GFC a long period of relatively 285 00:16:27,160 --> 00:16:31,400 Speaker 5: relatively low growth, but it was also really low inflation, 286 00:16:31,640 --> 00:16:33,680 Speaker 5: so it was you know, we were talking about deflation 287 00:16:33,800 --> 00:16:37,720 Speaker 5: and so yet a period where while things weren't booming 288 00:16:38,120 --> 00:16:41,840 Speaker 5: for quite a while, prices weren't going much up much either, 289 00:16:41,880 --> 00:16:45,440 Speaker 5: so things were stable and that was that's important, And 290 00:16:45,480 --> 00:16:47,840 Speaker 5: I think that's kind of what's been lacking for people 291 00:16:47,880 --> 00:16:50,960 Speaker 5: through this period since COVID is just the volatility is 292 00:16:51,800 --> 00:16:56,200 Speaker 5: really plays havoc with your you know, psychology around the economy, 293 00:16:56,880 --> 00:16:59,480 Speaker 5: and that goes to the confidence. And I think there's 294 00:16:59,560 --> 00:17:02,640 Speaker 5: just a lack of confidence in the future at the moment, 295 00:17:02,640 --> 00:17:04,600 Speaker 5: and we need a period of stability. 296 00:17:04,920 --> 00:17:06,359 Speaker 3: Yeah, because that's what I was thinking. 297 00:17:06,960 --> 00:17:13,040 Speaker 2: How long can the government perhaps blame COVID for economic 298 00:17:13,240 --> 00:17:16,600 Speaker 2: woes now in twenty twenty five, Well, I. 299 00:17:16,560 --> 00:17:19,040 Speaker 5: Mean there's there's two ways, two parts to it. So 300 00:17:19,480 --> 00:17:25,600 Speaker 5: if they're talking about the big picture government finances, they 301 00:17:25,600 --> 00:17:28,280 Speaker 5: could they still can be blaming COVID, you know, or 302 00:17:28,320 --> 00:17:30,640 Speaker 5: they can blame the last government. You can take your pick. 303 00:17:31,000 --> 00:17:32,520 Speaker 5: Either they had to do it or they didn't. But 304 00:17:34,200 --> 00:17:38,560 Speaker 5: the government accounts blew out during COVID one way or 305 00:17:38,600 --> 00:17:42,080 Speaker 5: the other, and that's going to take a long time, 306 00:17:42,160 --> 00:17:46,600 Speaker 5: many many years to correct. But then if you focus 307 00:17:46,640 --> 00:17:51,119 Speaker 5: in on the current economic cycle, that's a bit different 308 00:17:51,200 --> 00:17:54,399 Speaker 5: to the big macro stuff. So you know they're linked 309 00:17:54,440 --> 00:17:58,399 Speaker 5: because this government has felt a need to address some 310 00:17:58,440 --> 00:18:01,600 Speaker 5: of that macro stuff at a rate and it believes 311 00:18:01,600 --> 00:18:03,399 Speaker 5: that's the right thing to do. But that is also 312 00:18:03,520 --> 00:18:09,720 Speaker 5: meant it's not it's not actually cutting spending overall, but 313 00:18:09,800 --> 00:18:12,800 Speaker 5: it's not maintaining the increases and spending. It's trying to 314 00:18:12,840 --> 00:18:16,480 Speaker 5: cut back here and there to pay down debt and 315 00:18:16,520 --> 00:18:20,520 Speaker 5: get us into surplus by a certain date. Those are 316 00:18:20,560 --> 00:18:24,000 Speaker 5: political decisions and they've had an impact on the on 317 00:18:24,160 --> 00:18:30,160 Speaker 5: the shorter term economic cycle because you haven't had government 318 00:18:30,200 --> 00:18:35,320 Speaker 5: fiscal stimulus pushing the economy along. So yeah, I don't 319 00:18:35,359 --> 00:18:38,199 Speaker 5: think you can look back much longer at the current 320 00:18:38,320 --> 00:18:41,840 Speaker 5: economic cycle unless you tie it to that that and 321 00:18:42,119 --> 00:18:45,399 Speaker 5: you believe that you know that we must address There 322 00:18:45,440 --> 00:18:46,720 Speaker 5: are a lot of people who believe that that that 323 00:18:46,920 --> 00:18:49,919 Speaker 5: we're in sort of a crisis around the government's levels 324 00:18:49,920 --> 00:18:53,679 Speaker 5: of debt and you know, the deficit and all that 325 00:18:53,720 --> 00:18:55,760 Speaker 5: sort of stuff, and there are other people who are 326 00:18:55,760 --> 00:18:59,280 Speaker 5: more relaxed about it. So yeah, those are political decisions 327 00:18:59,320 --> 00:19:00,560 Speaker 5: I think for joining US. 328 00:19:00,600 --> 00:19:01,240 Speaker 3: Liam cheers. 329 00:19:01,560 --> 00:19:01,920 Speaker 5: All right. 330 00:19:04,680 --> 00:19:07,919 Speaker 2: That's it for this episode of the Front Page. You 331 00:19:07,960 --> 00:19:11,840 Speaker 2: can read more about today's stories and extensive news coverage 332 00:19:11,880 --> 00:19:15,960 Speaker 2: at enzidherld dot co dot nz. The Front Page is 333 00:19:16,040 --> 00:19:19,439 Speaker 2: produced by Jane Ye and Richard Martin, who is also 334 00:19:19,640 --> 00:19:20,280 Speaker 2: our editor. 335 00:19:20,800 --> 00:19:22,240 Speaker 3: I'm Chelsea Daniels. 336 00:19:22,680 --> 00:19:25,879 Speaker 2: Subscribe to the Front Page on iHeartRadio or wherever you 337 00:19:25,920 --> 00:19:29,600 Speaker 2: get your podcasts, and tune in tomorrow for another look 338 00:19:29,680 --> 00:19:30,840 Speaker 2: behind the headlines.