1 00:00:00,320 --> 00:00:01,960 Speaker 1: Back to the Reserve Bank New Gavin a cash right 2 00:00:02,080 --> 00:00:04,320 Speaker 1: unchanged two to five. They see a recovery, it's on 3 00:00:04,400 --> 00:00:07,480 Speaker 1: it's building, it's patchy. Anna Bremen is with us. Very 4 00:00:07,480 --> 00:00:10,639 Speaker 1: good morning to you. Good morning, very broad based question 5 00:00:10,720 --> 00:00:13,320 Speaker 1: if we can start with, not just out of yesterday's announcement, 6 00:00:13,360 --> 00:00:16,680 Speaker 1: but more generally, what's your sense of the New Zealand 7 00:00:16,720 --> 00:00:20,040 Speaker 1: economy of New Zealand inc is an outsider coming in. 8 00:00:21,720 --> 00:00:25,200 Speaker 2: I think it's a great economy. I think New Zealanders 9 00:00:25,239 --> 00:00:29,040 Speaker 2: are underestimating actually the potential going forward in the New 10 00:00:29,120 --> 00:00:34,680 Speaker 2: Zealand economy. We're already seeing some sectors doing really well. Agriculture, 11 00:00:34,800 --> 00:00:37,920 Speaker 2: manufacturing is starting going and I do expect this to 12 00:00:37,960 --> 00:00:41,959 Speaker 2: broaden in this year. So I'm very positive the. 13 00:00:42,000 --> 00:00:45,280 Speaker 1: Level of confidence with which you delivered your comments yesterday. 14 00:00:45,360 --> 00:00:47,440 Speaker 1: How confident are you that you are right? 15 00:00:49,200 --> 00:00:51,879 Speaker 2: Well, of course I'm confident, but you know, we have 16 00:00:51,960 --> 00:00:56,040 Speaker 2: a very uncertain global environment, so I think the key 17 00:00:56,080 --> 00:00:58,840 Speaker 2: thing is to always be very vigilant and look around 18 00:00:58,960 --> 00:01:01,520 Speaker 2: what's happening and see how that will affect New Zealand 19 00:01:01,560 --> 00:01:04,839 Speaker 2: going forward. So I'm confident that you know the potential 20 00:01:04,920 --> 00:01:06,880 Speaker 2: is there, but there's always the risk there will be 21 00:01:06,920 --> 00:01:10,360 Speaker 2: some global shock that will hit the New Zealand economy again. 22 00:01:10,600 --> 00:01:12,119 Speaker 2: Unfortunately that is the case. 23 00:01:12,360 --> 00:01:14,640 Speaker 1: Let me quote you Tony Alexander, well known economist in 24 00:01:14,680 --> 00:01:16,520 Speaker 1: this part of the world. This tells us that despite 25 00:01:16,600 --> 00:01:20,080 Speaker 1: underestimating inflation by zero point four percent, the committee is 26 00:01:20,120 --> 00:01:22,600 Speaker 1: probably still in the same mindset that has prevailed in 27 00:01:22,640 --> 00:01:25,360 Speaker 1: recent decades. That is tightened too late and too much, 28 00:01:25,640 --> 00:01:28,200 Speaker 1: then after that is too late, and feel encouraged to 29 00:01:28,240 --> 00:01:34,319 Speaker 1: ease too much. If he's wrong, what makes you right, well, what. 30 00:01:34,400 --> 00:01:37,480 Speaker 2: Makes me right is that we will adjust according to 31 00:01:37,520 --> 00:01:40,920 Speaker 2: how we see the economy evolving. So, you know, we 32 00:01:41,080 --> 00:01:44,200 Speaker 2: do a really careful assessment of what's happening in the economy. 33 00:01:44,240 --> 00:01:46,600 Speaker 2: We see we're in early stages of the recovery. We 34 00:01:46,680 --> 00:01:49,800 Speaker 2: expect inflation to fall, and if we see that things 35 00:01:49,840 --> 00:01:53,720 Speaker 2: evolve differently, we will act. So, you know, it is 36 00:01:53,720 --> 00:01:57,200 Speaker 2: a difficult thing to do forecasting, it always is, but 37 00:01:57,560 --> 00:02:00,600 Speaker 2: we will adjust to ensure that we wish to inflictation target. 38 00:02:00,640 --> 00:02:03,840 Speaker 2: Because inflation has been too high for too long. Households 39 00:02:03,880 --> 00:02:06,360 Speaker 2: have been suffering. So we do need to see inflation 40 00:02:06,480 --> 00:02:09,040 Speaker 2: coming down now because that's when household we get their 41 00:02:09,040 --> 00:02:12,239 Speaker 2: purchasing power back and that will boost the growth, it 42 00:02:12,320 --> 00:02:14,840 Speaker 2: will boost the labor market, So you know, we are 43 00:02:14,880 --> 00:02:18,000 Speaker 2: really focused on getting inflation down, are you. 44 00:02:18,120 --> 00:02:20,040 Speaker 1: The reason I asked that question is, of course we've 45 00:02:20,080 --> 00:02:23,080 Speaker 1: been here before and we've lived through it, and what 46 00:02:23,120 --> 00:02:25,320 Speaker 1: he says is technically correct. And when you say you 47 00:02:25,400 --> 00:02:27,440 Speaker 1: were just yes, you do, but he's suggesting you were 48 00:02:27,520 --> 00:02:29,720 Speaker 1: just too late. Now you're new, but the people on 49 00:02:29,720 --> 00:02:32,120 Speaker 1: your committee are not. They're the ones who made the mistakes. 50 00:02:32,200 --> 00:02:33,800 Speaker 1: How confident in that committee are you? 51 00:02:35,080 --> 00:02:38,120 Speaker 2: Well, I'm very confident in the committee, and i'm you know, 52 00:02:38,240 --> 00:02:43,600 Speaker 2: I'm we are going to ensure that we get inflation 53 00:02:43,720 --> 00:02:46,480 Speaker 2: back to target, and we are looking very carefully at 54 00:02:46,520 --> 00:02:49,560 Speaker 2: the data. So you know, it's always a difficult thing 55 00:02:49,680 --> 00:02:52,080 Speaker 2: at the moment and know where the economy is heading, 56 00:02:52,120 --> 00:02:54,840 Speaker 2: and afterwards it might look like, oh, it was obvious 57 00:02:54,880 --> 00:02:57,200 Speaker 2: you should have done this, But we're living in a 58 00:02:57,240 --> 00:03:01,320 Speaker 2: situation where where there are lots of global shocks that 59 00:03:01,400 --> 00:03:04,800 Speaker 2: are constantly hitting the New Zealand economy and we are 60 00:03:05,000 --> 00:03:08,760 Speaker 2: looking for those and focusing on ensuring that inflation gets 61 00:03:08,800 --> 00:03:11,200 Speaker 2: back to a low and stable level and then stays 62 00:03:11,240 --> 00:03:13,440 Speaker 2: at the low and stable level and we have good people. 63 00:03:13,680 --> 00:03:16,160 Speaker 1: What makes you so confident on inflation because what we've 64 00:03:16,160 --> 00:03:18,040 Speaker 1: also lived through in the last couple of years mainly 65 00:03:18,080 --> 00:03:21,440 Speaker 1: its power, it's right, its insurance, which is it's us, 66 00:03:21,480 --> 00:03:24,320 Speaker 1: it's here, and it's cost plus accounting. And I don't 67 00:03:24,320 --> 00:03:26,840 Speaker 1: see the end of that, and you somehow do. What 68 00:03:26,880 --> 00:03:27,880 Speaker 1: are you seeing that I don't? 69 00:03:29,480 --> 00:03:31,760 Speaker 2: Well, I do, I mean, we do see now that 70 00:03:31,800 --> 00:03:34,760 Speaker 2: insurance costs, for example, have come down. Food prices is 71 00:03:35,280 --> 00:03:37,640 Speaker 2: a big issue because we saw in some preliminary data 72 00:03:37,680 --> 00:03:40,560 Speaker 2: from January that food prices were going up again. If 73 00:03:40,560 --> 00:03:43,960 Speaker 2: you look at global food prices, they have actually been falling. 74 00:03:44,160 --> 00:03:47,480 Speaker 2: So if you look throughout this year, you know, we 75 00:03:47,520 --> 00:03:50,920 Speaker 2: do expect food price growth to not increase as much 76 00:03:50,920 --> 00:03:53,240 Speaker 2: as it has in previous years. But it is the 77 00:03:53,320 --> 00:03:55,720 Speaker 2: problem because these are necessities. So these are things that 78 00:03:55,800 --> 00:03:59,240 Speaker 2: households have to buy, and when those prices are high, 79 00:03:59,280 --> 00:04:02,440 Speaker 2: it makes it that crowds out other types of consumption, 80 00:04:02,760 --> 00:04:05,960 Speaker 2: so then you know the demand is really weak. So 81 00:04:06,040 --> 00:04:07,880 Speaker 2: and that's actually what we're seeing in the data. If 82 00:04:07,920 --> 00:04:10,840 Speaker 2: you look at other prices, they're not so high, but 83 00:04:10,960 --> 00:04:15,880 Speaker 2: you have these prices like food prices, insurance that I 84 00:04:16,000 --> 00:04:18,960 Speaker 2: have have been really high, and that is that is 85 00:04:19,000 --> 00:04:21,080 Speaker 2: the tricky issue for us. It is when it. 86 00:04:21,040 --> 00:04:23,880 Speaker 1: Does crowd out other consumptions, which plies into the psychology 87 00:04:23,880 --> 00:04:26,680 Speaker 1: of the recovery. And this is what worries me. We're 88 00:04:26,760 --> 00:04:29,680 Speaker 1: desperate for recovery. We're desperate for people to spend and 89 00:04:29,720 --> 00:04:33,600 Speaker 1: to feel good about themselves by saying what you said yesterday, 90 00:04:33,600 --> 00:04:35,640 Speaker 1: and we start to talk about things like interest rate 91 00:04:35,720 --> 00:04:38,400 Speaker 1: rises before the end of the year, do you worry 92 00:04:38,400 --> 00:04:43,400 Speaker 1: that we're so psychologically fragile will freeze now? 93 00:04:44,279 --> 00:04:46,479 Speaker 2: Not because I think that also, you know, after this 94 00:04:46,680 --> 00:04:49,480 Speaker 2: year that's been really hard on many households. I do 95 00:04:49,600 --> 00:04:53,120 Speaker 2: think that there is a need to increase consumption. So 96 00:04:53,120 --> 00:04:55,719 Speaker 2: when houses start seeing that the labor market is actually 97 00:04:55,760 --> 00:04:59,960 Speaker 2: improvement improving, and you know, we actually see employment growth now, 98 00:05:00,360 --> 00:05:03,280 Speaker 2: so unemployment is still halsed high, but more people are 99 00:05:03,360 --> 00:05:07,160 Speaker 2: entering the labor market, so there is actually employment growth now, 100 00:05:07,160 --> 00:05:09,280 Speaker 2: and people start seeing that it's getting a little bit 101 00:05:09,320 --> 00:05:12,560 Speaker 2: easier to get a new job, you know, inflation forces 102 00:05:12,600 --> 00:05:15,479 Speaker 2: a little bit more and the purchasing power comes back, 103 00:05:15,640 --> 00:05:18,680 Speaker 2: then I think we will actually see some more positive 104 00:05:18,680 --> 00:05:20,760 Speaker 2: consumption growth. But it is one of the risks that 105 00:05:20,800 --> 00:05:23,640 Speaker 2: we're saying, we are concerned that household spending is still weak, 106 00:05:24,120 --> 00:05:26,040 Speaker 2: and that's the reason why we also think it's going 107 00:05:26,080 --> 00:05:28,760 Speaker 2: to be hard for firms to high prices, and that's 108 00:05:28,800 --> 00:05:32,440 Speaker 2: why we're saying that inflation will fall further. So it does, 109 00:05:33,440 --> 00:05:35,920 Speaker 2: It does make sense to us, but we've been playing 110 00:05:35,920 --> 00:05:36,840 Speaker 2: it's been tough. 111 00:05:37,120 --> 00:05:39,080 Speaker 1: Of course it has, of course it has. But here's 112 00:05:39,080 --> 00:05:41,240 Speaker 1: the difficult what's to say about our capacity is an 113 00:05:41,240 --> 00:05:43,599 Speaker 1: economy if suddenly we start to grow this year a 114 00:05:43,600 --> 00:05:46,320 Speaker 1: bit and then you know what about October and November 115 00:05:46,320 --> 00:05:47,800 Speaker 1: the same? But you go and hike the rights we 116 00:05:47,839 --> 00:05:50,200 Speaker 1: go hold on is that that's as good as it was? 117 00:05:50,200 --> 00:05:50,400 Speaker 2: Was it? 118 00:05:50,440 --> 00:05:55,080 Speaker 1: That's our capacity? We lack capacity, don't we. 119 00:05:55,080 --> 00:05:57,560 Speaker 2: Well, we actually think there's quite lots of what we 120 00:05:57,640 --> 00:06:00,160 Speaker 2: call spare capacity and the economy. So we think that 121 00:06:00,640 --> 00:06:03,960 Speaker 2: the economy can grow at a higher pace without causing 122 00:06:04,000 --> 00:06:08,320 Speaker 2: so much inflationary pressures because there is still high unemployment. 123 00:06:08,520 --> 00:06:13,440 Speaker 2: Firms can increase manufacturing without how they're starting to invest actually, 124 00:06:13,440 --> 00:06:15,760 Speaker 2: which is also really good to see. So we do 125 00:06:15,839 --> 00:06:18,800 Speaker 2: think there is fair capacity and I you know, people, 126 00:06:19,200 --> 00:06:22,320 Speaker 2: there is a lot of good potential in this economy. 127 00:06:22,320 --> 00:06:24,080 Speaker 2: People should be a bit more optimistic. 128 00:06:24,320 --> 00:06:26,760 Speaker 1: All right, we'll take that advice onboard. Appreciate Anna Breyman, 129 00:06:26,800 --> 00:06:29,919 Speaker 1: doctor Ana Breman, who is the Reserve Bank Governor. For 130 00:06:30,040 --> 00:06:33,400 Speaker 1: more from the Mic Asking Breakfast, listen live to news talks. 131 00:06:33,400 --> 00:06:36,599 Speaker 1: It'd be from six am weekdays, or follow the podcast 132 00:06:36,640 --> 00:06:37,520 Speaker 1: on iHeartRadio.