1 00:00:00,080 --> 00:00:02,000 Speaker 1: So the New Zealand economy is that stood in the 2 00:00:02,000 --> 00:00:04,280 Speaker 1: months of April, May and June, otherwise known as Q two. 3 00:00:04,320 --> 00:00:06,440 Speaker 1: Everyone thinks that went backwards. Of course, the RB thinks 4 00:00:06,519 --> 00:00:09,119 Speaker 1: zero point three. The key to optimism is that as 5 00:00:09,200 --> 00:00:11,160 Speaker 1: bad as it got, in other words, as the current 6 00:00:11,200 --> 00:00:13,840 Speaker 1: quarter on the right direction. Michael Gordon, where's packs sing 7 00:00:13,880 --> 00:00:16,919 Speaker 1: your economists back with us? Michael morning, good morning. You're 8 00:00:16,960 --> 00:00:20,240 Speaker 1: minus what minus point four for us? So what are 9 00:00:20,239 --> 00:00:23,120 Speaker 1: you looking at? Construction, manufacturing, those sort of areas. 10 00:00:23,720 --> 00:00:26,240 Speaker 2: Yeah, I mean there's some areas like construction has been 11 00:00:26,239 --> 00:00:28,960 Speaker 2: in a downturn for a while. Manufacturing is a bit 12 00:00:29,320 --> 00:00:31,600 Speaker 2: more of a reversal from what was actually a decent 13 00:00:31,680 --> 00:00:34,800 Speaker 2: Q one. The big thing that in there, though, is 14 00:00:35,200 --> 00:00:39,159 Speaker 2: that we're finding at the moment the GDP numbers are 15 00:00:39,240 --> 00:00:43,800 Speaker 2: not really fully capturing the effects of winter or summer 16 00:00:43,840 --> 00:00:45,800 Speaker 2: for that matter. So there's a little bit of a 17 00:00:45,800 --> 00:00:48,320 Speaker 2: distortion that's slightly to cause that number to be negative. 18 00:00:48,360 --> 00:00:50,560 Speaker 2: But even without that, it's probably more like a true 19 00:00:50,600 --> 00:00:52,640 Speaker 2: picture of a very small. 20 00:00:52,400 --> 00:00:54,320 Speaker 1: Plus something better in Q three or not. 21 00:00:55,760 --> 00:00:58,360 Speaker 2: I think things are tracking better in Q three certainly, 22 00:00:59,160 --> 00:01:01,680 Speaker 2: and that kind of sit with the idea that as 23 00:01:01,720 --> 00:01:03,960 Speaker 2: interest rates are flowing through. It's really only in the 24 00:01:04,000 --> 00:01:06,880 Speaker 2: last few months we've really seeing substantial numbers of people 25 00:01:07,560 --> 00:01:10,080 Speaker 2: going from higher morgadrats to lower ones, and it's putting 26 00:01:10,080 --> 00:01:12,640 Speaker 2: a bit more money in people's pockets that will eventually 27 00:01:12,640 --> 00:01:14,200 Speaker 2: flow out to other parts of the economy. 28 00:01:14,280 --> 00:01:16,960 Speaker 1: And are you saying that as an economist, as a theorist, 29 00:01:17,080 --> 00:01:20,360 Speaker 1: or are you actually at the bank materially seeing that, 30 00:01:20,440 --> 00:01:22,800 Speaker 1: because we've been saying that all of twenty twenty five. 31 00:01:24,800 --> 00:01:27,640 Speaker 2: I mean, we're certainly seeing on the books in terms 32 00:01:27,640 --> 00:01:30,839 Speaker 2: of what rates people are paying, in terms of seeing 33 00:01:30,880 --> 00:01:32,680 Speaker 2: what they do with it, I mean, inevitably it's going 34 00:01:32,720 --> 00:01:35,600 Speaker 2: to be a combination of maybe some paying down debt, 35 00:01:36,080 --> 00:01:38,760 Speaker 2: maybe a bit of saving as well as spending. But 36 00:01:38,959 --> 00:01:40,959 Speaker 2: that tends to happen in every cycle, so we're not 37 00:01:41,000 --> 00:01:43,280 Speaker 2: counting on the idea that everyone's going to spend all 38 00:01:43,280 --> 00:01:44,959 Speaker 2: that money that they're saving on interest. 39 00:01:45,240 --> 00:01:46,960 Speaker 1: I read an article the other day that said this 40 00:01:47,280 --> 00:01:49,360 Speaker 1: interest rate thing has been overstated. In other words, from 41 00:01:49,360 --> 00:01:51,440 Speaker 1: the Reserve Bank's point of view, they keep saying, oh, 42 00:01:51,480 --> 00:01:53,360 Speaker 1: look we've cut here and there and everywhere, and that 43 00:01:53,400 --> 00:01:56,680 Speaker 1: will flow through. That's been overstated. Is there something in that, 44 00:01:56,760 --> 00:01:57,120 Speaker 1: do you. 45 00:01:57,080 --> 00:02:00,640 Speaker 2: Think, I mean, I think there's a pretty high hurdle 46 00:02:00,680 --> 00:02:03,360 Speaker 2: to making those kind of claims, just because again, this 47 00:02:03,760 --> 00:02:06,440 Speaker 2: happens every time around, and it's usually you know, we're 48 00:02:06,480 --> 00:02:08,640 Speaker 2: a year into an easing or a tightening cycle. Then 49 00:02:08,639 --> 00:02:11,120 Speaker 2: you get the people emerging starting to say things are different, 50 00:02:11,160 --> 00:02:14,600 Speaker 2: the economy's broken. Interest rates don't work. A year further 51 00:02:14,639 --> 00:02:16,320 Speaker 2: down the track, we usually find that they had worked. 52 00:02:16,520 --> 00:02:19,840 Speaker 1: Yeah, consumer, the mood that came out yesterday was still 53 00:02:19,960 --> 00:02:22,560 Speaker 1: in the in the negative. How much of that is 54 00:02:22,720 --> 00:02:25,800 Speaker 1: we've decided it's psychological. We've just decided things are stuffed 55 00:02:26,120 --> 00:02:27,680 Speaker 1: versus it actually being stuffed. 56 00:02:28,760 --> 00:02:32,880 Speaker 2: I think there is a psychological element, certainly. I mean one, 57 00:02:33,400 --> 00:02:35,040 Speaker 2: I mean, one thing that does cut up in any 58 00:02:35,040 --> 00:02:37,800 Speaker 2: conversation really is just this perception of the cost of 59 00:02:37,800 --> 00:02:41,760 Speaker 2: living crisis. Now we're kind of we're back to below 60 00:02:41,800 --> 00:02:45,320 Speaker 2: three percent inflation, so technicals was on target, but I 61 00:02:45,320 --> 00:02:48,160 Speaker 2: think there's still a perception that the cost of living 62 00:02:48,280 --> 00:02:49,800 Speaker 2: is just moving out of control. You get things like 63 00:02:49,840 --> 00:02:53,040 Speaker 2: food prices, electricity prices, and so on, the really visible stuff, 64 00:02:53,680 --> 00:02:55,760 Speaker 2: and that is just continuing to sour the mood. 65 00:02:56,000 --> 00:02:57,960 Speaker 1: But explain to me, just before the News. I gave 66 00:02:57,960 --> 00:02:59,720 Speaker 1: the numbers from Walkland Airport. There will be a million 67 00:02:59,720 --> 00:03:02,000 Speaker 1: people through these school holidays. A million people are flying. 68 00:03:02,000 --> 00:03:04,120 Speaker 1: They're going to America, they're going to China, they're going 69 00:03:04,120 --> 00:03:06,600 Speaker 1: to Fiji, they're going to Australia. So what's real. 70 00:03:09,040 --> 00:03:11,239 Speaker 2: Well, yeah, I mean, like I said, it's a multi 71 00:03:11,280 --> 00:03:13,639 Speaker 2: speed economy to some extent. But also I think it 72 00:03:13,720 --> 00:03:16,440 Speaker 2: flits the fact that, yeah, I mean people are spending, 73 00:03:16,480 --> 00:03:21,600 Speaker 2: they're just not necessarily spending here. And yeah, I mean 74 00:03:21,600 --> 00:03:25,680 Speaker 2: the travel numbers have been notable, and I think also 75 00:03:25,720 --> 00:03:28,280 Speaker 2: the exchange rate has been quite favorable for us compared 76 00:03:28,280 --> 00:03:29,360 Speaker 2: to the last couple of years. 77 00:03:29,400 --> 00:03:31,359 Speaker 1: Good stuff, Michael, appreciate it very much. Michael good and 78 00:03:31,360 --> 00:03:34,240 Speaker 1: Westpac senior economist. I'm going to Los Angeles and I'm 79 00:03:34,240 --> 00:03:36,720 Speaker 1: going to mine about the price of butter. 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