1 00:00:00,080 --> 00:00:02,880 Speaker 1: And Paul Bloxham, hspci's chief economist, is with us. Hello, 2 00:00:02,960 --> 00:00:05,640 Speaker 1: Paul good A, what do you make of our inflation 3 00:00:05,720 --> 00:00:06,440 Speaker 1: print yesterday? 4 00:00:07,760 --> 00:00:09,760 Speaker 2: Well, I think that it was a little bit lower 5 00:00:09,800 --> 00:00:12,200 Speaker 2: than the market had expected, which is a positive. So 6 00:00:12,440 --> 00:00:14,600 Speaker 2: you know, it's a little bit below where the market 7 00:00:14,640 --> 00:00:18,240 Speaker 2: was fearful and a touch above where the RBNZ was forecasting. 8 00:00:18,920 --> 00:00:21,360 Speaker 2: I think it still leaves the door open for the 9 00:00:21,480 --> 00:00:23,880 Speaker 2: rben Z to deliver a little bit more easy cut 10 00:00:23,920 --> 00:00:25,800 Speaker 2: their policy rate, and that's our central case. We think 11 00:00:25,840 --> 00:00:28,360 Speaker 2: at their next meeting they're likely to be able to 12 00:00:28,400 --> 00:00:31,760 Speaker 2: convince themselves that inflation still contained enough to allow them 13 00:00:31,800 --> 00:00:34,000 Speaker 2: to lower interest rates a bit further. But I mean, 14 00:00:34,040 --> 00:00:35,760 Speaker 2: we've got to keep in mind also it has picked 15 00:00:35,840 --> 00:00:37,239 Speaker 2: up a little bit. It's, you know, sitting at two 16 00:00:37,280 --> 00:00:39,320 Speaker 2: point seven. It's up a little bit from the low 17 00:00:39,360 --> 00:00:41,639 Speaker 2: point it had reached and so on. So we think 18 00:00:41,640 --> 00:00:43,559 Speaker 2: they'll cut again, but we don't think there's going to 19 00:00:43,560 --> 00:00:45,120 Speaker 2: be a lot more cuts to come. I mean, we 20 00:00:45,159 --> 00:00:47,400 Speaker 2: think the Arbenz is getting nearer to the end of 21 00:00:47,440 --> 00:00:48,280 Speaker 2: its easing phase. 22 00:00:49,440 --> 00:00:52,000 Speaker 1: See John Key, former Prime Minister, over the weekend, called 23 00:00:52,000 --> 00:00:54,440 Speaker 1: for one hundred basis points and cuts. What do you 24 00:00:54,440 --> 00:00:54,840 Speaker 1: think of that? 25 00:00:55,920 --> 00:00:59,080 Speaker 2: Well, I think the inflation being still above the midpoint 26 00:00:59,120 --> 00:01:01,160 Speaker 2: of the target band and actually picking up a little 27 00:01:01,200 --> 00:01:04,039 Speaker 2: bit recently means that we need to be careful about 28 00:01:04,040 --> 00:01:06,319 Speaker 2: how much more easing is delivered. I think, you know, 29 00:01:06,440 --> 00:01:10,040 Speaker 2: I think you'd want to say, well, the Arbenz targets 30 00:01:10,080 --> 00:01:12,200 Speaker 2: one through three percent. They target try to get a 31 00:01:12,240 --> 00:01:15,520 Speaker 2: two two percent inflation consistently, and they're sitting at two 32 00:01:15,560 --> 00:01:18,000 Speaker 2: point seven, So it's not convincing. I don't think that 33 00:01:18,080 --> 00:01:21,600 Speaker 2: they should be delivering a lot more easing rapidly. I 34 00:01:21,640 --> 00:01:24,399 Speaker 2: think the growth story is a little bit more nuanced 35 00:01:24,440 --> 00:01:26,639 Speaker 2: at the moment. Some of the timely indicators have weakened 36 00:01:26,640 --> 00:01:28,480 Speaker 2: a bit, but we're I mean, we're still of the 37 00:01:28,520 --> 00:01:31,319 Speaker 2: view actually that New Zealand's got positives and factors that 38 00:01:31,360 --> 00:01:33,600 Speaker 2: are going to lift growth. One of them is the 39 00:01:33,640 --> 00:01:35,920 Speaker 2: fact that they've already cut interest rates by two hundred 40 00:01:35,959 --> 00:01:38,280 Speaker 2: and twenty five basis points. And the other one is 41 00:01:38,480 --> 00:01:42,080 Speaker 2: the dairy prices are high and that's boosting agricultural incomes 42 00:01:42,120 --> 00:01:43,480 Speaker 2: and so on. So we think that's going to feed 43 00:01:43,560 --> 00:01:47,119 Speaker 2: through to a still a continued lifting growth in New Zealand, 44 00:01:47,160 --> 00:01:48,720 Speaker 2: and so I'm not sure the case is strong for 45 00:01:48,760 --> 00:01:52,000 Speaker 2: a substantial delivery of lots of cuts from here. 46 00:01:52,280 --> 00:01:54,160 Speaker 1: You don't buy the argument that the inflation that we're 47 00:01:54,160 --> 00:01:56,000 Speaker 1: seeing at the moment is very much temporary and will 48 00:01:56,040 --> 00:01:58,320 Speaker 1: fall back later on, there by justifying the cuts. 49 00:01:59,280 --> 00:02:01,080 Speaker 2: No. I think if if you look at the components 50 00:02:01,120 --> 00:02:03,360 Speaker 2: of what's going on with inflation, you've still got non 51 00:02:03,360 --> 00:02:06,240 Speaker 2: tradables inflation that's holding up reasonably well, So the domestic 52 00:02:06,320 --> 00:02:10,799 Speaker 2: part of inflation that's holding up reasonably well. And although 53 00:02:10,919 --> 00:02:13,080 Speaker 2: you know that the pickup you saw in the actual 54 00:02:13,560 --> 00:02:16,080 Speaker 2: print for the quarter was mostly about food prices, so 55 00:02:16,120 --> 00:02:18,440 Speaker 2: that might prove to be temporary, I think you'd still 56 00:02:18,440 --> 00:02:20,840 Speaker 2: be a bit cautious about whether you'd be convinced that 57 00:02:20,880 --> 00:02:24,239 Speaker 2: inflation was going to continue to fall towards towards two percent. 58 00:02:24,280 --> 00:02:25,920 Speaker 2: I think the other thing is this is not the 59 00:02:25,960 --> 00:02:28,079 Speaker 2: only survey that you can look at. You can look 60 00:02:28,080 --> 00:02:31,240 Speaker 2: at the measures of inflation expectations, the surveys where they 61 00:02:31,320 --> 00:02:34,000 Speaker 2: ask people what they think inflation's going to be in 62 00:02:34,040 --> 00:02:36,000 Speaker 2: the future, and those have all started to pick up 63 00:02:36,000 --> 00:02:38,360 Speaker 2: a little bit as well. So I think there's enough 64 00:02:38,720 --> 00:02:43,080 Speaker 2: indications to suggest that inflation's not back at the target 65 00:02:43,160 --> 00:02:46,000 Speaker 2: quite yet it's still in the upper part of the 66 00:02:46,040 --> 00:02:48,680 Speaker 2: target band, and it would, I think mean that you 67 00:02:48,720 --> 00:02:51,040 Speaker 2: have to be cautious about how much more monetary using 68 00:02:51,120 --> 00:02:53,200 Speaker 2: you deliver, or at least how quickly you deliver it. 69 00:02:53,280 --> 00:02:55,040 Speaker 2: So I think they're going to get over the line 70 00:02:55,040 --> 00:02:57,440 Speaker 2: for another cut, but I think taking it a bit 71 00:02:57,440 --> 00:02:59,240 Speaker 2: more carefully and a bit more slowly at this point 72 00:02:59,320 --> 00:03:03,280 Speaker 2: is important because inflation is not is in the upper 73 00:03:03,280 --> 00:03:03,920 Speaker 2: part of the target ban. 74 00:03:04,040 --> 00:03:06,600 Speaker 1: Fairpoint. Now to the RBA, we were a little bit 75 00:03:06,639 --> 00:03:08,720 Speaker 1: surprised when it held the rates a couple of weeks ago, 76 00:03:08,760 --> 00:03:10,560 Speaker 1: but now we've got the meeting minutes and it's shit 77 00:03:10,600 --> 00:03:11,320 Speaker 1: a little bit more light. 78 00:03:11,400 --> 00:03:11,520 Speaker 2: Right. 79 00:03:11,520 --> 00:03:13,320 Speaker 1: This comes down to the employment rate, doesn't it. 80 00:03:14,240 --> 00:03:16,480 Speaker 2: That's right, So, I mean, I think the RBA on 81 00:03:16,520 --> 00:03:19,000 Speaker 2: the day even they was a surprise for the market. 82 00:03:19,080 --> 00:03:21,359 Speaker 2: But they said, and the Governor had said at the time, 83 00:03:21,440 --> 00:03:24,720 Speaker 2: that it's about timing rather than direction. I issue was 84 00:03:24,760 --> 00:03:27,480 Speaker 2: saying the board wasn't quite convinced that they should deliver 85 00:03:27,560 --> 00:03:30,400 Speaker 2: a rate cut at that point in July, but they 86 00:03:30,480 --> 00:03:33,680 Speaker 2: still expect that they'll be lowering interest rates further. And 87 00:03:33,720 --> 00:03:35,360 Speaker 2: I think the minutes again just give a bit more 88 00:03:35,360 --> 00:03:38,119 Speaker 2: clarity around that was the discussion that was had. It's 89 00:03:38,120 --> 00:03:39,640 Speaker 2: not that they don't think that they need to do 90 00:03:39,680 --> 00:03:41,360 Speaker 2: a bit more easy, it's just that they want to 91 00:03:41,400 --> 00:03:45,560 Speaker 2: take a cautious approach to delivering that that easing. And 92 00:03:45,640 --> 00:03:46,880 Speaker 2: I think the other thing to keep in mind is 93 00:03:46,920 --> 00:03:49,240 Speaker 2: since then, we've had labor market numbers that were softer, 94 00:03:49,480 --> 00:03:52,400 Speaker 2: that were weaker, the unemployment rate actually rose. So I 95 00:03:52,440 --> 00:03:55,160 Speaker 2: think we're likely to see as well that the RBA 96 00:03:55,560 --> 00:03:58,840 Speaker 2: probably will probably deliver another rate cut come August as 97 00:03:58,880 --> 00:04:01,680 Speaker 2: a part of their cautious approach to delivering easing for 98 00:04:01,720 --> 00:04:02,280 Speaker 2: the economy. 99 00:04:02,320 --> 00:04:04,360 Speaker 1: Paul, I have a text question for you, says, hither 100 00:04:04,360 --> 00:04:06,280 Speaker 1: could you please ask Paul Bloxham with the New Zealand 101 00:04:06,320 --> 00:04:08,120 Speaker 1: we'll ever get the rock star economy back. 102 00:04:09,920 --> 00:04:12,440 Speaker 2: Ah, that's a great question. And look, I would hope 103 00:04:12,720 --> 00:04:14,560 Speaker 2: like I hope, so, I mean, of course it is. 104 00:04:14,600 --> 00:04:16,360 Speaker 2: I mean it would be great if New Zealand could 105 00:04:16,360 --> 00:04:19,360 Speaker 2: return to that former glory that we described. I described 106 00:04:19,360 --> 00:04:21,320 Speaker 2: it back in twenty fourteens. Is over ten years ago 107 00:04:21,360 --> 00:04:24,520 Speaker 2: now that you could get there, And I think the 108 00:04:24,560 --> 00:04:26,440 Speaker 2: main things you know you need to look for. Yes, 109 00:04:26,800 --> 00:04:28,800 Speaker 2: the dairy story was really strong back then and that 110 00:04:28,880 --> 00:04:31,920 Speaker 2: was that's one that's turned more positive more recently. That 111 00:04:32,040 --> 00:04:34,279 Speaker 2: the migration story was strong as well, and that's something 112 00:04:34,320 --> 00:04:35,640 Speaker 2: that you need to look at as well. But more 113 00:04:36,120 --> 00:04:37,520 Speaker 2: more importantly, I guess you need to look at the 114 00:04:37,600 --> 00:04:40,800 Speaker 2: reform agenda and making sure that you can attract more 115 00:04:40,839 --> 00:04:43,680 Speaker 2: foreign investment. And I think that's what policymakers asked. I 116 00:04:43,680 --> 00:04:45,719 Speaker 2: think to look more, you know, taking a bigger, a 117 00:04:45,720 --> 00:04:49,719 Speaker 2: stronger approach towards and if that starts to deliver, it 118 00:04:49,760 --> 00:04:53,200 Speaker 2: could really lift New Zealand's growth prospects. We're very optimistic. 119 00:04:53,240 --> 00:04:55,400 Speaker 2: I think I've said this to you before that you know, 120 00:04:55,520 --> 00:04:57,520 Speaker 2: we are at the top of consensus in terms of 121 00:04:57,560 --> 00:05:00,479 Speaker 2: thinking about New Zealand's growth for this year and we 122 00:05:00,520 --> 00:05:03,120 Speaker 2: think growth is likely to be in an upswing. Will 123 00:05:03,120 --> 00:05:05,599 Speaker 2: it be a rock star? Well, we'll just have to see. 124 00:05:05,839 --> 00:05:06,520 Speaker 1: Here's hoping. 125 00:05:06,680 --> 00:05:06,920 Speaker 2: Paul. 126 00:05:06,960 --> 00:05:10,560 Speaker 1: Thanks very much as always, Paul Bloxhom, HSPC Chief Economists. 127 00:05:10,560 --> 00:05:13,720 Speaker 2: For more from Hither Duplessy Allen Drive, listen live to 128 00:05:13,839 --> 00:05:14,359 Speaker 2: news talks. 129 00:05:14,400 --> 00:05:17,560 Speaker 1: It'd be from four pm weekdays, or follow the podcast 130 00:05:17,680 --> 00:05:18,680 Speaker 1: on iHeartRadio.