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Speaker 1: Minus zero point nine. When we talk of a Q

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Speaker 1: three bounce back. This is the problem. Bouncing back from

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Speaker 1: say zero point three is way easier than it would

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Speaker 1: be now seemingly. Is it possible that Q three may

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Speaker 1: in fact not have enough bounce to be back in

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Speaker 1: the black, and that then leads to a recession. So

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Speaker 1: what do we make of all of this? Nicola Willison's

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Speaker 1: of course the finance minister, and is well, this very

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Speaker 1: good morning to you.

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Speaker 2: Good morning mate.

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Speaker 1: The reason I asked that particular question is manufacturing, for example,

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Speaker 1: the other day is still in contraction. Here we are

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Speaker 1: at the latter part of Q three. Manufacturing, one of

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Speaker 1: the things that led us down so badly in Q two,

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Speaker 1: is still in contraction. Could we be heading for a recession?

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Speaker 2: Well, there are some very good signs. You've got electronic

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Speaker 2: card transactions values up, you've got retail spending up. You're

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Speaker 2: seeing that job adds are up the most significantly in

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Speaker 2: many years. You've got migration data starting to improve, and

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Speaker 2: most significantly, Mike, over the next six months, we're looking

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Speaker 2: at around half of mortgage is going on to lower rates,

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Speaker 2: and that means that there will be more cash flowing

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Speaker 2: into the economy, and actually that manufacturing index and that

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Speaker 2: services index they have recovered a little bit. So the

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Speaker 2: economists tell me there's every reason to believe that the

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Speaker 2: third quarter, the one we're in right now, we are growing.

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Speaker 2: And in fact, Treasury advised me that up to half

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Speaker 2: of the data for the quarter just being has been

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Speaker 2: affected by seasonality and measurement issues. And we know in

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Speaker 2: the first three months of this year we grew at

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Speaker 2: zero point nine percent, three times as fast as Australia did,

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Speaker 2: twice as fast as economists were forecasting. So we shouldn't

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Speaker 2: overreact to a bad quarter. We've got to keep playing

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Speaker 2: the full game. We've got to dig in. We've got

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Speaker 2: to do the things that we know and needed for

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Speaker 2: this economy, and that is what our government is doing. Right.

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Speaker 1: I'll let you do that because you're allowed to do it,

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Speaker 1: because that's your political defense. One of the examples you

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Speaker 1: just gave was the services sector. Services are still contracting.

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Speaker 2: Well. The PSI has show in some improvements from where

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Speaker 2: it was, and what we are seeing is that actually

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Speaker 2: in these numbers, the amount of investment going into intangible

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Speaker 2: as sets, so software and technology and the like, is

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Speaker 2: actually going up. So there are mixed signs. No one's

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Speaker 2: saying that we wanted to see negative growth in the

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Speaker 2: second quarter. The question for the government is what are

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Speaker 2: the things we should do to ensure that businesses are

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Speaker 2: confident about investing, about hiring people, about growing. When I

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Speaker 2: talk to them, they say, get some big fast track

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Speaker 2: projects out the door. Well, yesterday we had the first

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Speaker 2: major fast track housing project Indorse that's going to bring

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Speaker 2: hundreds of millions of dollars and hundreds of jobs into Nelson,

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Speaker 2: create hundreds of houses happening because of our fast track.

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Speaker 1: Nelson's closing down. I don't know if you've seen the

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Speaker 1: food and proper chips is going and the sawmill's gone,

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Speaker 1: so they'll need something that none of that's your fault.

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Speaker 1: I get it. Look, do you worry about the d

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Speaker 1: industrialization of this country when you're looking at manufacturing. Once

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Speaker 1: a manufacturer closes, they don't reopen.

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Speaker 2: We are very focused on energy policy because it's clear

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Speaker 2: that countries whose energy becomes less affordable find it difficult

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Speaker 2: to support manufacturing. And there's no question that the massive

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Speaker 2: declines and gas have led to higher spiking prices and electricity. Now,

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Speaker 2: of course that's a legacy left to us by the

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Speaker 2: last guys. But we're looking at the energy system to

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Speaker 2: ensure that we're getting the investments and the electricity generation

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Speaker 2: and future that mean that we will have affordable energy

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Speaker 2: that is essential to any economy, which is why it

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Speaker 2: was so reckless to ban the exploration of oil and gas.

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Speaker 1: Yeah, I look at that poll this week. The one

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Speaker 1: that really interested me and you will have seen it,

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Speaker 1: is the number of people who now blame you. See.

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Speaker 1: My argument's always been you get your first term, do

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Speaker 1: whatever you like, and then you go back to the

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Speaker 1: people and get a crack for a second term. In

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Speaker 1: history tells us, broadly speaking, that's how it happens. The

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Speaker 1: number of people who now blame you surprises me, and

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Speaker 1: that's your political reality. What do you do about it?

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Speaker 2: Well, we have just been through three very difficult months,

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Speaker 2: as the data shows, and I don't blame people who

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Speaker 2: say I want this economy fixed. That's what we're getting

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Speaker 2: on and doing. The real question is what is the

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Speaker 2: prescription that people would prefer. Would they prefer a labor

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Speaker 2: mardy to party green scenario? Where the answers I've heard

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Speaker 2: so far is let inflation go higher, spend more borrow more,

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Speaker 2: tax more, and I don't think that that is a

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Speaker 2: recipe that New Zealanders will vote for. They're smarter than that.

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Speaker 2: They tried that last time and it didn't lead to

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Speaker 2: a good place. It drove our economy into the ditch,

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Speaker 2: and we're doing the things needed to keep it going.

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Speaker 1: Can I suggest to you you, mister trick yesterday or

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Speaker 1: you lost the room when you were trying to tell

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Speaker 1: us the number of countries that went backwards. The reality

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Speaker 1: is the ones we play with, China, the US, Australia, Japan,

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Speaker 1: the OECD, the EU, Europe, They're all went forward. So

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Speaker 1: you're but Donald hurt us. They didn't hurt them. So

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Speaker 1: how came wear the out well? How can wear the

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Speaker 1: outlier well?

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Speaker 2: On that list? Mike, Actually Germany did go backwards in

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Speaker 2: this life.

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Speaker 1: I didn't say Germany, I said the EU and the

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Speaker 1: euro sector. Canada is your only one that went backwards

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Speaker 1: a little bit. I mean most trees survived and survived. Okay,

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Speaker 1: we are an outlier why.

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Speaker 2: We were in the second quarter. But equally, as I say,

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Speaker 2: in the first quarter, we had relatively high levels of

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Speaker 2: growth compared to many of those countries. And my view

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Speaker 2: on why the Trump tariff announcement, which remember happened on

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Speaker 2: the second day of the quarter, that this data relates

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Speaker 2: to my view is that it really knocked the stuffing

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Speaker 2: out of confidence. You saw that and all the confidence data.

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Speaker 2: Business confidence slumped, household confidence slumped, and people basically tucked

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Speaker 2: up their wallets, put their plans away in a locker.

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Speaker 2: And we saw that in terms of investment that which

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Speaker 2: reduced significantly during that period. I think there is no

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Speaker 2: question that the Trump tariff announcements had an effect on

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Speaker 2: the sentiment in New Zealand. We now have more certainty

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Speaker 2: and we have signs that people are feeling more confident

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Speaker 2: about investing and spending now and into the future.

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Speaker 1: I know you're probably not going to answer this the

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Speaker 1: way it should be answered, but the Reserve Bank, I mean,

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Speaker 1: at the end of the day, when Luxeon came on

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Speaker 1: this program and had to crack at them a couple

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Speaker 1: of weeks ago, everyone got angsty about it. In their independence,

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Speaker 1: you can't hide from the fact that their level of

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Speaker 1: incompetence is bordering on being criminal, and you're wearing the

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Speaker 1: political cost of that, aren't you.

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Speaker 2: Well. I'm allowed to state a fact which is that

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Speaker 2: the Reserve Bank completely underestimated the decline that happened in

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Speaker 2: the second quarter and that was the point where they

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Speaker 2: decided to hold rates. I'm also allowed to say that,

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Speaker 2: thank goodness, they made a pivot in August to focus

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Speaker 2: on the downside risks to growth and indicated a lower

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Speaker 2: interest rate track. I'm also allowed to say they have

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Speaker 2: the next opportunity on the eighth of October, and certainly

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Speaker 2: the market is pricing in a lower interest rate track.

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Speaker 2: So it will be up to them to make their

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Speaker 2: own decisions independently. But I will very shortly be announcing

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Speaker 2: a new governor for the Reserve Bank. Obviously we've had

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Speaker 2: a chair change at the Reserve Bank. We are refreshing

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Speaker 2: that institution and I think that that is very good.

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Speaker 1: Indeed, do you know who the new governor is? I do, right,

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Speaker 1: So when's the announcement coming?

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Speaker 2: Very shortly?

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Speaker 1: Okay, So my point being this, you don't want to

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Speaker 1: end up like Trump and just you know, Barrage pale

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Speaker 1: with endless abuse. But just explain to Megain your view

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Speaker 1: as finance minister, how is it? And I know economic

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Speaker 1: genius and I could see it if I can see

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Speaker 1: what was happening in Q two and they can't. Why

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Speaker 1: are they employed?

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Speaker 2: Well, the Reserve Bank is always balancing their responsibility to

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Speaker 2: keep inflation within the target band over the medium term,

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Speaker 2: and they need to have stable economic outpush. How they

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Speaker 2: weigh that balance even varies around their own table. You've

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Speaker 2: seen split votes around the Reserve Bank decisions in recent times,

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Speaker 2: and I think they will all be looking back, reflecting

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Speaker 2: on their decisions and thinking about how they might check

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Speaker 2: and adjust for the future.

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Speaker 1: Well, it doesn't help us, does it.

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Speaker 2: Well, I think it will help us because what we

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Speaker 2: have seen is that they're now committed to a lower

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Speaker 2: interest rate track, which is helpful because I think when

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Speaker 2: you think about your average they're saying, well, actually, I

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Speaker 2: need to have confidence that I can pay my mortgage,

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Speaker 2: maybe that I can buy a bigger house in future,

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Speaker 2: that I can buy a house at all. And the

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Speaker 2: biggest tailwind for that is lower interest rates. And we

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Speaker 2: know that they are what has spurred previous recoveries. That's

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Speaker 2: actually good economics. Our government has done everything we can

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Speaker 2: to create the space for the Reserve Bank to do this,

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Speaker 2: and they just have to keep doing that job.

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Speaker 1: When Douglas says what he says yesterday, I just do

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Speaker 1: wonder now whether you guys missed a bit of a

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Speaker 1: trick what he did to this country. It was short

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Speaker 1: and it was sharp, and you guys, this time around,

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Speaker 1: it hasn't been sharp enough, and therefore it hasn't been short.

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Speaker 1: It's been long and it carries on and that's a problem.

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Speaker 2: Well. Views will differ on Roger Douglas. There are many

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Speaker 2: who would say that he created quite a lot of

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Speaker 2: chaos in the economy, and of course it was Ruth

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Speaker 2: Richardson after him that did significant spending reductions. But for

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Speaker 2: our part, we've chosen a balanced course of consolidating the

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Speaker 2: books over a few years, which has been endorsed by

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Speaker 2: international economists, by ratings agencies who say that our fiscal

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Speaker 2: plan is a good one. We've delivered significant savings while

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Speaker 2: investing in more infrastructure in health services and education services.

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Speaker 2: I completely stand by that approach, and Roger Douglas may

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Speaker 2: want me to slash spending overnight. That would be the

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Speaker 2: wrong thing to do in terms of the commitment we've

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Speaker 2: made to voters, but actually it would be the wrong

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Speaker 2: thing economically, so I won't be taking his advice.

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Speaker 1: Appreciate your time and have a good week in Nikola, Willis,

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Speaker 1: the Finance Minister. For more from the mi Casking Breakfast,

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Speaker 1: listen live to news talks that'd be from six am weekdays,

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Speaker 1: or follow the podcast on iHeartRadio