1 00:00:00,000 --> 00:00:02,120 Speaker 1: So if I heard Adrian or correctly yesterday, the fifty 2 00:00:02,160 --> 00:00:04,280 Speaker 1: points will come with another couple of cuts shortly, and 3 00:00:04,360 --> 00:00:06,720 Speaker 1: at that point, all things being equal, we are in 4 00:00:06,760 --> 00:00:10,440 Speaker 1: neutral territory. The drama is over. Adrianare's with us? Very 5 00:00:10,440 --> 00:00:13,640 Speaker 1: good morning, am I? Worldwide coverage of what you did 6 00:00:13,720 --> 00:00:18,040 Speaker 1: yesterday continuously and consistently use the word slashed. New Zealand 7 00:00:18,079 --> 00:00:21,479 Speaker 1: has slashed. Does slashed imply drama or not? 8 00:00:23,480 --> 00:00:26,759 Speaker 2: It does imply drama, but it's probably misnamed for us. 9 00:00:27,040 --> 00:00:31,000 Speaker 2: It was the financial markets totally anticipated what we did, 10 00:00:31,040 --> 00:00:32,960 Speaker 2: and I think we barely left a rule. If it 11 00:00:33,000 --> 00:00:34,519 Speaker 2: was a hot dive, we would have got a ten. 12 00:00:35,240 --> 00:00:37,000 Speaker 2: So I'll sure what they're talking about. 13 00:00:37,440 --> 00:00:41,720 Speaker 1: The banks have passed on some but not all. Is 14 00:00:41,720 --> 00:00:42,760 Speaker 1: that acceptable or not? 15 00:00:44,880 --> 00:00:49,080 Speaker 2: The banks need to do better. They need to look 16 00:00:49,240 --> 00:00:54,240 Speaker 2: at their own margins and chase and compete with or 17 00:00:54,320 --> 00:00:59,600 Speaker 2: customers much more vigorously. Their funding costs are being challenged 18 00:00:59,680 --> 00:01:01,920 Speaker 2: because you know, the official cash rate is only one 19 00:01:01,920 --> 00:01:05,440 Speaker 2: of the variables that go into what they have to 20 00:01:05,480 --> 00:01:08,520 Speaker 2: pay when they're borrowing money to aunt Land. But the 21 00:01:08,560 --> 00:01:12,039 Speaker 2: margin is also sitting there at a very healthy level. 22 00:01:12,120 --> 00:01:17,639 Speaker 2: So one would hope that when the competition when people 23 00:01:17,640 --> 00:01:20,240 Speaker 2: come back to the market, which they're doing in drums 24 00:01:20,240 --> 00:01:23,760 Speaker 2: and drabs. Now, competition is alive. 25 00:01:24,120 --> 00:01:26,200 Speaker 1: Those profit margins you talked about, We saw a couple 26 00:01:26,240 --> 00:01:27,720 Speaker 1: of results in the last week or so and I 27 00:01:27,720 --> 00:01:30,200 Speaker 1: always compare the Australian number to the New Zealand number. 28 00:01:30,200 --> 00:01:32,520 Speaker 1: The New Zealand numbers always higher than the Australian number. 29 00:01:33,200 --> 00:01:36,000 Speaker 1: Why hasn't that been addressed by the government or you 30 00:01:36,319 --> 00:01:39,160 Speaker 1: or somebody somewhere so we get a better deal? 31 00:01:40,520 --> 00:01:43,720 Speaker 2: Yeah, I mean, spot on. The biggest challenge is, you know, 32 00:01:44,280 --> 00:01:49,240 Speaker 2: income streams don't disrupt themselves, but they need disrupting. We're 33 00:01:49,320 --> 00:01:51,360 Speaker 2: doing a lot of work here at the bank. While 34 00:01:51,560 --> 00:01:54,640 Speaker 2: whilst you know, we always get blamed for capital or 35 00:01:54,680 --> 00:01:59,440 Speaker 2: you know, prudential things for the level of interest rates, 36 00:01:59,600 --> 00:02:02,920 Speaker 2: we're talking being profit margins here, and you know, the 37 00:02:02,960 --> 00:02:06,040 Speaker 2: disruption type things we're looking at doing is central Bank 38 00:02:06,080 --> 00:02:11,120 Speaker 2: digital currencies, open access to our paiment and settlement systems, 39 00:02:11,160 --> 00:02:15,760 Speaker 2: all of the plumbing the background, allowing people to compete 40 00:02:15,800 --> 00:02:20,160 Speaker 2: in the simple transaction world at a cost. I mean 41 00:02:20,680 --> 00:02:25,880 Speaker 2: some countries, you know, we would be multiples more expensive 42 00:02:25,919 --> 00:02:29,280 Speaker 2: than many countries just to do basic transactional. 43 00:02:28,720 --> 00:02:32,400 Speaker 1: Banking ultimately whose doorsteps as on the governments. 44 00:02:35,200 --> 00:02:38,880 Speaker 2: It's you know, and the government's pretty limited. I mean, 45 00:02:38,919 --> 00:02:41,840 Speaker 2: it's competition. You know, you've seen how hard it is 46 00:02:41,880 --> 00:02:49,600 Speaker 2: to penetrate. I think I think it's technology implementation. You know, 47 00:02:50,000 --> 00:02:52,200 Speaker 2: I could rattle off a list of things we're doing 48 00:02:52,200 --> 00:02:56,840 Speaker 2: which I think would fundamentally change the competitive landscape. Government 49 00:02:56,880 --> 00:02:59,959 Speaker 2: has to buy into that. 50 00:03:00,080 --> 00:03:02,320 Speaker 1: Argue they are are they not? Because I mean Nichola 51 00:03:02,360 --> 00:03:04,440 Speaker 1: Willis is all over I mean, you plainly yak about 52 00:03:04,440 --> 00:03:06,680 Speaker 1: doing something about this. I just worry that nothing's happening. 53 00:03:07,360 --> 00:03:10,000 Speaker 2: I kind of think, you know, there's three forms of efficiency. 54 00:03:10,000 --> 00:03:12,920 Speaker 2: The first one is cost efficiency, and so you know, 55 00:03:13,080 --> 00:03:14,760 Speaker 2: just just trying to do the same thing cheaper and 56 00:03:14,840 --> 00:03:19,079 Speaker 2: cheaper will get you some way only but it still 57 00:03:19,120 --> 00:03:21,880 Speaker 2: needs to be passed on. The other one is allocative efficiency, 58 00:03:21,919 --> 00:03:23,840 Speaker 2: you know, lending to the right people and at the 59 00:03:23,919 --> 00:03:26,840 Speaker 2: right time. But the real one that's missing amongst all 60 00:03:26,880 --> 00:03:30,920 Speaker 2: this is dynamic efficiency, i e. You know, new technology, 61 00:03:31,280 --> 00:03:33,520 Speaker 2: new ways of doing the same thing. I can quote 62 00:03:33,639 --> 00:03:39,480 Speaker 2: several countries, Brazil, in the Malaysia, Singapore where the technology 63 00:03:39,600 --> 00:03:42,600 Speaker 2: is at the leading edge. We are far behind it 64 00:03:42,840 --> 00:03:46,560 Speaker 2: and trying to get people to focus on that I 65 00:03:46,600 --> 00:03:51,960 Speaker 2: think will be the game changer. So well, yeah, it's 66 00:03:52,000 --> 00:03:53,520 Speaker 2: all there. We don't have to reinvent it. 67 00:03:53,800 --> 00:03:55,960 Speaker 1: No good luck with it. The most depressing part about 68 00:03:55,960 --> 00:03:58,520 Speaker 1: your press conference yesterday was when you started talking about 69 00:03:58,520 --> 00:04:01,200 Speaker 1: fair value. So the currency gets to fair value. If 70 00:04:01,200 --> 00:04:03,440 Speaker 1: fair value is fifty seven US and forty five P 71 00:04:03,640 --> 00:04:06,440 Speaker 1: what's that tell you about New Zealand economy in the country. 72 00:04:07,640 --> 00:04:10,600 Speaker 2: Well, that's that's right, So you know, it's you know, 73 00:04:10,640 --> 00:04:13,840 Speaker 2: don't get too worried about comparing nominals, but fair value 74 00:04:13,880 --> 00:04:15,960 Speaker 2: is something where you know, the price of beer in 75 00:04:15,960 --> 00:04:18,520 Speaker 2: one country equals the price of beer in another once 76 00:04:18,560 --> 00:04:21,840 Speaker 2: you've a Jane adjusted for the exchange rate, and so 77 00:04:21,880 --> 00:04:24,599 Speaker 2: it's a nominal against nominal type thing. You know. The 78 00:04:24,640 --> 00:04:27,040 Speaker 2: most depressing thing amongst all of this is that we're 79 00:04:27,080 --> 00:04:29,880 Speaker 2: talking about economic growth picking up. But you know that's 80 00:04:29,880 --> 00:04:32,400 Speaker 2: to two and a half percent, so you know that 81 00:04:32,400 --> 00:04:36,680 Speaker 2: that's threshing, threshing the debts and as fast as we can. 82 00:04:36,760 --> 00:04:38,320 Speaker 2: You know, we need to upgrade the vehicle. 83 00:04:38,279 --> 00:04:40,719 Speaker 1: You in your class. So yesterday it was Reno. You 84 00:04:40,760 --> 00:04:43,039 Speaker 1: only get a good Reno on the third recall, are 85 00:04:43,080 --> 00:04:44,920 Speaker 1: you like a car expert. Is it true you only 86 00:04:44,920 --> 00:04:46,640 Speaker 1: get a good Reno on the third recall or you're 87 00:04:46,680 --> 00:04:47,440 Speaker 1: just making that up? 88 00:04:48,320 --> 00:04:51,440 Speaker 2: I loved that quote. I lived in transfer, isn't that 89 00:04:51,600 --> 00:04:55,120 Speaker 2: was the advice I received. The best vehicle to ever 90 00:04:55,160 --> 00:04:57,320 Speaker 2: buy is the Reno after its third recall. 91 00:04:59,080 --> 00:05:03,880 Speaker 1: So that this comes to the business of productivity, which 92 00:05:04,000 --> 00:05:06,320 Speaker 1: I don't know that we're ever going to tackle properly 93 00:05:06,360 --> 00:05:08,920 Speaker 1: because we understand on a piece of paper what productivity 94 00:05:09,000 --> 00:05:12,919 Speaker 1: might be, yet we're it's useless at it. What fundamentally 95 00:05:13,000 --> 00:05:14,640 Speaker 1: needs to change For that to. 96 00:05:14,640 --> 00:05:23,320 Speaker 2: Change, we need investment in technology and people, capability and competence, 97 00:05:23,920 --> 00:05:26,200 Speaker 2: and we tend to just do the opposite. Were just 98 00:05:26,320 --> 00:05:29,640 Speaker 2: like find doing the same thing slightly cheaper or just 99 00:05:29,880 --> 00:05:33,760 Speaker 2: applying more people. So generally the economic growth has seen 100 00:05:33,839 --> 00:05:36,800 Speaker 2: over decades now has been about more people coming into 101 00:05:36,839 --> 00:05:40,279 Speaker 2: the country, so more inputs, more the same things, slightly better. 102 00:05:40,640 --> 00:05:45,320 Speaker 2: It's investment in technology and capability. The government needs to 103 00:05:45,320 --> 00:05:51,040 Speaker 2: be courageous and be part of that investment. So infrastructure enabling, 104 00:05:51,440 --> 00:05:54,960 Speaker 2: enabling or allowing and enabling investment to occur. 105 00:05:55,080 --> 00:05:57,760 Speaker 1: Okay, I know the different scenarios. I get it, But 106 00:05:58,000 --> 00:06:00,960 Speaker 1: we're seeing you're seeing some inflation come in this country 107 00:06:01,000 --> 00:06:04,039 Speaker 1: this year. Britain's seeing it, America is seeing it. They've 108 00:06:04,040 --> 00:06:06,240 Speaker 1: got more of a backstop and being able to deal 109 00:06:06,279 --> 00:06:09,039 Speaker 1: with it. Do we face if you're a bit wrong, 110 00:06:09,760 --> 00:06:13,160 Speaker 1: stagflation in other words, more inflation, not a lot of growth, 111 00:06:13,360 --> 00:06:15,480 Speaker 1: and we're running out of tricks. 112 00:06:17,279 --> 00:06:22,520 Speaker 2: Yes, you know under that scenario, if we get significant 113 00:06:22,560 --> 00:06:25,640 Speaker 2: global inflation come back again, we're going to wear it. 114 00:06:27,120 --> 00:06:29,320 Speaker 2: Monetary policy will do its job. It's not going to 115 00:06:29,360 --> 00:06:32,599 Speaker 2: turn into domestic inflation. We will be targeting one to 116 00:06:32,640 --> 00:06:36,560 Speaker 2: three percent. Inflation has come down. We're feeling very confident 117 00:06:37,279 --> 00:06:41,520 Speaker 2: that it is contained, but it's around a low potential 118 00:06:41,560 --> 00:06:42,040 Speaker 2: growth rate. 119 00:06:42,480 --> 00:06:45,880 Speaker 1: So a lot of people texted me, you know, my 120 00:06:45,920 --> 00:06:47,640 Speaker 1: feelings about what you've been doing over the last couple 121 00:06:47,680 --> 00:06:50,040 Speaker 1: of years, But a lot of people text me about 122 00:06:50,040 --> 00:06:51,440 Speaker 1: the number of people who have left the country and 123 00:06:51,440 --> 00:06:56,039 Speaker 1: you talk about immigration, do you carry any responsibility do 124 00:06:56,120 --> 00:06:57,880 Speaker 1: you think for the number of people who are packed 125 00:06:57,960 --> 00:07:04,440 Speaker 1: up and left Because we're buggered and you back monetary policy. 126 00:07:05,160 --> 00:07:08,400 Speaker 2: We focus on low and stable inflation. That's all we 127 00:07:08,440 --> 00:07:12,120 Speaker 2: can provide. Monetary policy is neutral in the long run 128 00:07:12,320 --> 00:07:15,440 Speaker 2: on the effect on growth or where people choose to 129 00:07:15,480 --> 00:07:18,440 Speaker 2: live or not. What we can do is issue notes 130 00:07:18,480 --> 00:07:21,239 Speaker 2: and coins, and we want to make the purchasing value 131 00:07:21,240 --> 00:07:24,000 Speaker 2: of that broadly stable with the New Zealand. That is 132 00:07:24,000 --> 00:07:24,480 Speaker 2: our job. 133 00:07:25,840 --> 00:07:28,400 Speaker 1: By the time I interview we've achieved it, sure, exactly. 134 00:07:28,440 --> 00:07:30,280 Speaker 1: So by the time I interview you next, which is 135 00:07:30,280 --> 00:07:32,040 Speaker 1: in a couple of months, another couple of twenty five's 136 00:07:32,040 --> 00:07:35,120 Speaker 1: a game, We're about done, aren't we. It gets boring 137 00:07:35,160 --> 00:07:38,080 Speaker 1: after that in theory. 138 00:07:37,600 --> 00:07:40,360 Speaker 2: Yeah, which is great. You know, central bank should be boring. 139 00:07:40,880 --> 00:07:45,880 Speaker 2: That's where they chose me. You've got we think a 140 00:07:46,000 --> 00:07:50,000 Speaker 2: neutral interest rate is around three three and a half percent. 141 00:07:50,000 --> 00:07:53,440 Speaker 2: We're not too far off it now. So why is 142 00:07:53,520 --> 00:07:56,400 Speaker 2: that good news? That means we'll have stable nominal interest rates, 143 00:07:56,440 --> 00:07:59,640 Speaker 2: will have low and stable inflation, will have employment growing, 144 00:08:00,080 --> 00:08:04,920 Speaker 2: will have GDP growth, you know, will it be will 145 00:08:04,920 --> 00:08:09,320 Speaker 2: it be big long term strong growth and will It's 146 00:08:09,320 --> 00:08:11,640 Speaker 2: only going to be a functional of how we are 147 00:08:11,760 --> 00:08:12,000 Speaker 2: all right. 148 00:08:12,040 --> 00:08:14,720 Speaker 1: Appreciate your time as always, Adrian, all the Reserve Bank Governance. 149 00:08:15,160 --> 00:08:18,040 Speaker 2: For more from the My Asking Breakfast, listen live to 150 00:08:18,160 --> 00:08:21,240 Speaker 2: news talks it'd be from six am weekdays, or follow 151 00:08:21,280 --> 00:08:22,840 Speaker 2: the podcast on iHeartRadio.