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Speaker 1: Now.

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Speaker 2: The Reserve Bank yesterday blamed our prolonged recession, and they've

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Speaker 2: done this before on the fact that we don't feel

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Speaker 2: wealthy because the house prices haven't been rising as they

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Speaker 2: used to. This may, though, be the correction that we

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Speaker 2: actually really need. Brad Olsen is in for metrics principle

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Speaker 2: economist and with us. Now, Hi, Brad, good evening. Do

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Speaker 2: you still I mean you said to me in the

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Speaker 2: text I text you today. I said, do you still

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Speaker 2: think it was worth it? Because it's made this recession

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Speaker 2: so hard? And you said yes, why.

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Speaker 1: Oh well, just I mean simply because you know, what

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Speaker 1: we've done before has just been such a short term

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Speaker 1: sugar hit that you've yeah, okay, you might have got

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Speaker 1: a little bit more economic activity out of it, but

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Speaker 1: you look at the sort of social ills that have

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Speaker 1: come from it. When you've been locking generations out of

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Speaker 1: the housing market, you've got the numbers in such a

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Speaker 1: state that, you know, for a long period of time, genuinely,

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Speaker 1: kiwis were not feeling like they could actually afford a

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Speaker 1: house and you were seeing, you know, the rug pulled

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Speaker 1: out for under us. So I'm actually pretty okay with

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Speaker 1: the fact that we might have had a slightly slower recovery,

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Speaker 1: but a more sustainable one. And let's be clear, you

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Speaker 1: look at some of the economic numbers at the moment,

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Speaker 1: Yes it's tough, but I still think that we're actually

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Speaker 1: seeing already a bit of the early fruits of the

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Speaker 1: labor there when we've been able to decouple economic activity

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Speaker 1: a bit more with house prices, house prices of what

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Speaker 1: gone sideways at best this year, we had consumer spending

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Speaker 1: data out today that showed a one point nine percent

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Speaker 1: lift quarter on quarter, So we can have both. We

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Speaker 1: can have better housing outcomes and still economic activity without

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Speaker 1: having to sort of inextricably link ourselves to a rocket

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Speaker 1: to shoot up to the moon and then blow up.

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Speaker 2: How much harder, Like, can you actually quantify how much

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Speaker 2: harder the wealth effect going into the negative has made

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Speaker 2: this recession.

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Speaker 1: It's tricky to sort of pull out at an exact

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Speaker 1: number and say, you know, we would have been in

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Speaker 1: a better spot six months earlier or whatever it might

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Speaker 1: have been. Because I think also like part of this

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Speaker 1: is also just a fairly realistic reaction from investors from

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Speaker 1: homeowners who are going, you know what, like, there's still

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Speaker 1: houses being sold in the market, right. You know, house

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Speaker 1: sales at the moment are back towards sort of you know,

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Speaker 1: historical averages roughly. So it's not like there's no activity happening.

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Speaker 1: It's just so I think that we're not boostering things

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Speaker 1: to quite the same degree. And from that wealth a

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Speaker 1: thick point of view, you do often look at that

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Speaker 1: and go, well, was that people that were feeling wealthier

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Speaker 1: and spending their money, was that actually good for them themselves?

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Speaker 1: When you know they might have been putting it into

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Speaker 1: increasingly sort of speculative areas. Put it this way, and

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Speaker 1: I think this is probably where's it's a lot more

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Speaker 1: encouraging from an economic point of view. People are quite

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Speaker 1: sensibly now tossing up and going do I put my

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Speaker 1: money in the bank, Do I think about buying a house?

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Speaker 1: Do I think about building a business? Do I invest

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Speaker 1: in you know, some listed stocks or something. People having

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Speaker 1: a much more rational idea of where do I put

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Speaker 1: my money and where do I get a return? Rather

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Speaker 1: than you know, previously it did feel like sort of

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Speaker 1: flash banging economics when we were working so much in

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Speaker 1: the housing market that was just such big numbers. I mean,

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Speaker 1: the point I've made before here that I find that

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Speaker 1: it's wrong, and it was clearly not sustainable when back

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Speaker 1: a couple of years ago, I would have been better

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Speaker 1: to have been made of weatherboard than flesh and bone

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Speaker 1: in terms of earning potential like that, If anyone's sitting

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Speaker 1: out there and going, you know what, those were the

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Speaker 1: good old days, that is not a good old day

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Speaker 1: that was ever going to persist for a long time.

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Speaker 1: So more sensible, way better an approach for their homes.

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Speaker 2: Okay, So I mean, and the thing about it is

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Speaker 2: that what we need to understand is that's never going

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Speaker 2: to happen again, is it. We've got all of these

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Speaker 2: things in place like DTIs now that will prevent that

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Speaker 2: ever happening. So can we can we be sure that

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Speaker 2: we will never pile back into houses in the way

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Speaker 2: that we did before, and we will continue to put

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Speaker 2: our money in more productive assets.

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Speaker 1: I feel like no economists should ever say never, never

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Speaker 1: say never, you know, But realistically, I mean, you're right

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Speaker 1: that yes we had you know, well we've now got DTI's,

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Speaker 1: we've previously had our vrs. We still had house prices

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Speaker 1: that skyrocketed like thirty percent within a year when we

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Speaker 1: dropped interest rates, really low. So I think it's more

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Speaker 1: at the moment that you've sort of had the market

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Speaker 1: shopped a little bit and gone actually expecting ironclad massive

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Speaker 1: returns on an asset is probably not likely to be

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Speaker 1: long term. And more importantly, yes, you haven't seen the

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Speaker 1: full impact of supply coming into the market. Yes we

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Speaker 1: had a lot of building, but there's a lot more

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Speaker 1: the government wants to do. It's more than mindset. Everyone's

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Speaker 1: sitting out there now and going, you know what, I

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Speaker 1: might still be able to make a house work as

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Speaker 1: an investment property or everything else, but it's not going

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Speaker 1: to be the sort of thing where I can just fall,

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Speaker 1: you know, unassumingly into housing and it's going to make

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Speaker 1: me a megabillionaire. It's that you've actually got to do

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Speaker 1: a bit more hard work. You've got to run your numbers,

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Speaker 1: you've got to have the right option. So in that sense,

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Speaker 1: I think people are going to be a lot more

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Speaker 1: shy of committing wholly and solely into housing. They're going

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Speaker 1: to spread their risk a whole lot more, and that's healthy.

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Speaker 2: Yeah, they're gonna have to think about it a bit more.

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Speaker 2: So we come out of this probably in a better

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Speaker 2: place as an economy. Hey, and thank you for that.

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Speaker 2: Brad appreciated Brad Olson in for metrics principle econnors.

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