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Speaker 1: So what do we make of the CPI number? Inflation

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Speaker 1: weather inflation is now trending towards a level whereby the

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Speaker 1: Reserve Bank might have to cut and spark and a

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Speaker 1: little bit of hope, maybe some optimism back into the economy.

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Speaker 1: Zero point four percent for the three months to June

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Speaker 1: was what we got annualized. That's three point three, which

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Speaker 1: was down from four. And now the banks are aligned

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Speaker 1: and thinking that the cuts are going to come this year,

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Speaker 1: not next form of finance. Minister Stephen Joyce is with

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Speaker 1: this very good morning to you, by the way, to

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Speaker 1: see more comments which I'm sure you're up on. You

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Speaker 1: said yesterday we need relief. It's about time relief and

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Speaker 1: then we get the independence of the Reserve Bank, et cetera.

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Speaker 1: Is that politics or is that good sound the economic advice?

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Speaker 2: Do you reckon? Well? I think in this case probably

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Speaker 2: a little bit of both. I think we do need relief.

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Speaker 2: I think the Reserve Bank won't give the business sector

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Speaker 2: as much as at once and believes it needs, but

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Speaker 2: it will start moving fairly.

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Speaker 1: So I think the non tradable at five point four

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Speaker 1: it's still stuck as a stuck thing, despite the fact

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Speaker 1: it came down from five point eight. How much can

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Speaker 1: they look through or see through this stuff as it

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Speaker 1: being a real problem.

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Speaker 2: Well, it is the most important problem, if you like,

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Speaker 2: if you look across the data, is a non tradable

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Speaker 2: nice sort of go straight to that and see, Okay,

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Speaker 2: what are we doing at was point nine for the quarter,

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Speaker 2: still a bit high, but trending in the right direction.

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Speaker 2: And I understand it was a change in approach to

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Speaker 2: something like road user charges or something which made it

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Speaker 2: a bit noisier then than otherwise would have been according

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Speaker 2: to the A and Z. Anyway, so it's probably it's

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Speaker 2: definitely trending down. Is it down far enough? This is

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Speaker 2: where I think the bank needs to look beyond the

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Speaker 2: beyond the data and actually take a very close look

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Speaker 2: at what's happening around particularly regional New Zealand, but also

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Speaker 2: in Awkland. And I think there's a real risk of overshooting.

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Speaker 2: I think they know that. But you know, the question

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Speaker 2: we're now talking about is do we get one cut

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Speaker 2: in now September, October, November probable? Okay.

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Speaker 1: So it's interesting to hear because the other day was

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Speaker 1: key when they said, you know, all of a sudden

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Speaker 1: they changed take didn't they. So that was that the moment.

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Speaker 1: You think they got it?

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Speaker 2: Yeah, I think they now do get it. I mean, look,

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Speaker 2: they'll be worried sure of going too soon and unleashing

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Speaker 2: animal spirits in the housing market, for example, but it

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Speaker 2: doesn't seem to be much in the way of animal

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Speaker 2: spirits in the housing market at the moment. And I

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Speaker 2: think what will probably happen is you'll get one cut earlier,

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Speaker 2: maybe than we were expecting up until yesterday, and then

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Speaker 2: I suspect they might hold again to see the next

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Speaker 2: round of data, because the next round of data comes

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Speaker 2: in what late October? Does that go against nless something

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Speaker 2: else happens, right?

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Speaker 1: Does that they go against orthodoxy in the sense that

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Speaker 1: you don't cut once in hold, you cut, and then

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Speaker 1: you're cut because you're confident you've done your job.

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Speaker 2: Well, yeah, ideally that's the textbook. But this is still

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Speaker 2: you know, my point is they're still on a ninth edge, right,

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Speaker 2: So they they you know, they see all the data

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Speaker 2: and it's just just about there. And then they look

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Speaker 2: the other side and they look at the real economy,

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Speaker 2: and the real economy is really struggling, and it's the

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Speaker 2: real risk that they overshoot. So that's why I think

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Speaker 2: they might do something. I mean, you know, what do

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Speaker 2: I know? But I think they might do start and

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Speaker 2: then and then hold because it suits the cycle as well,

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Speaker 2: because they they have they yeah when the data, and

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Speaker 2: the data isn't available to the end of Octagers, so

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Speaker 2: what do they do to their way to the end

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Speaker 2: of October and then do something in November, which means

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Speaker 2: they're effectively doing one and holding anyway. So I suspect

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Speaker 2: we're now debating a first cut in October November. I

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Speaker 2: don't think we'll see a point five this year, that's

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Speaker 2: my view. But what we'll do is get a downard track.

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Speaker 2: It won't be enough on its own, but it might

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Speaker 2: give some people some hope, as it should. But we're

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Speaker 2: also the other thing to watch MIC is what's happening

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Speaker 2: and the rest of the economy, and I think people

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Speaker 2: want to keep it SI on things like the global

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Speaker 2: dairy auction, for example, and it's now been down three times.

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Speaker 2: They'll be watching that closely because that if that keeps dropping,

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Speaker 2: then they might feel the need to go a little

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Speaker 2: bit further sooner. Because it's no doubt about it that

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Speaker 2: the rural economy is in pretty tough shape and the

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Speaker 2: only thing that's keeping it going at the moment as

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Speaker 2: dairy prices, so you don't want to see that fall

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Speaker 2: over and then you're too late cutting exactly.

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Speaker 1: Appreciate your expertise Stephen Joyce, former Finance Minister, and answer

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Speaker 1: to the question what does he know? The answers he

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Speaker 1: knows a lot and it's why to keep getting him

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Speaker 1: on the program. For more from The Mic Asking Breakfast,

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

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