Weekend Edition: From Dairy to Data: Can NZ Outgrow Australia’s Shadow?
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How did the RBNZ’s early aggressive rate hikes compare to the RBA’s softer approach?
There aren't too many economies where you'd get excited about an increase in beef prices, but it has been good news in a quagmire of mediocrity for New Zealand, where the economy is bouncing back. Well, bouncing might be over-egging it a bit, but growth is happening there in a very New Zealand way. Gently, gently. We'll look in at our Trans-Tasman cousins this week and see how they're doing. The morning call from NAB with Phil Dobby. The weekend edition. So when it comes to fighting inflation and driving future growth, who's got it right? Is it Australia or is it New Zealand? Either you know, if we're looking at monetary policy or maybe by government action. Well Stephen Toplis is uh BN's edge head of research and one of New Zealand's most seasoned macro commentators, he asked me to point out.
No, he didn't actually do that, but it does happen to be true. And uh we've got Stephen with us now. Now you were a big critical of the RBNZ going so hard so early. And yet the economy is starting to bounce back. Do you still think that they should have been a a bit more accommodating early on?
Yeah, look, I think um the RBMZ uh basically gone hard both ways. I think they over tightened, um, which brought the the economy to its knees. Um and as a consequence of that they've eased, but they've probably overeased as well. Um and we've ended up with um monetary conditions here that are unsustainably uh loose. So um yeah, they've been a bit hyperactive, I guess.
So does that mean you're gonna face the same problem that we've got here in Australia, that the central bank is looking at inflation, gets worried about it. We've already had one interest rate obviously rise from the RBA, uh, and another one likely in a couple of months, are you gonna be going down that same road?
Yeah, look, I think um were we to keep interest rates at current levels, um, then that problem would reappear quite quickly. Um I I g I get the sense that they're not gonna wait for a long period of time before they they swing into action and certainly that markets are now pricing in the Reserve Bank um raising interest rates one or two times before the end of this year. So that they have the opportunity to keep things um uh in check. The question is will they take
it or not? And do we come out of the other side of this with New Zealand in the same place as it went into it all, or is it an economy which is likely to be growing slower? I mean, is there any lasting damage, I guess, is the question.
Yeah, I think that we've got a number of issues here that probably lower our potential growth rate. So it means we're going to end up with higher levels of interest rates for the same level of growth that we had previously. I don't think much of that can be attributed to monetary policy or even fiscal policy for that matter. I think it's just a function of the way the world is now. Um, with huge deadweight costs coming because the trade regime has changed, um, because of um the sort of the imposition of massive compliance costs on the economy, uh climate change, uh and and the like, all will reduce potential growth. And that's just something we've got to learn to live with. And I don't think we're particularly unique in that regard.
I was
going to say they they apply everywhere. So why would you be more susceptible for any of those factors?
I don't think we are more s uh susceptible. I think you're gonna see that sort of issue uh pop up pop up globally. So GDP
P per capita obviously is lower there than Australia. But is that gap widened because of these problems that you're talking about?
It's it seems to have, not necessarily because of those issues. Uh it may well be because of the um what we've seen in terms of uh both tight fiscal and monetary policy. There's a sort of strange behavior where we tend to fall behind in recessions but never catch up in periods of growth. So every time we get a um a recession, we sort of take that leg downwards uh and never regain it. And this particular recession's been no different in that regard.
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Chapters
6 chapters
1
How did the RBNZ’s early aggressive rate hikes compare to the RBA’s softer approach?
0:01–5:13
2
Why does Stephen Toplis think the RBNZ may have over‑tightened and now faces overly loose monetary conditions?
5:13–11:26
3
What are the main factors behind New Zealand’s slower potential growth – trade regime, climate costs, or fiscal policy?
11:26–16:45
4
Is New Zealand’s reliance on agriculture a growth constraint, and can technology unlock more value?
16:45–22:26
5
How do housing price corrections and the current rental market affect investment opportunities?
22:26–27:04
6
What role could data‑centres, renewable energy and digital industries play in diversifying the economy?
27:04–29:58