Nicola Willis: Finance Minister on the economic impact of the US-Iran peace deal, fuel crisis
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What impact will the US-Iran peace deal have on the economy?
Question is, if the Iran deal sticks, if this thing is heading to the rearview mirror, what impact is it going to have on the economy? Finance Minister Nicola Willis back with us. Morning.
Good morning, Mike.
Kelsey, have the straight back to normal by August. What do you reckon?
Well, look, I hope for that, but I continue to be in a state of waiting to see what the next development could be. The situation in the Middle East is still fragile, and we have had big breakthroughs in the past, only to go backwards. So I'm not counting all my chickens yet.
We haven't been this close yet, though, have we? This isn't bad news.
This is great news. It feels materially different. And you've seen that in the oil price, which came down significantly yesterday.
Why is the Finance Minister cautious about the fuel crisis resolution?
And look, let's hope that it holds. That would be good for the people of the Middle East. It would be good for the world. And it would be very good for New Zealanders, not only when they're at the pump, but for our economy as a whole, because lower fuel prices equals a stronger recovery.
Is it going to save your economy in the election?
Well, my view is that the forecasts which Treasury shared at the Budget show that the steps our government's been taking are actually making good progress. And what they see is the economy reviving, the growth strengthening, jobs being created. But there's no doubt we've just been through a very difficult few months. People have felt that in their wallets. They've felt that in their communities. And you'll continue to see the results of that reflected. But this will mean that things pick up as Treasury said they would.
Do you think there's a bounce or do you think there's a grind back up?
Well, I think that we'll get the data many months after things have happened.
How are lower fuel prices affecting the recovery in New Zealand?
So that will be a bit of a delayed factor. But I think as prices come down, people are going to feel better. They're going to have more money in their pockets, no doubt, because they're not spending it all on fuel. Businesses aren't going to have that pressure on prices. There's going to be less fear of inflation spiking, which it could have done if prices kept going up. And I think that the underlying fundamentals of this economy are good. We're exporting huge amounts to the world, not just in goods, but in services too. We have, comparative to many countries around the world, a better inflation picture, a better interest rate picture, and there's lots of great stuff happening. So there's every reason that we can and should bounce back well.
I reckon we've got out of this relatively unscathed, in the sense that it could have been a lot worse than it is. Q2's probably a bit ugly, but apart from that, it could have been way worse. Do you not think?
I do, and I stand by my view that the government could have made it a lot worse. If we'd chosen to get out the money bazooka and fly it all around and use this as an excuse for a huge spend up. Now I'd be talking to you about all the extra debt we racked up and how we'd wrecked the books on the way through and no one would be thanking us.
As they are in Australia at this very moment as the relief comes off the petrol.
Yeah look and they got into a funny situation over there where the price of petrol actually ended up lower than it was prior to the conflict because of the government's intervention. So you know we've taken a very careful approach here. I recognise that some people have found it very challenging. We've chosen temporary targeted support. And as that oil price comes down, you see lower numbers when you're filling up at the petrol station. I think we've seen that really it's international events that are affecting those numbers, not government policy.
How do you explain services yesterday v retail? So services are in the doldrums and yet retail bounced. How do you square that circle?
Well, look, you know, the data does fluctuate from one update to the other and it's difficult to over-interpret one data point rather than a trend. I've seen some different explanations for it. I think in retail you are seeing that people are continuing to spend and what Treasury have been saying is it's not like the Middle East crisis has meant a recession.
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Chapters
4 chapters
1
What impact will the US-Iran peace deal have on the economy?
0:00–0:45
2
Why is the Finance Minister cautious about the fuel crisis resolution?
0:45–1:41
3
How are lower fuel prices affecting the recovery in New Zealand?
1:41–3:56
4
What does the Treasury forecast say about economic growth?
3:56–5:35
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