Nicola Willis: Finance Minister on the International Monetary Fund's report card for New Zealand
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What does the IMF report say about New Zealand's economic growth?
The IMF have been looking at the way we do things broadly. They like what they see from the government and Reserve Bank. They do want a rate hike next week. They do see growth 2% this year, 2.7% next year. Inflation seems to have peaked, they say. Nicola Willis, Finance Minister, is with us. Good morning.
Good morning, Mike.
And they endorsed your oil support program, which must have been welcome.
Yes, they did. They thought that temporary and targeted was the right way to go without adding pressure to inflation and being mindful about our fiscal constraints. And they pointed out that some countries in the world haven't taken that approach and may live to regret it a little.
We seem to be broadly aligned, don't we, ReGDP? There is growth to come this year and there is more of that next year. Everyone seems to agree, banks and the whole lot of them.
How is the New Zealand government responding to inflation concerns?
Yeah, they do. The IMF is slightly more optimistic about how strong growth could be this year. But broadly, they see it recovering after what I think we all know was a difficult second quarter. And the bank economists are all falling in line in that regard. Recent data is positive. You will have seen business confidence out from the ANZ this week. That's really bounced back, which is positive to see. And pricing intentions are taking off, which is good for the inflation picture as well.
I've asked everybody, I've asked everyone this question, I might as well ask you. Can you explain the disconnect then, those business numbers? That looks like a group of people that want to get on with life and they understand the fundamentals, they're set to go. You talk to the consumer, they're in a funk. And yet you need the consumer to drive the business.
Well, that's because the consumer has just been through a massive price shock. Every time they've turned up at the petrol pump, the prices have been very high.
What impact do high oil prices have on inflation in New Zealand?
Now that's come down rapidly. Many people turning up at the petrol station now are saying petrol under $3. That means more cash in the back pocket, more ability to spend. But the consumer has been warned. Inflation was being talked about spiralling very high, interest rates being hiked very fast. So That has created some caution. But now we're coming right. We're coming through those difficult shocks. And I think the consumer will adjust because they can say, well, actually, everyone who was telling us that this was temporary and it was going to get better turns out to be right. And their own circumstance will improve if businesses' hiring intentions are increasing and they're investing more. So there is a positive picture here.
Indeed. Can we conclude that inflation was not going to be the problem we thought it would be?
Inflation would have been a massive problem if we'd hit the money bazooka hard.
How do business confidence and consumer sentiment differ in New Zealand?
And remember, that was what a lot of people were calling for. They were saying there's nothing good to be had other than the government spending. It needs to cut petrol tax. It needs to give everyone extra cash in their back pocket. It needs to spend up a storm. That's what we did during COVID. And that's what led to inflation spiralling higher and higher. So this is a case where making sensible decisions in the short term will lead to better outcomes in the long run.
You are in a tricky spot, but I'll ask it anyway. I don't see the need to hike next week. What do you say?
Well, obviously the IMF are saying they think that that will happen. Bank economists are a little bit split. Some are saying they might leave it till September. Others are saying it looks pretty odds on for a hike.
What are the implications of government spending decisions on inflation?
You'll recall last time the Monetary Policy Committee was split on whether it should have lifted at the last one. So we'll see what they do. They've now got a lot more data about what's really happening in the economy. So that will form the basis of their decisions.
Good to talk. Appreciate it, Nicola Willis, Finance Minister. Thank you. For more from the Mike Hosking Breakfast, listen live to News Talk ZB from 6 a.m. weekdays or follow the podcast on iHeartRadio.
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Chapters
5 chapters
1
What does the IMF report say about New Zealand's economic growth?
0:00–0:46
2
How is the New Zealand government responding to inflation concerns?
0:46–1:41
3
What impact do high oil prices have on inflation in New Zealand?
1:41–2:31
4
How do business confidence and consumer sentiment differ in New Zealand?
2:31–3:16
5
What are the implications of government spending decisions on inflation?
3:16–3:41
Speakers
2 identifiedMore from The Mike Hosking Breakfast
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