Mm-hmm.

You'd put that around an 8 or a 9, but the thing was it ended up being short-lived, which was a real saving grace.

This one you're probably talking about up there around a 9 out of 10 from the point of view of if you were thinking about one of the worst things you could have happen, it's probably, right, well, let's shut off global oil supplies to many countries because it's a hard one to step around.

But then they should talk to their accountant for that.

Just my caution for people at the moment is don't rely too heavily on, say, a particular forecast or review.

Think more of the general story behind what is going on and the risks.

And if you're running a business, one of the best things to do at the moment is think through different scenarios like what might be an OK scenario, what what will be a bad scenario, what could be the worst case scenario and understand what that might look like for your business and think about what actions you might need to take if you find you're going down one path over another because that's a lot more useful than people like me sitting here going, well, trying to pick a date in an environment which is so fluid.

So it's better to be planning and thinking about how you might respond.

What about price of fuel? I've seen all these stories about going to fill up now because the price is going to go up soon.

Well, there's definitely that risk that they do go up a little bit.

When you look at the wholesale markets, at least so far, the price of oil, yes, it's gone up a little bit and refinery margins have gone up a bit, but nowhere near the sorts of moves that we saw early on when the war hit and there was a lot of stress on there.

So I'm very hopeful that we're not going to see anywhere near the sorts of lifts in fuel prices that we saw and they're going to remain substantially off their lows.

And particularly that price of diesel is the important one because that's moving around so much of our goods and that's where a lot of the cost pressure we've been coming from earlier on in the year.

But where is that going to go? And if we get a coalition government, and again, we're likely to get another round of job cuts from the public service, what does that do?

Well, we think we'll see unemployment in the short term, so sitting around that 5.3%, 5.4% mark.

So just in the short term, employment itself being relatively soggy, but also you've got the immigration picking up.

What about price of fuel? I've seen all these stories about go and fill up now because the price is going to go up soon.

Well, there's definitely that risk that they do go up a little bit.

When you look at the wholesale markets, at least so far, the price of oil, yes, it's gone up a little bit and refinery margins have gone up a bit, but nowhere near the sorts of moves that we saw early on when the war hit and there was a lot of stress on there.

So I'm very hopeful that we're not going to see anywhere near the sorts of lifts in fuel prices that we saw and they're going to remain substantially off their lows.

And particularly that price of diesel is the important one because that's moving around so much of our goods and that's where a lot of the cost pressure we've been coming from earlier on in the year.

But where is that going to go? And if we get a coalition government, and again, we're likely to get another round of job cuts from the public service, what does that do?

Well, we think we'll see unemployment in the short term, so sitting around that 5.3%, 5.4% mark.

So just in the short term, employment itself being relatively soggy, but also you've got the immigration picking up.

What about price of fuel? We're seeing all these stories about go and fill up now because the price is gonna go up soon.

Well, there's, there's definitely that risk that they do go up a little bit.

But when you look at the wholesale markets, at least so far, the price of oil, yes, it's gone up a little bit and refinery margins have gone up a bit, but nowhere near the sorts of moves that we saw early on when the war hit and there was a lot of stress on there.

So I'm very hopeful that we're not gonna see anywhere near the sorts of lifts of fuel prices that we saw, and they're gonna remain substantially off their lows.

Uh, and particularly that price of diesel is the important one because that's moving around so much of our goods, and that's where a lot of the cost pressure we're seeing coming from earlier on in the year.

It's, although slightly, I think it was 1% quarter on quarter, but where is that gonna go? And, and if we get a coalition government, and again we're likely to get another round of job cuts from the public service, what does that do?

Well, we think we'll see unemployment in the short term, so sitting around that sort of 5.3, 5.4% mark.

So just in the short term, you know, employment itself being, being relatively, uh, soggy, but also you've got the immigration picking up.

So what do they do next? Do you reckon another hike still in September and then crouch, pause and hold and see what happens after the election or what?

We do think the Reserve Bank will steadily lift interest rates over the rest of the year.

So that would get the Reserve Bank and its cash rate back to three and a quarter percent by the end of the year.

But we do think there is a risk that they do pause along the way.

But having done one and started, we do think it's very likely that they'll follow through in September.

And then, yeah, they can keep looking at the lay of the land and work out the pace of which to tighten after that.

But deep down, they must have it quite firmly in the back of their mind.

Well...

So what do they do next? Do you reckon another hike still in September, and then crouch, pause and hold, and see what happens after the election, or what?

We do think the Reserve Bank will steadily lift interest rates over the rest of the year.

So that would get the Reserve Bank and its cash rate back to three and a quarter percent by the end of the year.

But we do think there is a risk that they do pause along the way.

But having done one and started, we do think it's very likely that they'll follow through in September and fall.

then, you know, they can keep looking at the lay of the land and work out the pace at which to tighten after that.

But deep down, they must have it quite firmly in the back of their mind.

Well...

You know, there's a lag effect, isn't there? Nick, you say almost conversely to that, with the oil price, because it's come down, inflation won't peak as high, therefore do they need to?

Well, we do agree over time the cash rate will need to go up.

It is starting from a low point, as Sharon said.

However, we don't think that the rush is there right now.

One of the things that had, had the Reserve Bank very concerned earlier on this year is that with very high oil prices, the potential for that to wash through and have cause wider inflation from the economy, that the inflation headache would be much larger than what they've been anticipating at the start of the year.

And we do think that the risks of the oil price shock just moving through and causing a much more sustained and bigger inflation problem, that risk has come back down.

It hasn't completely gone away.

Very fragile

And is that with or without housing playing a meaningful role?

That's even without housing.

We do see housing costs as helping keep things down, but there's still the challenges around a bit of domestic inflation.

Some of that's government-related, admittedly, in terms of things like local council rates, electricity costs.

But we do see that need to keep a bit of balance with interest rates so they're not too hot, not too cold as we sort of head into next year.

Do you think he's got something there or not?

Well, what will matter is if we're all outspending our money is whether that generates inflation or not.

And I think in the retail sector at the moment, you've still got a fair amount of margin pressure and you're not going to get much of an inflation headache coming is what you might think.

And is that with or without housing playing a meaningful role?

That's even w- even without housing, um, we do see housing costs as helping keep things down, but there's still the challenges around.

We've got a bit of domestic inflation.

Some of that's government related, admittedly, in terms of things like local council rates, electricity costs.

But we do see that need to keep, you know, a bit of balance, uh, with interest rates so they're not too hot, not too cold as we sort of head into next year.

"I'm not spending as much on petrol, but I'll spend it elsewhere, and that's inflationary." Do you think he's got something there or not?

Well, what will matter is if we're all out spending our money is what, whether that generates inflation or not.

And I think in the retail sector at the moment, you've still got a fair amount of margin pressure.

But what are we waiting and seeing for? Is it possible that nothing's going to actually arrive, and we'll get to September, and we don't need to do a lot?

Yeah, well, we s- still think the Reserve Bank will be needing to lift interest rates over time, just from the point of view that we started this year with rates at a, what we call like a below neutral level, so still a little bit of a foot on the accelerator and needing to take that, that off.

So we do see growth getting back above 3%, and inflation was pretty sticky heading into this year.

So yes, interest rates still need to go up at some point, but it's just not the rush now.

Do you think he's got something there or not?

Well, what will matter is if we're all out spending our money is what, whether that generates inflation or not.

And I think in the retail sector at the moment, you've still got a fair amount of margin pressure.

Uh, and you're not gonna get, you know, much of an inflation headache coming, is what you might think.

That's now gone down to a 0.24. Have we got a problem here with stats actually getting the stuff right?

Well, with this particular survey, look, what we've got to remember is, is that not too long ago we didn't even have this monthly survey.

So look, one trade-off of h- with having a new s- new monthly figures, they are viewed as exper- you know, basically provisional, uh, and for the first three months.

So we are gonna end up dealing with a few revisions, uh, along the way in this.

But it is giving us a slightly earlier trend than what we're used to.

But what's the point in it? What's the point in an earlier trend if it's literally going in the opposite direction when you, when you revise it?

Yeah.

Well, we, uh, uh, it doesn't, it doesn't help completely, but look, what we are still seeing, though, in those figures is that pattern where it does look like as we go, we've gone over the second quarter, it does look like we have had overall growth in, in jobs, which at least is pretty comforting given what we've been through.

That's now gone down to a 0.24. Have we got a problem here with Stats actually getting the stuff right?

Well, with this particular survey, look, what we've got to remember is, is that not too long ago we didn't even have this monthly survey.

So look, one trade-off of h- with having a new s- new monthly figures, they are viewed as exper- you know, basically provisional, uh, and for the first three months, so we are gonna end up dealing with a few revisions, uh, along the way in this.

But it is giving us a slightly earlier trend than what we're used to.

But what's the point, Nick? What's the point in an earlier trend if it's literally going in the opposite direction when you, when you revise it?

Yeah.

Well we, it doesn't, doesn't help completely, but look, what we are still seeing though in those figures is that pattern where it does look like as we go in, we've gone over the second quarter, it does look like we have had overall growth in, in jobs, which at least is pretty comforting given what we've been through.

But look, appreciate month-to-month data are very, very noisy regardless of what it is.

How's it looking for Auckland?

Well, we do have quite a few regional disparities coming through.

So Auckland, most regions we have started to see the job numbers coming up, but it's just more a case of we've had varying degrees of underperformance over the last couple of years.

So Auckland's not one of your strongest markets.

Wellington has really been right at the back of the pack.

It's bright lights like Canterbury and in Otago where we've actually been seeing some decent jobs growth coming through since late last year.

That's now gone down to a 0.24. Have we got a problem here with stats actually getting this stuff right?

Well, with this particular survey, what we've got to remember is that Not too long ago, we didn't even have this monthly survey.

they've got uh predictions in there i think we're at 4.9 the average mortgage interest rates at the moment going up to 5.3 5.4 i mean once they start talking in the way that anna bremen was talking yesterday if you've got a mortgage mortgages are going up anyway aren't they

Look, they have been since late last year when it was getting clear that the Reserve Bank wasn't going to cut any further and that the next move would be up at some point.

So you have seen people... net fixing at rates that are higher than what we had last year and look that's continued into this year so that sort of average that people are paying across the across the boards are going from 4.9 to 5.3 it's not too dramatic but look the the impacts of that will will come through slightly over time but yes your window for a for a lower mortgage you know that sort of really did slam shut late last year And unfortunately, we've already seen rates that have climbed to some degree and that will continue.

Nick, do you find it interesting that the split was along internal versus external lines?

Yeah, look, it was fascinating.

It's probably not too surprising to see all the internal Reserve Bank staff of a similar view because they were working together, preparing the view together.

But having all the externals sort of lined up was quite surprising because they are from different backgrounds.

You do have one Professor Profana guy who... did some research that did suggest you should be lifting interest rates sooner rather than later, so that wasn't a surprise, but some of the other members externally could well have had a very different view.

I mean, once they start talking in the way that Anna Bremen was talking yesterday, if you've got a mortgage, mortgages are going up anyway, aren't they?

they have been since late last year when it was getting clear that the reserve bank wasn't going to cut any further and that the next move would would be up at some point so you have seen people uh fixing at rates that are higher than what we had last year and look that's continued into this year so that sort of average that people are paying across the across the boards are going from 4.9 to 5.3 it's not too dramatic but look the impacts of that will come through slightly over time.

But yes, your window for a lower mortgage, you know, that sort of really did slam shut late last year.

And unfortunately, we've already seen rates that have climbed to some degree and that will continue.

Nick, do you find it interesting that the split was along internal versus external lines?

Yeah, look, it was fascinating.

It's probably not too surprising to see all the internal Reserve Bank staff of a similar view because they were working together, preparing the view together.

But having all the external sort of lined up was quite surprising because they are from different backgrounds.

And also the first half, I keep going on about this because it kind of annoyed me, and this is the problem with the data, is it's never accurate on the day it comes out, right? But do you think we will revise down, they will revise down next week, the very bad number we got for quarter two?

Look, it's very possible that that 0.9% contraction gets revised to something a bit smaller.

But you've also got to be very mindful, though, that with this December release, we get a lot of annual revisions coming through.

So we could see some revisions going back quite some time.

But look, it would be a good Christmas present if we see that big contraction in the second quarter get revised to something a bit smaller than what it was.

Next year, they reckon we're going to grow faster than Australia, we're going to grow faster than the Americans, we're going to grow faster than the British, and the year after that too, do you?

Well, we do have over 2.5% growth.

predicted for next year, and some things are not too bad the year after that.

And this is the problem with the data is it's never accurate on the day it comes out, right? But do you think we will revise down, they will revise down next week, the very bad number we got for quarter two?

Look it's very possible that that 0.9% contraction gets revised to something a bit smaller but you've also got to be very mindful though that with this December release we get a lot of annual revisions coming through so we could see some revisions going back quite some time but look it would be a good Christmas present if we see that big contraction in the second quarter get revised to something a bit smaller than what it was.

Next year, they reckon we're going to grow faster than Australia, we're going to grow faster than the Americans, we're going to grow faster than the British, and the year after that too, do you?

Well, we do have over 2.5% growth.

predicted for next year, and some things were not too bad the year after that.

So look, it is possible.

I think one thing we've got to bear in mind before we pat ourselves on the back too much is that we've come from one of the weaker economies recently, so we're sort of getting back and growing above trend because we've been in a bit of a rut, whereas other countries, slightly different circumstances.

Australia's held up much better than we have over the last couple of years.

OK, so what brought

this on? Well, you had the markets before the monetary policy statement still, in effect, building into wholesale rates that there was probably about a 50-50 chance of a further interest rate cut.

And the Reserve Bank said, I guess you could say they left the door slightly ajar to cutting further if the economy doesn't pick up like it's generally expected to.

But they were making some pretty clear noises that they think they're pretty much done.

And so that markets have shifted to pricing in a much greater chance of the official cash rate going up as the next move rather than down.

Was this clumsy from the Reserve Bank?

Well, I think I would say it's inconvenient from the point of view that we know that there are a number of people who will be fixing their mortgage rates and you run the risk of – we certainly put the cost of wholesale borrowing up a bit higher as a result of this.

The challenge is, look, if you've got markets pricing in a cut and you get to a point where that's no longer likely to happen, you are going to get a market reaction at some point.

OK, so what brought this on?

Well, you had the markets before the monetary policy statement still in effect building into wholesale rates that there was probably about a 50-50 chance of a further interest rate cut.

And the Reserve Bank, I guess you could say they left the door slightly ajar to cutting further if the economy doesn't pick up like it's generally expected to.

But they were making some pretty clear noises that they think they're pretty much done.

And so that markets have shifted to pricing and a much greater chance of the official cash rate going up as the next move rather than down.

Was this clumsy from the Reserve Bank?

Well, I think I would say it's inconvenient from the point of view that we know that there are a number of people who will be fixing their mortgage rates and you run the risk of, we certainly put the cost of wholesale borrowing up a bit higher as a result of this.

The challenge is, look, if you've got markets pricing in a cut and you get to a point where that's no longer likely to happen, you are going to get a market reaction at some point.

What is it going to do to inflation? I mean, it's all crystal ball gazing at this point, isn't it? But what do you expect?

Our hunch is that in the short term we may well get some slight inflation impacts when you're looking outside over the next year, but longer term the dominant impacts could be slightly negative.

You're kind of breaking it up into, like, in the short term, you could have the New Zealand dollar weaken, which could push import prices up.

Some things that we buy may get caught up in all the supply chain added expenses from tariffs, and those things could go up, particularly if we're importing stuff from the States.

But you could also get stuff coming in from places like China, Canada, other countries where they've been clobbered by tariffs, and they're pretty desperate to sell their stuff.

So there's a lot of mixed influences in the short term.

Longer term, if our exports do get a bit affected, then those sort of more longer capacity-related inflation pressures could be a bit damper in the longer term.

Competing forces.