(all laughing)
- Never live that down.
- No.
- Delicious.
- Last time I buy it for you.
- Yeah.
- Uh oh, here comes the bill, everyone hide.
(all laugh)
Thank you.
All right.
Let's check out the damage.
Whoa.
Those tapas really add up.
So, how should we do this?
Shall we just split it four ways?
- Oh, erm... - Oh, erm...
We thought we'd cover for ourselves, you know,
we ate before we came here
and we didn't really have any of the tapas.
- Yeah and I just, had the one wine so I'll get that.
- Oh great, well that saves us all some money,
so we'll just go quarters minus Sarah's wine.
Well how much was your wine Sarah?
- Why do we just let everyone pay for themselves babe?
- Oh, I mean we could but, you know,
I don't think it's a good idea,
what with the, economy and everything.
Probably shouldn't risk it.
- What do you mean by that?
- Oh, it's Economics 101.
If we all don't start spending more money,
then we'll crash the economy.
- How does that work?
- Please don't start talking about the economy (laughs).
- He did ask the question love.
better answer his question or it'd be rude.
So, if people don't spend money
then companies can't make money
and they can't pay the employees, right?
And then people lose their jobs.
Also known as...
A recession.
So, you'll lose your job,
I'll lose my job.
They'll lose their job.
I mean, is that really what you want?
- I just don't think
that us paying for your tapas
is gonna help save the economy.
(laughs)
- Do you think I'm making this up?
Would I make this up?
(clicks fingers) Garcon.
- Yes, yep.
- Excuse me.
You're fired.
- What?
Why?
- Because Sarah here
doesn't wanna contribute to the economy.
- How does that affect me?
- Good question.
See this chicken drumstick?
This is the New Zealand dollar.
- Mm-hmm. - And this bowl here
is the exchange rate.
Now what happens is,
when the Reserve Bank increases the Official Cash Rate,
GDP drops.
(clatter)
And the exchange rate decreases
relevant to unemployment, which is this hummus.
Yeah.
- So the pepper shaker is the government debt?
- No, the fork's the government's debt.
- I thought the fork was the Reserve Bank.
- No because the risotto
is the Reserve Bank, isn't it?
- What's that bowl then?
- This bowl is the interest rate.
- Yes. - And the more
chicken there is on this plate,
the higher inflation is.
- Bingo!
Yep, yeah. - Oh, and a cash injection
into the local economy means that,
unemployment goes down.
- Yep.
- And we all get to keep our jobs.
- Yes! But only
if we all start to increase spending right now.
Yeah!
Very good, well,
Looks like the bill is taken care of.
I left my wallet in my car,
I'm just gonna,
duck out. (chair scraping)
- Nice, good work everybody.
(laughs wickedly)
- Sometimes the economy seems confusing on purpose,
so lets unconfuse it.
(screams)
♪ The Citizen's Handbook ♪
♪ Hmmmmmmm ♪
Here's what you need to know
about the New Zealand economy.
For the last hundred years or so,
the government has made
all it's decisions about how to run the economy
based on a simple idea.
Finding a balance between two bad things.
Those bad things are inflation,
how expensive everything is getting
and unemployment, how many of us are out of a job.
If the seesaw tips too far
on the unemployment end, you're in a recession
and it's super hard to get any work.
And if it tips too far on the inflation end,
you're heading towards hyperinflation,
and a loaf of bread costs 100 times
what it cost yesterday even when it's on special.
Those are both bad outcomes.
So the government tries to keep the seesaw nice and flat
because a flat seesaw is a safe seesaw.
And in many ways, just a bench.
So, how do they do that?
First of all, recessions.
This is what a recession looks like.
It's like the recycling symbol, but evil.
Recessions happen when people stop buying things.
So companies don't want to make things,
which means that they don't want to hire people
so people have less money.
So now they really don't want to buy things
and companies really don't want to hire people
and people have even less money.
If it gets really bad,
this whole spinny cycle turns a recession
into a depression. (buzzer noise)
But on the plus side,
you might finally get a chance
to see that friend from school
you said you'd catch up with
because neither of you have jobs anymore.
Although, obviously neither of you
will be able to pay for the coffee
and also the cafe has gone out of business.
The people who try to stop us tipping into recession town.
- No no no no no no no no. - Pull up! Pull up! Pull up!
- Are the Reserve Bank and the Ministry of Finance
and their mates at the Treasury.
Because the Ministry of Finance writes the budget,
they decide how much tax everyone has to pay
and how much the government's gonna spend.
If they're trying to prevent a recession,
they want people to buy more stuff
and a good way to get people to buy more stuff
is to give them money.
So, if there's a recession on the horizon,
the Ministry of Finance might wanna slip some cash
into people's pockets by either cutting taxes
or just making up some unnecessary jobs
like Official Dog Patter or Public Tree Appreciator
or Road Builder or Web Series Host.
And then there's the Reserve Bank.
They're part of the government
but they're also kind of a free spirit
and they do their own thing.
So when they see a recession on the horizon,
the Reserve Bank can pop the hood of the economy
and grab some tools and have a little tinker.
The Reserve Bank is sort of like the Bank's Bank,
they magic money into existence
and loan it out to the normal banks.
And the main tool they have to tip the seesaw
is the Official Cash Rate
and I know that sounds boring and it is.
I don't wanna talk about it either but it's important,
so we have to.
The OCR determines how expensive it is for normal banks
to get a loan from the Reserve Bank.
So, if the OCR is low,
then it's cheaper for banks to get loans
which means it's probably cheaper
for you to get a loan from the bank.
So you do get a loan
and you spend more money.
If we're tipping towards a recession
and the Reserve Bank wants everyone to spend more,
they'll lower the OCR to make it easier
for you to get a loan.
People start throwing cash around again,
the seesaw starts tipping away
from recession town and everyone breathes a sigh of relief.
(sighs)
But Wait!
Stop everything!
What if the seesaw tips too far the other way.
What if the seesaw is tipping towards,
Hyperinflation City.
It's time for another cycle.
Yaaay.
Inflation happens when people ask for higher wages
and employers decide to put their prices up to pay for them.
But that makes everything more expensive.
So employees ask for higher wages again
and employers put prices up again
and so on and so on and so on.
And if your groceries cost twice as much as last week
and you can't ask for a pay rise
fast enough to pay for them,
then congratulations, welcome to Hyperinflation City.
I hope you're ready for some physical labor
because you're now carrying around a wheelbarrow of cash,
just to pay for a single, delicious Fanta.
So, how does the government
keep us out of Hyperinflation City.
Easy!
They do the opposite of what they did last time.
In hyperinflation, prices are skyrocketing.
So the government wants people to spend less money.
The Ministry of Finance does this
by sucking money out of the system.
Either by spending less on Government stuff
and slash or raising taxes which seems mean
but they're just trying to keep your groceries affordable.
Meanwhile, at the Reserve Bank,
they're getting people to spend less by raising the OCR.
Now, it's more expensive for banks to get loans,
so it's more expensive for people
to get loans from the bank.
So, people start being more careful with their cash,
companies have to stop raising their prices
and wages catch up again.
The seesaw swings back to neutral.
That's the theory.
The government is fiddling with taxes, spending and the OCR
to try and find a balance
somewhere between Recession and Hyperinflation.
They wanna make sure you can get a job
but still afford groceries and the occasional treat.
I mean that's the general idea,
I mean it's more complicated than this
but to be honest I barely understand it myself.
Now, you might be asking,
If there's more money in the economy
but wages aren't going up,
where's all that extra money going?
And is rising inequality an inevitable part of the system?
And if you became Minister of Finance,
how much money would you give me?
And that seesaw thing is a nice metaphor and all
but is it actually true?
Those are questions that economists are asking themselves.
They don't have all the answers.
The most important thing
is that the economy is making you happy.
And if it isn't.
Get the government to change it.
After all, they work for you.
You're the boss.
You're a citizen.
♪ The Citizen's Handbook ♪
I mean good job on that, nice one.
♪ Hmmmmm ♪