Let's kick things off with what the IBM Z has been doing and what you're doing
in the moment to support their moves. Yeah well from our perspective obviously
monetary and fiscal policy do need to work together.
That's what happened through the pandemic.
And now as we come through the I guess the emergency stage of it.
Our spending is becoming much more targeted.
We're looking to get ourselves back to a level of government spending as a
percentage of GDP around the 30 percent level which is where New Zealand
historically has been. We recognize that having done such a big
fiscal contribution to keeping New Zealand is healthy keeping New
Zealanders in work. Our job now is to get a bit of fiscal
stabilisation going alongside continuing to invest in those core public services
that we all need. The RBA also continues to be quite
hawkish. Prime Minister.
I just wonder. Minister I should say.
Do you think New Zealand can avoid entering into a recession next year.
Look a lot of commentators in New Zealand still see some real resilience
and strengthen our economy our exports are holding up particularly well the
kinds of things New Zealand exports to the world people want.
Tourism is starting to come back here and it's going to be a challenging year
and no doubt with the global slowdown. But a lot of economists can still see
that resilience. The Reserve Bank's got a job to do here
in New Zealand. Inflation is well outside of the target
band of 1 to 3 percent cent but I think we can keep a balance going through into
next year and avoid that. But obviously you know what happens in
the rest of the world has a big impact on an open trading nation like New
Zealand. Well Minister it's that same resilience
that the Reserve Bank has pointed to for the need for higher rates.
Let me ask you directly do you think the economy needs a recession even a mild
one. You look I mean obviously we've seen a
significant amount of stimulus in the economy.
Demand has held up supply has not been able to meet demand.
And as we know that's not what causes those inflationary pressures.
Most economists recognize that there will be some effect from that and that
we will see less of that demand and some slowdown.
But it doesn't need to me a recession by any means in my view.
But there is a balance to be struck here.
As I said from a government perspective we've removed the emergency measures
that we put in place through Covid to support people.
We're bringing ourselves back to a level of spending that's around the long term
average. So I think we're doing what we can to
make sure we find that balance. But as I say the Reserve Bank's got its
job to do. It will do that.
And you know that will have the impacts that that we would expect to see when
you see interest rates increasing. But but I've still got a lot of
confidence in the long term resilience of the New Zealand economy.
Well you know one of the things that's been pointed out is this a labor
shortage you have and that's partly responsible for this a big move up we've
seen in wages. What I've got to tell you to address
that it's quite important really because it makes the central bank's job that
much harder. You look that's been the number one
challenge for New Zealand we obviously closed our borders as part of our Covid
response. That was something we needed to do from
a health perspective and it worked. But now we're in a new phase and so
we've undertaken what we're calling an immigration rebalance.
We're starting to see that take effect. We got a large number of people who come
here for working holidays who fill out tourism and our hospitality businesses.
We've granted over 30000 of those visas recently.
Our new accredited employer scheme makes it much easier for people to bring the
labour in that they need. And that is now starting to happen
across a range of industries and sectors.
We are seeing people coming in. It will take a bit of time because the
whole world is competing for that talent at the moment.
But over the course of the rest of this year and into next year we will see
immigration come back. And I think that will start to ease some
of those labour shortages. But it's no doubt it's the number one
issue in the New Zealand economy and talking to many of my ministerial
counterparts around the world. It's the number one issue for them too.
And yeah now that the pandemic is basically over you know.
Are you concerned about a potential exodus of these skilled workers moving
to other economies with higher wages. Well look.
New Zealanders have always gone overseas.
We talk about the way the overseas experience in New Zealand and certainly
there will be people who've wanted to do that for the last couple of years who
haven't been able to. So we are seeing some of that.
But New Zealand is still a very attractive destination for people to
come to and live in and make their lives.
And we're out there in the world trying to get people to come in and seek those
as diverse as the health sector through the construction through the I.T..
And we are seeing good levels of interest.
But New Zealand does have people who travel a lot and they generally do come
back eventually which is a good thing. But right now we've got to get get that
balance right. It is hard when every other country in
the world is also seeking that labor force.
But it's a great place to come and live here in New Zealand.
And we certainly encourage people to take the opportunities that are here.
The current projection and we're talking finances now is you will return to
surplus 2025 based on the information that's come through recently.
Do you have confidence you'll be able to return to surplus before that projection
of 20 25. Yeah.
So obviously our next set of forecasts come in December and so we'll wait to
see those as to where it ends up. The twenty twenty four twenty five
financial year is the one that we've set ourselves to get back into surplus.
The pathway we've got around expenditure around what we expect in terms of
revenue will see us get there. I think given the global conditions that
there are at the moment doing that any quicker feels unlikely given the global
slowdown. But we're still targeting that 24 25
year. From our perspective that would be five
years after the pandemic really began. And if we compare that to the GFC it
took New Zealand six years to get back into surplus after the GFC.
So we're feeling confident that it's a year we can target.
But the global economy is going to have a big impact on whether we reach that or
not. All right.
I want to get your comments here on the currency.
And obviously this indirectly affects affects what you do.
And you know a lot of the economist speak to not just on New Zealand.
You don't point to weak currency is a successor meeting things that would
normally be things like trade surplus and current account surplus.
In your case how are you viewing the weakness we are seeing in the Kiwi
dollar against the backdrop of really when it shouldn't be happening because
the RBA intends raising rates. Yeah.
Look we're not alone in that are we. I mean most currencies in the world are
affected when people come back to the US dollar and that's what you're seeing
play out for New Zealand. We have a floating currency.
The government does not control what happens there directly.
What we can do is continue to support those in the economy who are affected by
those significant shifts from an export point of view can be very helpful for
some of our exporters. When we're talking about imports and
coming into New Zealand we just need to make sure the supply chain stays open.
We need to make sure we support those inside our economy with low and middle
incomes who might be affected by it by there.
But in terms of where the dollar is. I mean I think if you look around the
world we're similar unless are directly pegged to the US dollar you're gonna be
affected in this way long term. When you look over the big trend for the
New Zealand dollar there is no stability there.
People can see that we've got an economy that's well based.
That's resilience. We've got good public management here in
New Zealand that's stable and sound. And so over the long term I'm not too
worried about it. Obviously in the short term we've got
that volatility as people head back to the US dollar.
We're definitely not alone in that. What do you see as the biggest risk then
for the economic outlook then Minister. Is it more on higher interest rates on
the RBA NZ or this global slowdown. Look I think it is the global
conditions. New Zealand is a small open trading
economy. We rely on those exports that we've seen
out to the rest of the world. We need the markets that we're in.
Like China the US Europe to be strong. And so that will have an impact on us.
And that's an issue that we can't entirely control.
But we're really focused on a strategy of diversification of adding value to
the exports that we create. Looking for those new markets we've
signed free trade deals with the UK and the EU recently.
We want to keep pushing into that area domestically.
The big issue is labour supply. And obviously I've told you what we're
doing about that. That's a slow burn to get that right.
And it is causing a lot of stress for businesses.
But we will get there. So that two of the big dynamics in the
economy. How about your cost of borrowing that's
gone up four times and a two year. That's gone up twice on your 10 year
debt. Has that affected how you plan in terms
of the supply that you're going to put to this market how you're raising money
and how you're spending that money to. Yeah but we do keep an eye on that
obviously highest on historical basis. The cost of borrowing in New Zealand is
still relatively low and given the amount of money that we have had to
borrow in order to get ourselves through Covid.
You know. I'm comfortable with where we are.
The ratings agencies are comfortable with us.
We've had ratings upgrades and stable readings as well.
And so we keep an eye on that. But this is the level of debt that we
needed to get ourselves through the pandemic.
And as I say looking looking into the future we want to be seeing that come
down. But we're comfortable.
New Zealand has one of the lowest levels of public debt in the RTS day.
And so I think we're pretty well positioned to deal with the situation
we're in now. Minister you're saying that labour
shortages were the biggest issue facing the country.
I mean if you. I beg to differ.
If you put your other portfolio hat on as minister of sport surely the
performance of the All Blacks apart from of course the recent wins against the
Wallabies. That's the biggest issue isn't it.
Oh look you know it's certainly a political issue in New Zealand.
I can tell you that. But I know that they came right towards
the end of the season. And we were about to host the woman's
Rugby World Cup here in New Zealand. And that's going to be a bit of a
contest. I think with the England and with France
as well. So I don't you worry.
Come come. Rugby World Cup 2023.
The OpEx will be right there. Let's hope not.
Prime Minister thank you so much.
Minister thank you so much for that. And just based on how your smile and how
you perked up in that last and so I think we know where to pick up next time
where you spend most of that conversation next.
Do you have a great weekend ahead.