0:00
Right, what does this all mean for us in New Zealand?
0:02
Let's bring in Kelly Ecol Westpacche for Economist Kelly. Good morning.
0:06
Now, I've had a look at your forecast, your most recent forecast.
0:09
So we'll start with inflation.
0:10
What are you expecting this is going to do to our inflation?
0:13
Well, we're going to get a lift in the inflation rate.
0:16
So the current level of inflation is about 3.1.
0:19
And we were expecting it to drop back down to below two and a half percent
0:23
as we went through the next two or three quarters.
0:26
But that looks like it's gone now.
0:28
I'd say we're probably looking at inflation in the low threes now.
0:31
And perhaps if things blow over in the next couple of months or so,
0:35
which is basically what we're assuming right now,
0:38
then we'll be just below 3 percent.
0:40
Right, so we're going to be at three for the rest of the year.
0:43
Pretty much. Yeah, pretty much.
0:44
Does that mean we'll have to do something with interest rates
0:46
or do you think they'll keep holding?
0:48
Well, I don't think so.
0:49
I mean, this is a really nasty negative supply shock.
0:52
So at the same time as this happening,
0:54
the growth fundamentals of the economy are being undermined as well.
0:57
And we've reduced our growth forecast, reflecting that.
1:00
I see that. So you've come down from GDP growth to 2026
1:03
from 3.3 percent to 2.8 percent.
1:07
That's right. It's the first cut half of the percent off what we had before.
1:11
I would say that you should think of that as a start of a 10
1:15
because it's very uncertain here about how long this is going to last.
1:18
But I think it's pretty reasonable to assume that we'll see a big drop off
1:22
in business and consumer confidence in the next six weeks or so.
1:25
Because of all of the news out there.
1:27
For consumers, it's the higher petrol price.
1:30
That almost always leads to decent falls and consumer confidence.
1:34
And for businesses, I mean, they're looking at the news as well.
1:37
And we'll be wondering about fuel availability,
1:40
costs, and ultimately demand.
1:42
So GDP, you're saying, don't think about,
1:45
we don't need to talk about recession
1:46
because we've got quite a bit of growth patted in there
1:50
about half a percent off for starters.
1:53
I mean, basically, a growth in the fourth quarter,
1:55
that data we're going to get this week.
1:58
Well, that's pretty much...
1:59
Well, we've still got 0.4 for this quarter.
2:01
It's still moving forward in our view.
2:04
But the first quarter is basically baked in as well.
2:06
It's about what happens in the June quarter
2:09
and the rest of the year when these oil impacts
2:11
are going to have their big impact.
2:13
But what I'm saying is like the fourth quarter for last year,
2:16
we're getting numbers, obviously, this week,
2:18
but you're picking about half a percent.
2:20
So that's the equivalent of a whole quarter's...
2:23
Growth, potentially, you know,
2:25
that we're going to have come off this year as a result.
2:30
Yeah, that's what's happened in the June quarter
2:31
and the unemployment rate is expected to be up
2:34
higher accordingly as well.
2:36
What happens to the price of petrol?
2:40
I mean, they still look like they're on track
2:42
to head to a nationwide average just over three bucks.
2:45
Diesel prices likely to continue to rise.
2:49
Looks like into that kind of $2.80 tight range, I think.
2:53
Very uncertain these things, though,
2:54
because, okay, oil is settling around at 100 bucks at the moment.
2:59
But the crack spreads.
3:01
The refined spreads in Asia.
3:03
These are the things that are blowing out.
3:05
And that's because the refineries in Singapore
3:08
can see that their supply of crude oil
3:10
is going to dry up pretty soon
3:12
unless things start happening at the other end of the chain.
3:16
Kelly, what does this mean for average punters?
3:19
I mean, do we have a number on potential job losses?
3:23
Well, for the unemployment rate,
3:25
we've got an ending the year at 5%,
3:27
which is still lower than where it is today,
3:29
because, and that's entirely contingent on things
3:32
sorting themselves out realistically
3:34
in the next six weeks or so.
3:36
That's why I say these adjustments are a start of a 10.
3:39
We can't know exactly what's going to happen here.
3:42
Things could be great in two weeks
3:44
and I could be back revising those forecasts up
3:46
or we might have to do some further adjustments.
3:48
Fingers crossed for the former.
3:50
Appreciate your time this morning.
3:51
There's always Kelly Ikold,
3:52
West Peck Chief Economist with us.