Live now
Start time
Playing for
End time
Listen live
Up next
Listen live on

Mike's Minute: You can't sell it any other way - the economy's in trouble

Mike Hosking,
Publish Date
Mon, 12 Aug 2019, 10:07AM

Mike's Minute: You can't sell it any other way - the economy's in trouble

Mike Hosking,
Publish Date
Mon, 12 Aug 2019, 10:07AM

It might just be the fact that the Reserve Bank cut 50 points and no one saw it coming, but suddenly we get the sort of coverage we haven't seen before around monetary policy.

I mention this because on TVNZ's Friday night news I watched Geoff Bascand, the Deputy Reserve Bank Governor, delivering a speech to business explaining why they have done what they have. Ask yourself when you last saw Geoff Bascand on the news.

In speaking to the media afterwards he sounded like he could be working for Briscoes, Godfreys, or Farmers. He claimed these are great times, a wonderful time to borrow, invest and expand. So come on New Zealand, the bargains are here, and the money is cheap. Why on Earth aren't you tucking into the savings?

He was almost evangelical about it, almost as though he was on commission.

One of the attendees summed up why I think Bascand has been sent out to sell this thing like there is no tomorrow: there might not be a tomorrow. Certainly not the sort of tomorrow that we have been enjoying for the past decade or so.

The attendee was a banker, and he quite rightly pointed out the gap between the bank, its rhetoric, and us. Just because you say it, doesn't mean it's true. And most importantly in this equation, it's all about confidence.

Do you feel that what Bascand is saying is accurate? Are you inspired by his words? Or once it comes down to really pulling the trigger, borrowing, expanding, investing, and taking risks do you look to other areas of the economy and go, you know what, I'll pass?

The banker thought the sales pitch was good, there just aren't enough buyers, and I am with the bank. Reserve Bank governor Adrian Orr didn't help by saying we are in the realms of possibility that we are heading towards negative rates.

Given the official cash rate currently sits at one per cent, that's a lot of cutting still to come. Why send Bascand out with the sales pitch and never to be repeated prices line when the prices will be repeated - and repeated at an even better rate.

The Reserve Bank is independent, so it would be unfair of me to suggest that a Government minister or two has made a phone call to get a few voices out there pumping up the economic prospects, but Bascand certainly sounded like a man with instruction and on a mission. After all the bank is really there to manage the economy with the tools they have, which aren't many.

The real running of the economy is, of course, the domain of the government.

And in that fact is your real issue: confidence. Business does not have confidence in this Government, and all the numbers, polls, surveys, and actions show it.

Right here today the world hasn't ended. But the world is shaky, and we over the past two years have not helped ourselves. The domestic economy has been squeezed through a combination of anti-business policy, tax, and ideology. And it's coming back to bite us.

Bascand can sell it as hard as he likes, and kudos for the effort, but if you're selling a dog, it's still a dog.

Take your Radio, Podcasts and Music with you