00:00What are the impacts that you're seeing so far on the Kiwi economy from this ongoing energy crisis and the
00:06war?
00:07Well, like many countries around the world, the initial impact has been a significant increase in the price of petrol,
00:16diesel and jet fuel.
00:18And that is, of course, affecting all New Zealanders, businesses and households alike.
00:23The petrol price at the pump has gone up about 30% for diesel, a very important fuel, obviously, for
00:29industry.
00:30It's more than 50% increase and so that price is having a significant impact.
00:36We do already have very good stock holdings of fuel in the country and on their way.
00:42These are minimum stock holding obligations which fuel importers into New Zealand need to meet.
00:47So we have fuel security, but we have stepped up a government response to anticipate that in the future there
00:53could be disruptions to supply as we source a lot of our refined fuel out of South Korea and Singapore.
00:59And it's obviously that region of the world that has been impacted by disrupted access to crude oil out of
01:05the Middle East.
01:06So we are working closely with fuel importers to ensure that, if required, they are able to source alternative forms
01:12of supply.
01:15I wanted to ask you about the impact on the fiscal situation because there has been an answer of targeted
01:21support to those who are most badly affected.
01:23How does that impact the other parts of the budget and where will those costs be coming from?
01:30We're determined to have a very responsible approach to how we respond to the unfolding crisis.
01:37And it's been our view that blanket reductions in the petrol tax or capping of prices is not an affordable
01:45response for New Zealand.
01:47We're in a period of fiscal consolidation and we wish to stick to our goals of returning our books to
01:53surplus and bending our debt curve down.
01:55So we yesterday announced a temporary, targeted and very timely package of support focused on lower to middle income households
02:05with children, with working parents,
02:07who we judge will be most impacted by the increase in the price of petrol.
02:14And so that package targets an additional $50 per week to those families.
02:19It is for the duration of either a year or when petrol goes back down to its long run average
02:27price for a period of four weeks or more.
02:30So that policy takes the lessons we have learned as a country.
02:34Our response to COVID involved very significant increase in public expenditure.
02:40And that has put us in a position with much higher debt than has previously been the case.
02:45So we're taking a careful, targeted approach.
02:49Within, you say that these are also, again, extraordinary times.
02:53Why not more support for the likes of far more small businesses, especially given also that it's an election year?
03:00Well, we recognize that the increased fuel price is, of course, impacting every business and the economy in some way.
03:09Our first duty to those businesses is to ensure they have ongoing access to the fuel they need.
03:15And we have stepped up a significant all-of-government response to focus on that fuel security.
03:21So that's the first thing we're doing for them.
03:24Beyond that, it's our expectation that in the first instance, if businesses are having challenges with their working capital or
03:31other issues with their finance,
03:33that they should turn to their commercial bankers for support in the first instance.
03:38And I've engaged with the major banks in New Zealand, and they share my view that that is a responsibility
03:44that falls to them in the first instance.
03:46As the events unfold with this crisis, which I think the whole world is watching evolve in real time, we
03:55have said as a government we will take a careful and measured response.
03:59We're working very closely alongside industry and business to understand what they need.
04:03And they've reiterated to us very clearly that in the first instance, they're relying on us to do everything we
04:10can to ensure they have access to fuel.
04:15We have heard from the RBNZ governor, for example, in the previous...
04:20Sorry, I was just going to ask about the RBNZ governor and her comments.
04:24They will really not be rushing to raise rates.
04:27But at the same time, we have seen some banks who have already raised home loan interest rates.
04:33What do you make of that, and do you agree?
04:36Well, look, I think there's two things going on.
04:38The first is, of course, internationally, we've seen wholesale funding markets see increases in borrowing and yields.
04:46And so, of course, New Zealand is not immune to that.
04:49And you're seeing that reflected in some of the commercial decision-making by our banks.
04:53At the same time, of course, the Reserve Bank has a job to do with its own monetary policy settings.
05:00But what the Reserve Bank governor set out yesterday, clearly, was what I'd call central banker textbook stuff,
05:07which is that in the first instance, for a price shock, an increase in the OCR would not be the
05:13appropriate response,
05:14given the other demand effects at play.
05:16However, the Reserve Bank was conscious of its medium-term mandate to keep inflation between 1% and 3%
05:23and would be watching most carefully those ongoing inflation expectations and secondary effects.
05:30So it does appear that the markets here have reacted to that statement.
05:34It's seen some nervousness disappear because they've taken the message that that means
05:41there won't be imminent increases in our official cash rate.
05:50Mr. Willis, if you were to take a look at modelling, which I know is difficult to do,
05:55given the flux of geopolitical developments, how much slower do you think economic growth could be?
06:02We are fortunate in that we came into this period in a very healthy state as an economy.
06:09Our growth had recovered after what has been a challenging period post-COVID.
06:13We were forecasting growth of 3% this year, and we've now had to, of course,
06:20go and look at how those forecasts will be altered by current events.
06:24Like everyone, we're analysing a range of different scenarios relating to how long the conflict endures,
06:30how long supply chains are disrupted afterwards, how high prices for fuel will go.
06:36So in those scenarios, we see lower growth occurring.
06:39But even in some of the worst-case scenarios, we are still at this point anticipating our economy
06:45will continue to grow positively this year, but not as fast as it was going to.
06:50We are anticipating higher levels of inflation.
06:54And of course, we are being prudent as a government to ensure that our fiscal response
06:59doesn't inadvertently pump prime and exacerbate those inflationary pressures in the economy.
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