00:00I hope you're doing well. We know the world is going through a lot right now.
00:05I do want to start on the war. Per your own government, around 80% of New Zealand's refined oil
00:10flows in its unrefined state through the Strait of Hormuz.
00:14How radically has that impacted, affected your economy at this moment in time?
00:21Well, look, it's a very significant challenge for our economy, which has been recovering strongly after a challenged period.
00:29We've seen a doubling in the price of diesel, one of the refined fuels that we rely on significantly, and
00:36about a 35% increase in the price of petrol.
00:39So consumers are already feeling that price pressure at the pump, and we expect it will have an inflationary impulse
00:46throughout the economy, with a downside for the growth potential of the economy this year.
00:51We are also having to anticipate some worst-case scenarios in which there could be genuine supply disruption of the
00:58fuel that we import into New Zealand.
01:00So we're preparing for those worst-case scenarios through options to potentially build up our own national reserves of fuel,
01:07and also to have a fuel response plan in which we may need to call for voluntary demand restraint in
01:13the future.
01:14So it's a very significant set of circumstances for us to be navigating our way through.
01:19Yeah, you're certainly not the only country that's affected by this, but, I mean, you do put in stark relief
01:24just the fact that, you know, with the Strait closed, how challenging it can be for an entire economy.
01:30You mentioned stockpiles. You do have stockpiles in petrol, diesel, jet fuel. We know that.
01:35How are the stockpiles faring right now? Are they close to exhaustion? What's the status of them?
01:42Yeah, look, our stockpiles are in very good shape. We have minimum stockholding obligations for every fuel importing company who
01:49imports fuel into New Zealand,
01:51and we are diversified across a range of fuel importing companies, including multinationals.
01:56And so those reserves are in great shape. There's no risk of them going below the obligation.
02:01We have around between 50 and 60 days of each of the respective fuel types, either in the country or
02:08safely in tankers on the water on its way to New Zealand.
02:12We monitor those fuel supplies closely. We're doing twice-weekly reporting to New Zealanders about those fuel levels, and we've
02:18had no disruption so far to supply.
02:22However, we are being proactive, and we're anticipating scenarios in the future in which fuel importing companies who rely on
02:29those refineries in Singapore and South Korea
02:32that are experiencing less crude stock than usual may not be able to fulfil all of their usual orders.
02:38Now, were that to occur, we'd expect in the first instance fuel importing companies would access fuel elsewhere on the
02:44spot market or from refineries elsewhere.
02:46But even so, there could be disruption or delay, and so as an economy, we need to prepare for that
02:53potentiality.
02:54Minister Wills, one of the things that we've been talking about a lot here at Bloomberg is kind of longer
02:58-term, the impact,
03:00whether it's on the energy markets or raw materials, crucial minerals.
03:04It does look like every nation is looking to make itself secure because of national security concerns to protect their
03:10economy.
03:11Let's just start with oil, long-term strategies, if at all, to lessen the dependency.
03:16It sounds like you guys are on foreign oil or on the United States, which must be, I think it's
03:22safe to say, the U.S. is a turbulent partner at this moment.
03:27Well, look, New Zealand is somewhat ahead of some countries in that our electricity system is largely independent of oil.
03:36We have a largely renewable electricity generation in New Zealand from hydro, solar, and wind.
03:40But as I've outlined, we depend on fuel for our transportation system in particular.
03:47And so we are taking steps as a country to build our own resilience.
03:52We've seen a doubling in the registration of electric vehicles this year off the back of these heightened prices.
03:58And we do expect, as a government, to continue to take steps such as rolling out an electric vehicle charging
04:04network to support that transition.
04:07But ultimately, it is the case that when conflicts like that that's playing out in the Middle East occur
04:14and they disrupt global supply chains and the global economy, New Zealand is not immune from the impacts.
04:21We are also unable to influence the decision-making of the major actors in this conflict.
04:28But the economic ramifications are significant for us, even though we are so many miles away from the conflict itself.
04:36I want to dig into those.
04:37The global economic impact to inflation and growth is massive.
04:40So let's go there, Minister Willis, and to what exactly you're pencilling out in a worst-case scenario here.
04:47Moments ago, you did say that this is inflationary and it could be inflationary
04:51and it could also lead to lower growth for the economy this year.
04:56What are you pencilling out here?
04:57What are your predictions?
05:00Well, like every forecaster in the world right now, including the IMF who put their forecasts out yesterday,
05:06there are such a broad range of scenarios that could still play out,
05:11depending on the trajectory of the conflict and how long it takes for supply chains to resume to normal.
05:16Our Reserve Bank have published their views on where inflation could go
05:22and they're forecasting that in the third quarter of the year that inflation could hit 4.2% in New
05:29Zealand,
05:30which is outside our target band.
05:31We target inflation to remain between 1% and 3%.
05:35And they're forecasting that potential growth will be lower than would have otherwise been the case.
05:40We were looking at annualised growth of about 3% this year.
05:44It's very unlikely we will hit those levels now.
05:47But as to how bad the worst-case scenario could be, how high inflation could go, how low growth could
05:53go,
05:53it all depends on how quickly the conflict ends.
05:57So we're calling for the ceasefire to be enduring, for negotiations to resume, for de-escalation to be chosen at
06:05every point,
06:05because the sooner that happens, the better our economic prospects are for the year ahead.
06:11Well, let's go there.
06:12How do you feel like, what information, whether it's being there in D.C., talking to other leaders,
06:17I don't know if you're planning to have any meetings with the administration.
06:20Have you met with anybody in the administration while you're there?
06:24And whether you feel like we're getting anything definitive about when this war ends?
06:31I will, in the coming days, meet with members of the president's economic team
06:38and get the views of the administration that way.
06:42So far, I've met with a number of finance ministers from around the world,
06:47and I'd say a thing that's coming through is uncertainty,
06:50a lack of clarity about what the next steps will be in the Middle East
06:56and, therefore, what it is that we as nations need to be prepared for.
07:01There's a common theme that we all wish to see that Strait of Hormuz reopened fully as soon as possible
07:07so that that supply chain keeps functioning well
07:10and really a shared concern across nations
07:13that when the global oil market is disrupted in this way,
07:17it has inflationary impacts for our consumers, growth impacts for our countries,
07:22and, frankly, has made the whole world poorer than it would otherwise be.
07:26So a shared concern.
07:28You mentioned the Strait of Hormuz, and that's where I want to go back to right now
07:32because all the challenges when it comes to energy are emanating from there and from the region.
07:36New Zealand, one of 35 countries led by the UK in seeking to reopen the Strait,
07:41the US not included in that group.
07:44They're in their own negotiations.
07:45We're in our own negotiations.
07:46Is there progress in this group of 35?
07:52Well, of course, we are continuing to seek, as a group of 35,
07:56diplomatic and political solutions to ensure that the Strait can reopen and remain open.
08:02We're conscious, though, that until there is an enduring ceasefire in which hostilities has ceased,
08:07it will be very challenging to keep that Strait open.
08:11So there's an order of events here.
08:12I think it's for the main actors in this conflict, for Iran, for the United States, for Israel,
08:18to come to an enduring ceasefire,
08:20at which point our other nations can support efforts to keep maritime passage going
08:26and support the Strait of Hormuz, once again, being a critical channel for global supply.
08:31Hey, one thing we've got to ask you, we were just talking about with our Michael McKee,
08:35about, first of all, the state of global monetary flow is something that we like to watch a lot.
08:41President Trump here continues to attack Fed Chair Jay Powell.
08:45If there's turbulence in the U.S. financial system, what's the net impact on New Zealand and Oceana?
08:54Well, look, I would hesitate to comment on the domestic affairs of the United States.
09:00But it's not great, right?
09:01Because everybody, yeah, but it's not great because everybody watches the U.S. Central Bank.
09:06But go ahead, please.
09:08Yeah, certainly for New Zealand, we have gained considerably from the independence of our Reserve Bank.
09:16We very strongly support that independence in monetary policy.
09:21We believe that independent monetary policy has led to stable inflation and effective inflation targeting.
09:29And in the case of New Zealand, we have been able to have largely stable inflation,
09:34as well as interest rate trajectories that have been predictable with good information for markets.
09:41So we stand strongly on the side of independence in central banks.
09:46And certainly that's been the case for our Reserve Bank in New Zealand.
09:51Okay, we've got one more question because both of us are just sitting here dying to go to New Zealand.
09:55I want to go diving there.
09:56I feel like we could do an exchange with you.
09:59You've been here twice now.
10:00Please come. You're very, very welcome.
10:02Yeah, Carol wants to do some diving and some sailing there.
10:04I have some friends whose parents just got back from a month there, and they absolutely loved it, Minister.
10:11I'm just wondering about tourism, though, in an age of higher energy prices
10:15and whether the higher energy costs are crimping tourism and what that outlook looks like for the year
10:20because this is so crucial to the country's economy.
10:25Yeah, look, tourism's a very important industry for us.
10:29And, of course, we are braced for the potential impact of higher jet fuel prices impacting travel to New Zealand.
10:36So far, we're not seeing strong evidence of that.
10:39It seems there's a very resilient travel market, actually particularly out of North America,
10:44where people are continuing to choose New Zealand as their next destination.
10:48And I think, actually, we've got something particular to offer in a world that is more unstable than it has
10:55been,
10:55that we are very safe, we are very peaceful, we are very predictable as a country.
11:01So those choosing a destination in the future can pick New Zealand on their itinerary
11:05and know our airports will still be functioning.
11:08There'll be no missiles flying over your head, and we'll have a very beautiful offering for you as well
11:13with very friendly people, a gorgeous environment and a lot to do.
11:16So we'll be continuing to market New Zealand as a wonderful premium destination.
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