ZM's Fletch, Vaughan & Hayley - Fletch, Vaughan & Hayley Podcast - Finance Chat with Bad News Brad Olsen!

Episode Date: December 12, 2022

Fletch, Vaughan & Hayley have a chat with everyone's favourite Principal Economist at Infometrics, Brad Olsen.They covered all the big topics, Recession, Housing, Savings, and answered your burning listener questions!See omnystudio.com/listener for privacy information.

The ZM Podcast Network. Play ZM's Fletch, Vaughan and Hayley. Hello and welcome to a special, special Fletch, Vaughan and Hayley podcast. It's not us, it's not only Fletch, Vaughan and Hayley. No. Because the three of us are always kicking about. We're actually joined by our very own, we've claimed you, Bad News Brad, Principal Economist at Infometrics. Welcome.

Oh, sorry, I forgot to turn your mic on. Now that's an essential part of broadcasting, Fletch. Turn on the microphone that someone's talking into. Actually, I just turned it off because Brad told us a secret. He did tell us a secret. And I didn't want it recorded, but we can't It's where. It's how to make millions of dollars next year. This sounds like a real bad

email that you get every now and then. You want to know the secret? No one wants you to know. Now, it's lovely to do a podcast special with you, Brad, because we've had you on the show a lot this year, and it was quite surprising. We would get so many messages. We're constrained for time by the boundaries that commercial radio

has set for us. We just want to talk forever, but people are like, play the ads and hear some songs, and we're just like, nope. So here we are. Brad, you always say when you come in, like, I'll try to make it sound as interesting as possible, as if it's boring.

People are like, no. But how many times have you ever had an economist on your show, guys? I mean, this is pretty unusual for me. This is so much more fun than the real. I mean, the serious stuff is great, but this is epic. Brad, I couldn't even name another economist economist this is good for my job security new zealand's most famous i'm new zealand's most famous economists suzy care kerr you don't know suzy julia lane most of the if you've gone if you've gone on the google route most of these are not necessarily the people that you'll see

pop up on one news or something right they're behind the scenes well we asked you on instagram for your questions for uh brad uh bad news brad and we're gonna uh we've kind of divided them up into categories we're gonna do housing then questions about recession slash inflation and then uh questions on savings slash investment can i ask a question to start it it's why is it in one of these categories it's a fourth category i'd like to addendum addendum your honor to the front of my um persuasive argument that will be the most entertaining and informative uh big build up next year is also an election year yep now you've we've talked about it before and you say you don't you don't play with sides in politics which i respect but who's going to be better for the economy? Oh, God.

This has always been nationals thing, right? If you're listening overseas, nationals are more right-leaning, still fairly centrist. I'm not talking like fascist right-wing, but they're definitely more right than centre, and Labour is our left of centre. Those are the two major parties. And they also have this argument in America

where they say that Republicans are better managers of the economy. But are they actually? Well, Trump took the numbers in terms of their debt levels on a similar way up. Now, to be fair, he's a special case, shall we say. Yes. I think a nut case is actually. I could buy into that. Maybe a little bit stronger even.

Yes, of course. I think realistically, normally when you come into an election year, everyone's trying to figure out, like you say, what do I get from party A or party B? What's on the table? What are they going to spend on? And normally parties come up with some pretty big spending options. This time around, I think it's going to be a bit different. People are going to be, yep, still looking for what do I get? But increasingly, because of how high inflation is, given that the government just simply can't spend all that much, there's going to be a, how much do I get? But also how much are you not going to add to inflation? How do you sort of, as a government, balance out giving more to people

and supporting Kiwis, but also not overcooking it and actually making the problem worse? That's a big one for the next year, and I think both of the major parties have a difficult job in front of them. You want to provide enough that you get into the Treasury benches, but not so much that you actually exacerbate inflation even worse oh no we're so too this is a podcast bro we can swear here so we're doing two texts i'm pretty sure you asked me that exact same question six months ago and i'm pretty sure i was super reluctant to swear and all of you are like

give it a go so because more traditionally go. Give it a little go. Because more traditionally, Labour spends more but earns more. Is that fair to say? The tax rates are higher, your tax is slightly higher, but they spend it more on sort of social stuff. Stuff that goes directly to people. They've kind of said we're not going to do tax cuts. Yeah, well, I mean, they say that, but also you look at where the polls are,

there's going to have to be some conversations around how do you entice enough people to vote for you that you might get in again but not so much that you know you can't just cut taxes significantly at the moment because otherwise you won't have enough to run the government so again delicate balance I don't know if anyone's got the sort of

none of these options are good I don't think next year it's going to be how do we sort of pick the most amazing options it's how do we balance all of the really quite, none of these options are good. I don't think next year it's going to be how do we sort of pick the most amazing options. It's how do we balance all of the really quite challenging ones of spending enough that you get enough, but not spending so much that things go to bonkers even further. God, but politics. Who would do it?

I'd be horrible. Everyone's just ungrateful. That would be a good point. You ungrateful shits. Yeah, yeah, yeah. Okay, should we get into the questions we've received? Let's start with housing. We've talked about this briefly, but I know things have definitely changed.

Is now a good time to buy a house, or should we be holding off? House prices are down, which makes them feel cheaper, but interest rates are fucked. Welcome to the podcast. Scary. Yeah, I was going to say, normally I refer to the housing market as cooked, but in this sort of environment, yeah, fucked is pretty normal. I think the worst thing is that I'm seeing a lot of people at the moment, some people within the general housing sector who are still saying, man, it's a pretty good time to buy a house.

And I'm looking at things, I'm going, look, it might not be the worst time imaginable, but I'm not going to say it's a good time per se. And I think importantly, when we look through the figures, we know that house prices are still falling. So if you're buying a house at the moment, you're going to be pretty cautious. You don't necessarily want to just go, yep, whatever they're asking, I'm going to take it, because you know that almost the minute you buy that house, it's going to go down in value. So you want to barter hard. You want to sort of figure out, how do I get the house that I want, perhaps, but for a lower price? Because realistically, I'm not going to be getting as much from it. Has this ever happened? It has but not often. Last time it happened was around the GFC sort of thing and even then it wasn't. I mean we've already gone past that. Peak to trough the GFC fell I think

11-12%. We're already at that and we've got a wee way to go yet I'd expect. What was the pre-pandemic house price level compared to where it is now? It's still higher right? It's still higher. The big one's probably around what you can buy with your money. And I think really, I mean, we often look at house prices to incomes, which is a good measure. It's a comparable measure internationally. More important for me is how much do you have to spend of your income to service your mortgage? That's a lot more realistic, if you will. This year, we're expecting that people are spending around about half of their average household income servicing their mortgage if they bought this year. And how does that compare to around the world?

Because that's still coked, right? That's very coked. And importantly, that's the highest we've seen in New Zealand. So the second worst time, if you will, was back in 1987 when interest rates were at 20%. Everyone's grandparents and parents will remember them moaning about, you guys don't have it that hard. It was so much harder when interest rates were at 20%. You were spending 48% of your average household income on your first year mortgage repayments back in 87.

So it's worse now. And it's very much because, look, if you go to the bank at the moment, the actual number of money bags you can walk out with is substantially less than you used to be able to because of how high interest rates are. I heard one bank the other day saying that they're now testing people at 8.6%. So your income has to not only work now, interest rates are about six.

Remember, they were at 2.2 last year. Yeah, I liked that part. Yeah, that was cool, Brad. That was cool. But we recently did this, my partner and I. We went to the bank and we got some more money for our renovation. And the hoops, even though I'm going like,

this is who we bank with we've had a mortgage with them for about five years You had to beat them at basketball. I had to slam down. You had to slam down I mean, Aaron's 6'1", hey, that's gotta be Well that's why we got the money. Cause he slammed down. Cause he slammed down. He's so big. Like seriously, they looked

through our bank accounts, they questioned everything Oh, anytime you ever had Uber Eats, it would have been just a disapproving look over the top. Well, we ripped our kitchen out, so it's just been Uber Eats. Because what I saw John Key say last week, he's the chairman of, he's on the board of ANZ, said that

50-something percent of their mortgage holders are going to go from having a one or a two mortgage rate to a whatever in the next six months. There's a lot of people that are about three things. Yeah, it's pretty hard. Here's a good example. I've got a friend in Wellington.

They need to, if they sold their house today, they bought it around about this time last year. If they sold it, yeah, right at the top, right? Real harsh. If they sold it today, they'd make at least $200,000 less than what they paid for it. Next year, they need to find at least $24,000 more to pay the mortgage.

They haven't changed their spending quite yet, but we're getting there, maybe. So that's what is called negative equity, right? Yes, although important, right? You look at my friend, for example, she doesn't need to sell her house. Right. So it looks like that on paper,

but it's also like saying that you had earned $300,000 more on your house in the last few years. Until you sell it, you don't have the actual money. You don't have it. And it's not an investment property for her. It's for her to live in. So she's fine with having negative equity because she doesn't need to get rid of it anytime soon. It's a roof over her head.

As long as you can pay the mortgage each month. Absolutely. So batten down the hatches. Tighten the... You guys need to be offering some dinners and that toally so that the Uber Eats is completely gone and similar. I can whip her up a cottage pie. I can whip her up a cottage pie. But that's the thing.

With these mortgage rates changing for so many people, why aren't people cutting back? Because it is blowing my mind that people are still spending. Daddy Budget's over here. He doesn't spend money when the times are good and the paddocks are flush with grass, he still won't spend any money. I was going to say, are you the sort of person that, like, you know,

it's time for drinks, you know, out. So I'm just going to the bathroom now, guys. Bye-bye. The dude brings the cheapest garlic bread is on the market to potluck. Mama Fiorelli. He's a piece of shit bread. There's nothing wrong with Mama Fiorelli. It's the garlic bread we had at the ZM Christmas party at the weekend.

Oh, my God. No, can we talk about Friday? Talk about going on a budget. You went to a potluck and he bought a pre-cooked pav. Yeah, it was cheaper. A can of melted cream that had gone spoiled and like a couple of berries on top. Your poor friend. Man, after my own heart. That there is some economist stuff right there. Thank you, Brad. He knows. This is also why I don't have any friends. Can you answer that though? Why aren't people cutting back? I think a part of it is because it's in the future.

And at the moment, everyone's so playing in the here and now. The last few years have just been chaotic. I feel like that's a big part of it. You are starting to see a little bit of it. Let's remember Black Friday sales down 6.9% on the Friday of Black Friday. So people are spending a little bit less. There was a lot of money being spent last time around, but I think this year people are just starting to get the message a little bit more.

When we looked at those figures, it was interesting because people spent 5% more this year than last Black Friday on clothing and stuff, which is slightly smaller items, maybe a little bit more essential. 20% less, though, on the likes of homeware and carpets and stuff that you put in your house. And I feel like that sort of says that, look, every household's got a bit of a priority list, right? I want to put food on the table, fuel in the car, roof over my head. After that, I've got to toss up, do I get the new electronic or do I get the new sports jacket or whatever it might be? People are starting to make those adjustments a little bit more, but

it's taking a little while longer than we might have expected. I'm glad that you said that the people that bought clothing on the Black Friday sales is a little bit more essential. I bought a gorgeous, sort of like a kimono, and it's like got this sort of drapey sleeve. Did you get a good sale? Yeah, hell yeah, and it's got this wrap around it's so essential. It is gorgeous.

It's just wardrobe essential. Okay, back to housing. Next question from our listeners what are the pros and cons of going interest only on a mortgage for just to get through this time yeah i guess i mean the the pro there is that you don't have to pay as much right you're not paying off principal so you're just paying off the the interest component uh so it gives you a little bit more wriggle room through those harder times i guess the question at the moment is how long are you going to be doing that for because all of it all it really does is delay the inevitable. In fact, it makes

your mortgage more expensive in totality. So you might well have, say, six months of a bit more relief, but coming out the other side, you've effectively got a larger mortgage now to pay off. And if things are going to get worse next year, you sort of go, when do you take that interest only period? When's the sort of place where you need the support the most? Because it might not be right here right now. If you're already in that sort of position where you're going, gosh, maybe I need to think about interest only a little bit more, now is the time to talk to the bank and figure out what are your options?

What would that look like? What are the payments looking like if you did it? And how long can you get on it for? Okay, that's good. And interest only used to be the thing people would do when they'd buy an investment property and they'd put it on interest only to keep the price down. And then the price of the house would go up so much they'd sell it. No capital gains.

Money in the bank. Cash in your pocket. Holy moly. That's wild. Okay, next question. How much should I be trying to save per year towards a house deposit? Someone still wanting to buy a house? I mean, as much as possible in a sense.

I mean, that's probably me. I try to squirrel away as much money as I can for the house deposit. It's a fair amount. I mean, you're talking hundreds of thousands of dollars in some parts of the country that you need to be saving up. So I think increasingly, I mean, it is as much as you can. I think questions around savings have come through a little bit from listeners, and all of that really comes down to there's no one set number. A proportion of your income is always a good idea if you can set aside maybe 10-20%.

But let's be real, at the moment everything else is going up so much in price that sometimes you're living pretty close to as much money as comes in the pay packet you spend out on everything else. So if you can save, fantastic, and do try to save as much as you can. The real one there I think is also thinking about where are you going to buy

and who else is going to help? Maybe have that conversation with mum and dad over the holidays if they're willing to step up maybe start figuring out are there any good friends that are like not flaky that maybe you could buy together you know people are buying houses in very different ways than we used to so there might be an option you know have you found a partner

is now the time to pop the question and make sure they're locked in for the long haul holy shit you are Fletch I'll marry you if it's a financially sound decision. There will be a prenup, though. I was going to say, I'm pretty sure that my Tinder bar was something along the lines of, you know, looking forward to finding someone else

that's willing to contribute to the house deposit. Can we just side note? We did side note. We did get a lot of questions asking if you were single. Oh, God. The answer is? Absolutely. So single. Oh, God. The answer is? Absolutely. So single it's not funny.

Send through your current account that you're putting all your savings into. You thought it was hard getting money from the bank. You could try to get a date with Brad Olsen. He's going to go over three months worth of your accounts. With interest rates going up, I've got a question Because I don't like banks But they're sort of like a necessary evil This is a lot of things in life

We're going to be paying them so much more money For interest Did they have an increase in Expenditure Or are they just absolutely Out of the rate, just raking in the cash now? Bit of both.

So what we look at when we look through the numbers is that, yeah, the banks are paying more. So when you hear about the Reserve Bank increasing the official cash rate, for example, think of that as the bank's mortgage rate. So you guys pay ANZ, ASB, whoever it might be, your mortgage rate. The Reserve Bank charges the retail banks a mortgage

rate as well, to use cash, to spend cash, to have cash in the system. And that's the official cash rate. So as it's gone up, remember it was 0.25 just over a year ago, it's now 4.25. So the retail banks are paying a fair bit more, which is why you're seeing your own mortgages rise. The difference though is that when we look through the figures, the banks got ahead of the curve. They decided to raise their mortgage rates faster than the official cash rate was, which is why what we call their net interest margin, which is effectively the difference between the mortgage rates they charge you and what they get charged themselves, has grown over the last year. So not only have they made more profit, but they are more profitable generally because of how much money's been flowing through the system. So yes, they've been creaming it. Cheeky fucks. Yeah, man. Can't they give some? I mean, I know it's

not that simple. Well, the question here, I think, for next year becomes, during the GFC, for example, when the housing market was in decline, when there was real challenges, there were huge numbers of mortgagee sales. People were really quite crushed by it. In recent times, we've seen on average before the GFC, for example, there were about 100 mortgagee sales a quarter. Now, those are people that were real stressed. Banks were very much going, look, you can't make your repayment. I'm taking your house, thanks. Now, in recent times, there's been fewer than 30 in most of 2022 each quarter. So there's a lot less pressure. The question becomes next year, if there are more people that are in strife that can't make their finances work around the house, I'd expect those banks who have taken a pretty good creaming of it all in the last few years to

go, you know what, I'm going to be a little bit nicer this time around. I'm going to help out a bit more and figure out a way forward. Because it'd be pretty nasty of them in my mind to go, yep, we'll take some massive, massive profits and take all the money in the good times and then completely string out to dry in the bad. Well, they're certainly nice people. They should take that into account. Oh, I love them. You've got good faith, actually. What about Kiwi Bank?

Shouldn't that be the bank everybody can rely on? Isn't that our bank? I mean, it is our bank, but it's also, I mean, it's trying to operate in the wider environment. So, I mean, there's options that they can try and support. They've been trying to do that over time, of course, backed by the government. But I think at the moment, they're still a fairly small player in it. People often like the other offerings from the other banks. But probably next year, I think you're going to see a lot more competition. People will be thinking a lot more about where their money goes and what their money does for them. Maybe that requires a bit of a change in bank. It's just so hard at the moment, though.

You know, if you want to do anything different with another bank that you didn't get set up when you were two years old when your mother did it, it's really difficult. It takes time. Increasingly, the government's looking to make that easier to do, but I don't think it'll come through very quickly. Can I ask a quick question, literally personally? Because my big mortgage is coming up in January.

I know a lot of people up for for renewal and they're going how long should I lock in at this rate am I you know do I go I'll give it faith and say give it a year and then I hope it drops or 18 months two years general advice as always although I feel like I need to start charging again. Please send in a voice. You can block her on Instagram, Brad. I'm just going to put some personal questions written down. I'm going to send them to you. Before I block you.

No, no, it's a good question. I think, I mean, people have been starting to lock in for slightly longer rates. Now, to be fair, by the time you think that it's a good time to lock in for a longer rate, normally that longer rate is already high enough. Like I had a friend who locked in for five years back in sort of like mid-2021 when everyone was saying there's no point, that's so stupid, you know, you're going to be paying so much more. They are made. And that's really good.

I think at the moment you might not get a particularly good rate, if you will, at say two to three years. What you might get, though, is a little bit more security security so you know exactly what you're paying for that period yeah equally though like you say i mean there's a good chance that the reserve bank has to overcook the correction that we're seeing at the moment and so you could see interest rates go quite high next year but then also start to pull back maybe into 2024 to be fair i'm not putting a huge amount of credibility on that at the moment just because gosh gosh, who knows? We've just about doubled our interest rate expectations this year as a team.

So I'm not sure is the short answer. But I think realistically, maybe a little bit on a slightly longer term just so you know exactly what you have to pay. You can budget around that. But also maybe a little bit more that you are able to more flexibly shift around. So that's housing. Oh, you've got another one? One more on housing. What about, because obviously landlords will also have higher interest rates,

are you worried that people renting are going to have to pay more? Is this what we're going to expect or no? I am worried. I'm always worried because, you know, I remember having this conversation with my landlord and they were sort of like, oh, all my costs have gone up. And I said, yeah, but your costs didn't go up during 2020. They, in fact, went down.

You didn't give me a cheaper rent. So, you know, let's fair's fair here. Oh, bloody lefty. Hey, have you seen Wellington rentals? They're expensive. Oh, dude, they're the worst rentals. They're the worst rentals in New Zealand. The quality is awful.

Auckland's got some shitty rentals, but Wellington's, the climate's colder, it's wetter generally. Yeah. And the housing is poorer.ters, but Wellington, the climate's colder, it's wetter generally, and the housing is poorer. Yeah, but they're expensive. So you're getting a crap product and paying more for it. Exactly. I mean, it took me quite a while to just get a heat pump in our flat.

We do have one now, which is great. Not that I'm home much to see. I was going to say, I'd make sure the flatmates weren't using that too much while we were away. But look, in terms of rents, I think, yes, there's risks that they go up because those interest rates are rising. But realistically, the bigger change in the market that we're seeing at the moment is there's not as much demand for rentals as before. That's not saying it's real easy to find a rental. But I remember a few years back when I was going along with my rental CV in hand, you know, walking through the thongs of people who are trying to get a rental in Wellington,

you know, and just about everyone lost out because there were 50 people there and there was one house with four bedrooms. Now you're starting to see a few more people that are saying it's more difficult to fill some of those areas, particularly our urban centres, Auckland CBD and Wellington. People aren't living there quite as much. They're able to work from home. They're thinking further afield. And if you look at who's leaving the country at the moment, it's the 20 to 29-year-olds who are normally going to be your renters. What's wrong with us? The worst generation.

Guys! Are you Gen Z? Yes. I'm sorry about that. But you're more of us. You're more of a millennial. You're more of an older soul to us. What is it?

Guys. Okay, boomer. Jeez. You all are not that old And you need to calm the farm Okay I think that's good I get to see why boomers Have so much fun

Punching down on Gen Z Gen Y The haters gonna hate I think the irony is We're all gonna turn into our parents And not be going out For breakfast soon I mean we're all

We're halfway there aren't we That's a generation of You know 80s interest rates That's why they don't want they don't you know they scoff at you for going out for breakfast oh yeah there's no money for it

important question what's your go-to brunch order then oh I'm do you know salmon latkes oh we love a salmon latkes if there's a frisher on the menu I'm there

yeah some kind of corn or pea can't go wrong with an eggs Benny bacon did you say a pea fritter yeah man no corn yeah no corn but if there was like a pea fritter yeah man no corn yeah no corn

but if it was like a pea zucchini right why are you getting in on peas why do I I'm here thanks for breakfast

alright what's yours no I need to know yours I was going to say just an eggs benedict oh eggs benedict it's the cheapest isn't it no extra bacon

Vaughn's is always like a fried chicken or a hot dog what are you doing yeah it's not always conventional breakfast next time I see you guys on Fed Street

like that other time I'll judge you all very much on what you ordered. Okay, that's how. All right, let's go to recession slash inflation questions. First question, why are we forcing a recession? Is it a good thing in the long run? We kind of touched on this before. It is a good thing in the long run.

I mean, I think a lot of people are asking this question. They're going, why are we deliberately trying to hurt ourselves? And effectively, it's because the other result, if we don't do it now, is that things become so much more painful. Now, I say that because at the moment, inflation is really nasty, right? The risk is what happens if that continued and never got back into check? Venezuela. Exactly. We'd be Venezuela.

We'd be Germany back in the early days. Hot, though. Hot. Hot, though. Not hot. Realistically, at the moment, you're having inflation running at 7.2%. Now, if households at the moment are saying they expect inflation to be another 7% next year, if it goes on and on and on like that, effectively you do get into a pretty nasty economic position

where particularly those on the lowest incomes get hit harder. So there is a real challenge at the moment. You've got to get inflation under control, but that hurts. And that's effectively because you've got to engineer slower spending. The idea of just to walk through it is effectively at the moment trying to do too much with too little, and because of that, businesses are falling over themselves trying to raise prices.

Because if you and me are trying to compete on something, I'm going to make sure I'm paying more to get my thing first, and you're going to do the same, which means that we keep bidding the price up, demand and supply. Over time then, if you stop spending as much, then as a business, my sales are lower, my revenue's lower, and I'm going, actually, I can't make this work quite as much. I can't put up my prices anymore, because if I put up prices and sales are already pretty bad, then everyone's going to go and buy from my competitor who might not put up prices yeah and at some point as well and this is the real brutal one is as a business I go well I'm not doing as much work maybe I don't need as many workers and eventually

if there are fewer people in work or not earning quite as much then eventually they're not able to spend as much in the economy either that's the hard one though isn't it like you hear that going we need you know employment to unemployment to go on the rise so that people have less money. And you're like, there's going to be some real people suffering there. Absolutely. And I think importantly, no one's holding a ticker tape parade as that happens. It's a byproduct of how we get inflation under control. But I think, you know, one thing that is really challenging is that we haven't seen inflation like this in well over 30 years. And of that I think we've lost the idea of just how painful and difficult it is to unstick you know that this is not an easy process it's not a painless process it's going to hurt bad

next year but realistically it's better to have that short-term pain and then get through it and get onto a more even keel. It also says that if we are going to have more people out of work if there are going to be people in a more challenging position, next year is the time that the government has to come to the table with more support for those groups because they are going to be hurting and there's not going to be nearly as many options for them as there are today. But that's the government spending money. It is, it is. I mean, the government's always got to spend money. I guess the question at the moment, and this is, you know, we talked a little bit before about, you know, what government might need to think about next year,

what options are on the table. Next year not only is a period of consolidation, but for people, for businesses, for government, is a challenge around priorities. You have a much more limited set of money available to you next year no matter what position you're in, and you've now got to figure out what's priority one and what's priority two and where's the cut-off point. And for government, that's an increasingly challenging

conversation. They've got to go, look, I want to do a lot of stuff, but I haven't got enough people, I haven't got enough resource, I haven't got enough cash. Therefore, what must I do and what other things might I like to do, but don't critically have to happen right here, right now, that I can defer until a slightly better time. It's the same as what we're all doing in life. I mean, I'd like to fly off to the US tomorrow. I'd like to go out for a big lunch every day of the week, but I realise I need to do other things first. They are my priority.

Afterwards, if there's money left over, yep, I've got some more options. Is that going to cause more of this what we're seeing between people's political beliefs and people become so entrenched in it because the roads need to be fixed. Yeah, but we need to look after people. People can get stuff they should be looking after themselves. It just seems everything is fueling the problem at the moment. I mean, I think there's definitely a lot more of those sort of conversations happening.

I mean, one thing that I've been talking to some people about this year is the fact that we have lost the ability to disagree agreeably. I don't have to agree with everything that people say, but I also don't need to jump down their throat and tell them they're idiots and then smack them and walk off. Put that up and send it around the internet. Just to be clear, look at me. I don't think I could smack any...

I couldn't even smack a fly and make it work. I could body slam them, perhaps. Yeah, it's just... Is it capitalism that's fucked, Brad? Should we do away with this? Everyone reckons that capitalism's fucked. I don't know if anyone's come up with a better option that magically works. I mean, if capitalism's fucked, then communism's far, far more fucked.

Has inequality ever been this bad in New Zealand? Well, it's interesting, right, because I think it's a little bit challenging. Some of the analysis would actually tell you that there is greater increases in New Zealand in terms of less inequality now than before. Now, that's not saying that people are doing a lot better. It's just that over time, we have been supporting more and more people. I guess the difference really here is that, look, there's always a line under which you say that people are in abject poverty. They just cannot afford even the basics. But there's always going to be sort of a relative level of deprivation because you're going to have the haves and you're going to have the have-nots. The question in my mind has always got to be, those groups who are doing it the toughest,

can they still survive? Maybe they're not thriving right here, right now, but are they able to survive? If they're not even able to survive, then we as society do need to step up and go, you know, where are our priorities? Because if they're not with those who are hurting the hardest, then we really do need to evaluate. Realistically, we know that there's always going to be some people in society that are facing some challenging conditions. COVID was a great example of where we saw that. I think in the next year, there's going to be more people that are struggling. We've got to be able to back them. Another question from our listeners, how can we prepare for this recession? What's the best way? And they also say thanks for next year, making those priority lists. What is your priority as a household, as a family, as a couple, as a flat,

whatever it might be that you know you have to spend on? And then what are you actually spending on at the moment that you might not be thinking about? I mean, gosh, if I went through my bank statements and figured out how many different subscriptions I have for Netflix and some of the... I have them all. I swear I have them all.

And is that the sort of thing where, again, you divvy them up a bit more so that each person in the flat has one, or that you decide, actually, look, I like lots of shows, but Disney Plus has got more of them than Netflix at the moment, so I'll hold off. Those sort of decisions over time can add up. It's also maybe now's the time for a bit more meal prep or thinking about some of those options. There will be some that will be able to do that.

There's some who are probably already a bit challenged. But yeah, I think this summer would be a good time to get ready for the recession by thinking about what your personal circumstances look like, where's your money going, and how might you be able to trim back a little bit and give yourself a bit more room. Is Pirate Bay still around?

I can get rid of all of these streaming services. I'll just go back to torrenting. I mean, this is better than that conversation I think that we had a few shows back where you were all talking about your different opportunities for where else to make money. I mean, this is better than that conversation I think that we had a few shows back where you were all talking about your different opportunities for where else to make money. Only fans. Only fans.

Only fans and gambling came up. I've got a hell of a set of feet on me. I'll tell you what, Brad. A question or something I don't think we've got in our list of questions. What about debts and debt consolidation? Like if people have like loans or credit cards, what's your advice to

them get rid of them because that is a massive anchor isn't it how do you get rid of it you gotta pay for it you just cut them up and you ignore the limits all right that's what i've been doing for years you don't have a credit card no i can't be trusted you can't be is this because you've given it a crack and it didn't work no no i've never had one because i'm a shopper. Okay, so you know, that's good. I mean, self-awareness is fantastic. Look, I think importantly, again, talk to your financial advisor,

talk to whoever you've got the loan with and think about seeing if they can help you consolidate it. But if you do have those, then effectively you want to generally get rid of the ones with the highest interest rates first because they'll be costing you so much more over time. They're building up and up and up. And that comes in, you know, we've just been talking about priorities.

That should be one of your priorities. So you go through the necessities of life, get the rent paid, get the fuel bought, get the food on the table. Then maybe, you know, before you think about anything else, maybe a proportion of your income goes on debt consolidation.

Get rid of those ones. And I think, I mean, it depends on the type of debt. Student loans, leave that one alone. That's a completely different kettle of fish. It's not real. It's fine. It's proportional to your income. But, you know, if you've taken out a small personal loan for a car,

if you've got credit card debt or something, wipe that shit out real quick. Yeah. Well, especially a credit card can be, what, 20% interest, can't it? Yeah. Whereas you might be able to get a loan to consolidate that for, what, way less. Much lower.

Absolutely. And I think, you know, again, that's the sort of stuff that will start to trip you up particularly when you are thinking later in life around you know buying or again it's the sort of thing where it saps your money potential so so quickly because it's building up it's becoming you know it is turning from a molehill into a mountain pretty quickly so if you can nip that one in the mud you've not only got more money over time to be able to spend on stuff, but you also sort of don't have that grindstone that's weighing you back and keeping you down. Mind you, the way interest rates are going,

it might be better to put the house on the credit card. Buy the house with the credit card. Yeah, buy the house with the credit card. I mean, a mortgage rate of maybe 7% is still better than 20%. Now, this podcast might not date well, Brett. Depends on how many air points you get for it. Yeah.

Oh! You got no money for all that, boy. You got enough air points to get there. Play ZM's Fletch Vaughan and Hayley. Play ZM. Okay, do prices actually go down post-inflation, or is butter always going to be a luxury? I'm interested in the butter comment.

Like, is this person a baker, or what? Yeah, probably. It is weird how butter, I think butter is the product that people use as a reference point for costs. Or cheese. I was going to say cheese is my go-to. Any dairy product that comes in a block.

Yogurt, not interested. Too sloppy. It needs to be hard and sluggish. But then that would have its own bad effects if the price of everything dropped well and this is the double-edged sword right i mean you think of new zealand where we're uh you know we're a farming country we do a lot of this sort of stuff if all of a sudden the price of butter or milk or anything else dropped then all of a sudden yep good for consumers but there's a whole bunch of producers a whole bunch of

people that are getting paid that aren't going to be getting paid nearly as much. So look, the general rule here is that no, you don't see prices go down. There's a stickiness element to most prices in some regard. Wages is probably the best one, right? When you have an economic downturn, people don't get their wages cut. They just, as a business, you get rid of people. How would any of us feel if the boss came in and said, look, we're going to be paying you less next week? You go, but hang on, I was worth that much to you this week. Why are you cutting it back? So what you generally see with most of this is that you don't actually want inflation generally to go negative, but you want it to stop going up at such a fast pace. So if we can get it back to sort of 2% a year, that's a lot more manageable,

on par with often how people's pay rises and similar go up as well, becoming more productive. So the price of stuff probably won't get a whole lot cheaper. Hopefully we will catch up to it though over time. And earn more. That's the plan. I've always wondered that. I always feel like we're kind of thinking about things like, after this, everything will settle down. And that's not true. Well, I mean, just think, I mean, over our lifetimes, right, you could go to the dairy

when we were younger, maybe, you know, I mean, over our lifetimes, right, you could go to the dairy when we were younger, maybe, you know, you guys a little bit older than I, only because of your comments before, just to be clear. Also, I'm more you, Brad, than these two. But, you know, you could go down to the dairy and you'd get like a 50 cent lolly packet. I mean, you can't get anything for less than three bucks now for the same sort of quantity.

So that's probably a good example over time of how inflation works. You sort of see those set prices and they become normal right a three dollar lolly bag is now a lot more normal than what it was back in the day that becomes the base reference point but man if that went up to seven dollars you'd be going heck that's that's that's a bit insane i don't know i love lollies still worth it you reckon still worth it priority list being established right here lollies are in there so somebody asked when will interest rates start to go back down? We don't have a crystal ball That's a million dollar question.

No, and I mean, I guess the challenge here is that we were picking the interest rates, the official cash rate at least, would go to a peak of 3.5% this year. And when we made that prediction,

that was back in July. Remember, it's now already at 4.25, and we were expecting it might have to head to nearly 6. So we've made some big increases in the last year, which makes picking the top and also when it then shifts pretty difficult.

In my mind, at the moment, if you've got inflation the way it is, if you've got the Reserve Bank, which is going, well, this stuff is way out of control, then you do need more interest rate increases into next year, and then probably it's more 2024 when the wheels have fallen off the economy a bit more and the Reserve Bank thinks actually we need to sort of kick the engine back into a higher gear that's when you might start to see some interest rate cuts but I'm reluctant to make a huge forecast on that given how wrong we've been in recent times not I wouldn't build it into my predictions at this point I'd be more worried about you know

taking that more defensive position of how can I afford the higher ones, and if interest rates become lower, that's an advantage. Yeah. What's the perfect level for interest rates to sit at? There must be some sort of Goldilocks zone, because when it was at 1.95 at one stage, that's too low, right? Yeah, way too low.

But now we're sneaking back up to 7, which it was sitting at for a very long time in like the early 2000s so where is the goldilocks zone of like affordability but everyone gets to make it off but it doesn't make you know it doesn't free up too much money so inflation goes nuts you're probably and is this all the kardashians fault i mean it's encouraging us and this feels like a kardashian brother because they're encouraging everybody to spend their money on all this junk and shit we don't need. Yeah, see, I mean, that's definitely not helpful. I mean, it depends, right?

Are you going to look at the Kardashians on the TV at night or are you going to look at Adrienne Orr? Which one are you going to listen to? Plus that Disney Plus subscription's costing a fortune. So you've got to make the most of it and watch what we've got to offer. Yeah, right, okay.

I think, I mean, in terms of where's that sort of level peg, I think you're probably looking around about the six-ish percent mark and maybe 5.56% for a mortgage rate. I'll meet you at 4. Yeah, I'm happy with a 3.89. Which is what it was eight years ago, seven, eight years ago. Yeah, I mean, the general feeling I feel like is for the official cash rate

to sort of sit in the sort of 3% to 4% range, all else being equal. And then again, your mortgage rate's a little bit higher than that. So probably around that sort of 5.5%, 6% rate is probably a comfortable long-term zone, but I think as well, it's pretty difficult to get there, so you're always going to have unders and overs. All right, let's talk about savings, the last batch of our questions. Savings. I have no thoughts on them as I have none.

If you have money left over after pay, what should you do with it? Because now I've noticed... Don't use after pay. Sorry, did you say after pay? Or after your salary payments. I've noticed now that... Every financial professional is like, don't do that. It's a bad idea. Everybody wants it. It's nuts. I have not heard a single person who's a professional in the financial industry be like are this after pay is a great idea yeah here's how it works apart from after pay are saying everybody else says it's a bad idea yet

everybody's just like give me give me give me the after pay well i mean it's it's the idea right of that um there are some times when purchases are so big that you'd never save up enough to actually make the entire purchase. Like a house, for example. I'm not going to make that amount of money and put it and squirrel it away and get a house at any point before probably 65, 70. But I'm able to sort of repay that over time when it's a smaller manageable piece. I guess the worry there is that if you're living effectively what you're doing when you're purchasing stuff and you're getting it here and now but you're not paying it until later, you're living outside your means. You've got more stuff coming in than you've got money available to look after it. That's always a dangerous sort of position to get into because the risk then is that if you

think, oh that's right, I can make the repayment in a few months time. If something happens, if you lose your job, if you get sick, if another important expense comes up, you can't actually meet that obligation. And so the idea is always that generally speaking, that this is just good advice for life. You should try and live within your means. And that means that you should, if there's a big item coming up, you want to save for it. I remember when I was younger, I really wanted a Nintendo DS. I had to save up the pocket money. No one was going to just give it to me and say, oh, he's good for it later on. I guess that is a slippery slope that we often find with people that what you can also find is, hey, maybe that's all right for one item, but then one item becomes two,

becomes three, becomes four. And all of a sudden there's a whole bunch of stuff that, you know, put it this way, you know, a lot of people might buy clothing or something on it. What happens if, you know, you wear that new dress that you've just bought, it gets something on it, and then you can't use it again? You're still paying that off for the next four months, and you can't even wear the damn thing. So this is the Kardashians. Because they've got so much money, and they make it seem like achievable. They get given stuff.

Yeah, they do. They get given stuff, but then they've got more money than God as well, so they can, you know, buy all these things, and people are like, well, she's 21, why don't I have that? Yeah. Maybe I'll just tick it up. I just want to become a hashtag influencer and have people send me stuff. That would be the life.

Or like get free paint for your renos. Out of all the free things I can think of, not going to lie, paint was not on my list. Let's talk about the tax deductibility of that later. No, thank you. If you're lucky enough to have some money, you're saving for whatever, what is the best thing to do with it?

Because up until very recently, turn deposit rates haven't been great, but they are going up. Absolutely. I think, I mean, at the moment, you should be in KiwiSaver is I think the first bit there because you just don't even have to think about it.

Because that was a question to interrupt somebody. Is it actually a good idea or should I just save on my own? Well, I mean, look, if you're good enough to save on your own, fantastic. But man, I'm pretty on to this stuff and even I don't know if I am. And I say, look, I was lucky enough to finally pay off my student loan the other day. I forgot that you couldn't.

There's a whole range of things. Thank you. So there's a whole bunch of money there that normally I would never see that all of a sudden I will be seeing in my pay pack. And I said to myself, I'm going to invest that. It's now been two pay rounds and I've forgotten it both times. I know, it's like if you get a pay raise, you're like, well, this extra money will go straight to savings.

And it never does. You just live with more money. I will say, though, you're wearing a lovely blazer. If that's where the money went, I think it was well worth it. Very well spent. That was a Black Friday sale. Yeah, it's good. But you said it was essential. You. Very well spent. Money well spent. That was a Black Friday sale. Yeah, oh. But you said it was essential.

You said it was essential. So with KiwiSaver, though, it's hard to keep being cool about putting a percentage of your income away when lately it's kind of just been either plummeting or slowly creeping back up. There's been no like... It's not great. I'm not going to lie. But see, the big one there is that, I guess two points.

One, if you don't have a man retirement, it's going to be pretty brutal. It's going to be but see the big one there is that i guess two points one if you don't have it man retirement's going to be pretty brutal it's going to be a pretty challenge and i know that a lot of people say yeah but i've got to live life right here right now i guess the beauty of it is that you don't ever have to look at it you set it and broadly forget it yeah i mean especially when now you've got more options where they'll change your risk profile over time so the sort of closer you get to retirement the less risky your fund becomes and the more likely it is it's going to start at that same level and you should start off in a high risk like a yep as a young person generally speaking i mean i mean everyone needs to think about their own risk levels but see good example if you look at mine mine's in the high risk category and that means that yep it's lost thousands of dollars at the moment i don't need that money though i don't

need it right here right now and i'm hoping that over time it makes more money over the next 20, 30, 40, 50 years before I retire. So that's a good opportunity. So the set and forget option is great because I don't have to touch it. I don't have to worry about it. I don't even have to think about it. If you've got other money outside of this, my money from my student loan, for example, what you might want to do is you're thinking at the moment about the different opportunities. Now, you could put it into the likes of the housing market. Well, that's not going great at the moment, and it's very expensive. You've got to have a lot of cash behind you to do that. You might be thinking about putting it into your Sharesies account or putting it into investments.

Hayley's not doing great at Sharesies. I've had four weeks of emails saying, your payment has defaulted or something. I've got to top it up. But it's terrible. It's like I've made 0.2 cents or something or lost. Oh, I was going to say, I'm down more as well. Down, yeah. But I guess, so that's down, not great.

Has more upside, but is a longer term game. And I think, I mean, when you look at something like that, unless you're the sort of person that's sitting there with three phones there is like in the New York Stock Exchange yelling buy sell orders and thinking like you know the market you're probably on a bit of a hiding to nothing in the short term so that's alright but if you're thinking longer term

I'm expecting that some of the investments that I've made eventually will do better I've just got one open this is my thing I think everyone asks this who do we have from girls who invest SimCore

SimCore and yeah she was talking I was like just tell me which ones she's like no it's obviously because then

and people probably do ask you for investment all the time but yeah you understand that if it goes badly I was the one that told you

that that was going to be good but also no one's ever shared the profits of when I've told them good things. No, I'm kidding. Yeah, exactly. But I think the other option, right, we talked about term deposits. The thing with your investments and some of those are losing money at the moment,

they're challenging, you know, it's not great. Term deposits now are worth around about 5% sometimes, so they're actually starting to make cash. Now, that's below inflation, which isn't great, but it's more than if you just left the money in the bank and it did nothing. So I think, again, a bit of a spread there. There'll be some where you might want to go, yep, I've got to put some away on my KiwiSaver. I don't even know about that. It just comes out of the pay packet. I'll save a little bit more. I'll put it into a term deposit that will roll over and I'll put

that on for shorter periods of time so it can get better interest over time. And then maybe as well, I'll think about putting something a little bit more into the shares and making sure the auto repayments happen a little bit more. I think, I mean, the big one for all this is that, let's be real, all of us think that we're, I mean, I think I'm a genius at the financial market. How good has that played out in recent times? Like none of us are that good. Monkeys, you know, studies have shown that monkeys, you know,

picking this bowl of apples or the other sometimes can do it better. So I think increasingly it's that thing of maybe not timing the market, but time in the market. The longer you're in, the longer you have to win. Has the government guaranteed deposits in the bank, your savings? Not yet. Because we're still, correct me if I'm wrong,

we're still one of the only countries in the developed world that does not guarantee your savings in your bank. That's fucked. So it could just go. And that was the risk at the global financial crisis. People thought, man, what happens if my bank goes under? Those things are supposed to be safe,

but maybe they're not. So you're right. At the moment, I think it's still going through them. I'll have to check up on that, the deposit takers bill. Because the banks are whinging about that, weren't they, because they had to raise extra money?

I mean, they're always whinging. They do, sausage sizzle. And then cramming a bit more money. I mean, what are they going to do, whack our interest rate? Oh, wait, they've already done that. The banks are the equivalent of that girl we all went to school with, who is like, I'm not going to pass this exam.

Give me strength. And then you get to 90 or something. Yeah, yeah, yeah. That was probably me. I didn't know. But I think, I mean, you're right. So there is currently an option or a bill, I think, before Parliament that would make sure that,

I think it's like $50,000 worth of your money in the bank would be definitely protected, which is good. We're getting there is all I can say. Wow. Brad, Brad, Brad. How's everyone feeling into there? Oh, Brad. I'm exhausted after that.

It's so fascinating. It is, yeah. We really appreciate you taking the time, sharing your just extreme wealth of knowledge around this. Extreme downer wealth of knowledge. It's not your fault. But aren't we lucky? Like, we're all homeowners.

Aren't we bloody lucky? Like, that's what I often have to think to myself lucky? Like, we're all homeowners. Aren't we bloody lucky? Like, that's what I often have to think to myself. I've got to check my privilege every now and then when I feel like I'm about to have a winch because I'm not likely to be the person who bears the brunt of, you know, an August straight recession, you know? No, you will if they fire you tomorrow. My contract is the same as yours and it's watertight. Watertight!

I will sink this place! But, you know, yeah, I think it's important while it's, you know, a struggle, if all it requires is tightening the belt and cutting out some unnecessary spending, shit, aren't we the lucky ones? Yeah, for sure.

I think as well, I mean, look, really important that we're having the conversation. New Zealanders don't talk about money enough. You know, there's a lot of, I mean, the number of questions that you guys would have got for this would have been enormous. That's what I think speaks to people who go, you know, actually, I'm pretty keen to know a bit more about this. So we obviously aren't doing it right. So good funnel ways to yarn. I think it's important when people do have questions, you know, I've had a few people who have flicked them through in the DMs and similar.

Keep them coming. They are only general advice. Don't encourage Hayley. Don't encourage Hayley. No, I've already got a little note. I'm just going to flick it your way, actually. Look, all I can say is I'll have to come and see the house when it's done and sort of see where the advice went.

See how many bottles are left in her wine rack. You'll be able to tell where the bloody money's gone. Brad Olson, Bad News Brad. Thank you so much for taking the time. Appreciate it Thanks team ZM's Fletch Vaughan and Hayley See ya See ya later

Actually I'm going to Have to stop you there That's copyrighted Sue DeCato's a very Good friend of mine She's already sued me twice So if you could maybe Get her to drop her

Litigious action That would be great Tell her I'll review Her five stars Yeah If she does the same For this podcast Yeah

And then she tells all her friends. And if you're listening, maybe give it five stars as well.