The Reserve Bank hopes high frequency data will better equip the central bank to see the road ahead more clearly – but warns we’re not ready to relax into cruise control just yet.

The Reserve Bank’s recent pivot to cut the official cash rate, despite weeks earlier stating that action would be unlikely, came off the back of fresh high-frequency data suggesting the economy was losing steam. Paul Conway, RBNZ’s chief economist, reckons this adjustment is a no-brainer given the latest signals.

In this week’s episode of Bernard Hickey’s economics podcast When the Facts Change, Conway lays bare a major challenge for the RBNZ: New Zealand’s economy isn’t well-measured and our traditional data sets from Statistics New Zealand can lag compared to other countries.

To help navigate these unpredictable economic roads, the Reserve Bank is leaning more on high-frequency data like card spending, freight movements and even some intel from the private sector to get a clearer picture of the economy’s pulse. It’s not perfect, but in the world of economic forecasting, you work with what you’ve got.

Getting those forecasts as accurate as possible is key for an economy that’s only just inching back from the brink of pandemic-induced turmoil. Conway warns that while we’re moving in the right direction, that doesn’t mean the road ahead is smooth. He says New Zealand is a low productivity growth, low wage economy and he doesn’t see anything to suggest we’re going back to something other than that. Conway says the pandemic has fundamentally shifted the economic landscape and what lies ahead is less of a return to what once was and more of a move to a new normal.

While he acknowledges the government’s ambitious plans to lift productivity and wages and is hopeful there will be positive movement in this space, he’s cautious about the timeline and likelihood of a dramatic shift. “Fingers crossed we’ve got a structural change coming up,” he says, before adding “there’s no sign of it yet”.

Click here for more episodes Bernard Hickey’s economics podcast When the Facts Change