“The thing about Washington, DC is there’s quite a lot of political intrigue, lots of discussions on geopolitics,” he says.
“Pretty much every conversation you have in the hallway is about the politics or the geopolitics of lots of different places in the world – and the Middle East was one of those places.
“I found myself, during those 12 years, spending a lot of time working in those countries and working with people who were experts in the area.”
Eckhold became hyper-focused on the Iran conflict as soon as it kicked off in February.
“I just realised immediately, they [the US administration] are doing the thing that every geopolitical analyst would have advised them not to do.”
He has argued for some time that the situation in the Strait of Hormuz can’t be resolved easily or quickly.
As the conflict drags on, he has been proved correct.
Despite oil prices stabilising at about US$100 ($173) a barrel and concerns about fuel shortages easing, Eckhold says we’re not out of the woods yet.
It’s certainly still a crisis on a global level, he says.
“The world’s lost an equivalent amount of supply, which only compares to the 1974 oil shock.
“But because we use oil less intensively than we did back then, it hasn’t really become a crisis for New Zealand.”
Oil at US$100 doesn’t break the New Zealand economy, he says.
“It’s pretty unpleasant, but it doesn’t break it.
“What we’ve discovered as we’ve gone through is, firstly, these conflicts can go on a hell of a lot longer than first thought.
“But there’s also a lot of moving parts, a lot of buffers in the system that we’re gradually eroding.
“The question is now, when do they break?”
Eckhold is talking specifically about global oil reserves, which have buffered markets from the worst of the supply shortfall, but which are now dangerously low.
“So when does the chain break?” he says.
Westpac chief economist Kelly Eckhold.
He suggests the way US President Donald Trump talks, the Israelis talk, and the Iranians talk implies the Strait of Hormuz could be closed for a long time.
“They [all] have limited room to manoeuvre, to give up on things. The alternative, without a negotiation being successful, is pretty dire for all of them.”
From Ōamaru to Washington, DC
It’s a long way from Ōamaru, where Eckhold grew up, to the Strait of Hormuz. Or Washington, DC for that matter.
There wasn’t a lot of money in his household growing up, he says.
His father, a freezing worker, had to contend with the tough economic reforms and downturns of the 1980s.
“We didn’t have that much. I remember mum and dad had to scrape up loans from about three or four different places to buy a relatively simple house in a suburb outside Ōamaru.”
His earliest memories of money are things such as getting $5 for Christmas from his nana or collecting empty bottles to return for a refund.
“I started working when I was probably 12 or 13 years old in market garden operations around town. I remember the first day of work I did, I got $7.”
He remembers saving his money at an early age and says he’s always been conservative with debt and investments.
“I mean, I think my parents have always focused on just making sure that you can cover the interest that you’re building up,” he says.
“I think that came from their experiences, when they were trying to build a family and build a household, you were facing interest rates over 20%. It was just tight.”
Eckhold says he got into economics in high school and immediately loved it.
“I did that along with accounting and I found it therapeutic, almost,” he says.
“There is a logic and an order to things like accounting and economics that I liked.”
From there, there was a strong expectation that he’d go on to university.
“Which is quite remarkable because no one else in my family at that stage had been anywhere near university,” he says.
At the University of Otago, he switched to focus on finance and economics.
“It becomes quite mathematical, so the logic just expands, doesn’t it? You can solve things.”
He did well there. Despite coming out into the workforce at the height of the early 90s unemployment spike, Eckhold managed to get a job at the Reserve Bank under Don Brash.
“I looked on these statistics, about 20% at this stage,” he says.
“It was really hard. I got two interviews coming out of university … one with Treasury and one with the Reserve Bank. You couldn’t get one with anyone else.”
Eckhold recalls the hard focus the RBNZ had on taming inflation at that time.
“In the first couple of years, I was writing memos for Brash so that he could explain why inflation might potentially be 2 or 2.1%, usually because something like the oil price went up or down.”
After that initial stint at the RBNZ, Eckhold headed to London and a job with the Bank of England, on the trading desk.
It was a great opportunity, but he was on a Kiwi working visa and had to leave after 18 months.
It did give him a foot in the door at the IMF, though.
“I came back and went to the IMF after having worked for them as a contractor for a couple of weeks at a time,” he says.
“That was something where somebody else on the [trading] desk had been doing that sort of work, and the IMF was always looking for experts around the world to come and help them.”
He seems humble about his success in the organisation.
“You know, once you start doing that work, people get comfortable with what you’re doing.”
He stayed for almost 12 years, eventually becoming a senior financial sector expert, which involved him analysing economies worldwide and writing reports for the fund.
‘I call it as I see it’
“I tend to call it as I see it,” Eckhold says.
“But you’ve also got to be very conscious about what you know and what you don’t know.
“Most of the things that you have to comment on, it’s not a slam dunk to say that someone’s got something categorically wrong because, you know, there’s a lot of moving parts out there.
“But I think people appreciate a bit of honesty and a bit of clarity as well.“
Eckhold hasn’t been shy about taking a stance on big issues, including what should happen to interest rates.
That’s seen him offer personal takes in Westpac economic reports about what he thinks the RBNZ should do, in addition to formal forecasts about what it will most likely do.
For the record, he’d have been on the side of the Monetary Policy Committee members who voted to raise the Official Cash Rate at the May meeting.
But he’s wary of opinions being treated as gospel.
“Heck, you can’t come across as knowing everything, because you don’t actually know that much at all a lot of the time.”
Economic forecasts provide a useful framework for understanding the world, I suggest.
“That’s the best way of thinking about it,” he says.
“But you need to be clear as well. Economists often get criticised because we’re on the one hand or on the other hand. By the time you get to the end of the sentence, you go: ‘Well, has this guy said anything?’
“You need to say something.”
Three months ago, all the initial Iran war scenarios said that by now the oil price would be US$175 a barrel, he recalls.
“It’s not US$175 a barrel, is it? Because lots of things have changed in the interim.”
Some things have gone right, but the big one, the resolving of the war, hasn’t yet, he says.
“It’s a difficult position, as we said earlier, you still can’t say we’re out of the woods here because there’s still this massive blockage.”
Global view on New Zealand’s economic problems
Eckhold’s time at the IMF has given him a fresh set of eyes on New Zealand’s economy.
Relative to some of the countries he’s studied, it’s certainly not all bad.
“I would say that in New Zealand we take a lot of stuff for granted,” he says.
“Probably in 90% of the countries I worked in, the real basic stuff, we just take for granted, the idea that you can go to the bank and borrow money at a market-determined interest rate, or you can go and get some foreign currency because you want to buy something from overseas or go overseas.
“The idea that prices for things are market-determined.
“These are things that are alien to a lot of parts of the world, but we just accept that that’s what happens.”
So, having worked in countries with much greater degrees of poverty and social inequality, what does Eckhold see as the biggest challenges facing New Zealand?
“We need to build people’s real incomes in this country, and that comes from growing the pie as opposed to divvying it up,” he says.
“I think a real challenge we have in New Zealand is that too many of us are focused on getting as much of the existing pie as we can.”
He sees too much “rent-seeking” behaviour because we have a lack of competition in important parts of the economy.
“They are getting as much as they can for themselves and their stakeholders, but it comes at the cost of the rest of us.
“So I think action in the form of thinking about the competitiveness of this economy will be key, so that everybody can have a bit more, as opposed to some people having a lot more.”
That’s not unique to New Zealand, he says.
“Most of the countries I worked in, I’d turn up, and you would see what the problem was, but then you would see that the people you were talking to also knew what the problem was.
“What they wanted you to do was to do something to break the deadlock between the stakeholders who were stopping them from doing what they needed to do to fix things.”
It’s hard to get momentum because the things that need doing are always perceived as disruptive, he says.
“There’s never something that you do that will cost nothing or have no risk, right?
“Otherwise, you would’ve done it already.”
Listen to the full episode for the complete conversation.
Money Talks and The Economy of Everything is available on the iHeart app or wherever you get your podcasts.
The series is hosted by Liam Dann, business editor-at-large. Thanks to CMC Markets.