1 00:00:00,040 --> 00:00:02,240 Speaker 1: We've got another OCI cut down twenty five points to 2 00:00:02,279 --> 00:00:06,240 Speaker 1: three point twenty five. Uncertainty again reigns supreme. They reckon 3 00:00:06,280 --> 00:00:08,399 Speaker 1: we'll get another cut at their next meeting, but there's 4 00:00:08,400 --> 00:00:11,000 Speaker 1: a bunch of caveats to that. Inflation will hit two 5 00:00:11,039 --> 00:00:13,480 Speaker 1: point seven percent nearly out of range, then come down 6 00:00:13,480 --> 00:00:16,599 Speaker 1: to two percent next year. Nick Tuffley, chief Economist, today 7 00:00:16,640 --> 00:00:17,880 Speaker 1: is to be back with me this morning, Nick, Good 8 00:00:17,920 --> 00:00:21,360 Speaker 1: morning morning. Does the fact that they had to vote 9 00:00:21,440 --> 00:00:24,640 Speaker 1: on this one make it more or less hopeful that 10 00:00:24,680 --> 00:00:26,400 Speaker 1: they will do a cut next time? 11 00:00:27,720 --> 00:00:30,680 Speaker 2: Look, it is really a reflection of just how much 12 00:00:30,800 --> 00:00:33,920 Speaker 2: uncertainty there is out there, and the member of the 13 00:00:34,040 --> 00:00:37,280 Speaker 2: committee that voted to keep things on hold just really 14 00:00:37,280 --> 00:00:39,800 Speaker 2: wanted more time to see how some of the the 15 00:00:39,920 --> 00:00:42,320 Speaker 2: inflation risks pan out. And of course the big one 16 00:00:42,360 --> 00:00:45,080 Speaker 2: is what Donald Trump is doing with the tariffs and 17 00:00:45,200 --> 00:00:48,720 Speaker 2: just how that will impact inflation in New Zealand. I 18 00:00:48,720 --> 00:00:51,720 Speaker 2: think we still get another cut next month. We still 19 00:00:51,760 --> 00:00:54,480 Speaker 2: think we'll get two more in fact, but there's still 20 00:00:54,480 --> 00:00:57,520 Speaker 2: that uncertainty about just how far the Reserve Bank will go, 21 00:00:57,880 --> 00:01:02,200 Speaker 2: and also when it's almost possible pause at some point. 22 00:01:02,280 --> 00:01:06,200 Speaker 1: The Trump uncertainty, think the only certain thing about him 23 00:01:06,280 --> 00:01:08,760 Speaker 1: is that he is uncertain. Does that not take some 24 00:01:08,840 --> 00:01:11,320 Speaker 1: of the unpredictability of it out of the equation? 25 00:01:12,720 --> 00:01:16,440 Speaker 2: Well, the challenges is that when you have an uncertain environment, 26 00:01:16,640 --> 00:01:19,000 Speaker 2: you get people who don't make decisions, and that also 27 00:01:19,160 --> 00:01:23,120 Speaker 2: flows through and potentially weakens the economy. For the Reserve Bank, 28 00:01:23,120 --> 00:01:26,640 Speaker 2: where they seem to have been debating global growth will slow. 29 00:01:26,880 --> 00:01:28,760 Speaker 2: What will that do to inflation? Is it going to 30 00:01:28,760 --> 00:01:31,759 Speaker 2: be a bit like a supply shop or a cost 31 00:01:31,760 --> 00:01:33,880 Speaker 2: shop where it just gets more expensive to make stuff 32 00:01:33,920 --> 00:01:36,840 Speaker 2: around the world, or is the dominating fact going to 33 00:01:36,880 --> 00:01:41,120 Speaker 2: be people stop buying things, you get weaker demand, you 34 00:01:41,200 --> 00:01:44,720 Speaker 2: get slow exports from New Zealand, and less inflation pressure. 35 00:01:44,800 --> 00:01:47,720 Speaker 2: So they've assumed that's what's going to happen. But they 36 00:01:47,720 --> 00:01:50,440 Speaker 2: are in two minds and that's where the internal debate 37 00:01:51,280 --> 00:01:53,200 Speaker 2: seem to have been for this meeting. 38 00:01:53,400 --> 00:01:56,080 Speaker 1: And then you look at consumer confidence bouncing back in 39 00:01:56,280 --> 00:01:59,080 Speaker 1: the US, you look at some of that Chinese industrial 40 00:01:59,240 --> 00:02:01,680 Speaker 1: profit number, you look at a whole bunch of stuff. 41 00:02:01,680 --> 00:02:04,800 Speaker 1: I mean, it's not it's not actually doom and gloom, 42 00:02:04,880 --> 00:02:05,120 Speaker 1: is it. 43 00:02:06,280 --> 00:02:11,280 Speaker 2: Look it's not overall? I think with the brink being 44 00:02:11,360 --> 00:02:14,240 Speaker 2: sort of pulled back from particularly around China and the US. 45 00:02:14,360 --> 00:02:17,040 Speaker 2: You are getting some of the lurching from a sort 46 00:02:17,080 --> 00:02:20,760 Speaker 2: of almost a freeze on some trade and manufacturing to 47 00:02:20,800 --> 00:02:23,360 Speaker 2: its starting to turn around. But look, even that is 48 00:02:23,400 --> 00:02:26,639 Speaker 2: doing some damage in the short term. And the reality 49 00:02:26,720 --> 00:02:29,760 Speaker 2: is is that when you look at the US consumers, 50 00:02:29,800 --> 00:02:32,799 Speaker 2: there will have slightly less money to go around. In China, 51 00:02:32,880 --> 00:02:35,240 Speaker 2: there's going to be slightly less manufacturing activity. There will 52 00:02:35,240 --> 00:02:38,079 Speaker 2: be ripple effects coming through. But no, not the end 53 00:02:38,080 --> 00:02:40,720 Speaker 2: of the world, but it is in our view, likely 54 00:02:40,760 --> 00:02:43,000 Speaker 2: to dampen inflation when you're looking a year or two out. 55 00:02:43,240 --> 00:02:46,640 Speaker 1: They spoke about, you know, the three percent neutral rate, 56 00:02:46,880 --> 00:02:49,360 Speaker 1: and there was people asking at the press conference, you know, 57 00:02:49,560 --> 00:02:52,560 Speaker 1: do you go lower so that you start revving things up, 58 00:02:53,000 --> 00:02:55,360 Speaker 1: and they said, basically, we don't like that word anymore. 59 00:02:55,360 --> 00:02:57,880 Speaker 1: It's a little bit obsolete because we're so close to neutral. 60 00:02:57,919 --> 00:03:00,560 Speaker 1: We're going to start using this quote feel our way. 61 00:03:00,800 --> 00:03:01,600 Speaker 1: What's that about? 62 00:03:02,680 --> 00:03:05,520 Speaker 2: Well, I think that's reality is like neutral some concept 63 00:03:05,560 --> 00:03:07,560 Speaker 2: where you can never really see it, and they see 64 00:03:07,600 --> 00:03:09,280 Speaker 2: it somewhere between two and a half and three and 65 00:03:09,320 --> 00:03:11,040 Speaker 2: a half. So they're kind of in that territory at 66 00:03:11,040 --> 00:03:13,560 Speaker 2: the moment. It's kind of like trying to engineer a 67 00:03:13,680 --> 00:03:15,880 Speaker 2: landing in the fog. You kind of have to sort 68 00:03:15,919 --> 00:03:17,880 Speaker 2: of almost sort of wait until you feel a bit 69 00:03:17,919 --> 00:03:21,200 Speaker 2: of rumbling from the ground coming through. Where we are 70 00:03:21,280 --> 00:03:23,320 Speaker 2: at the moment, you can see there's a bit of 71 00:03:23,360 --> 00:03:26,120 Speaker 2: a lag in the impact of interest rates coming through. 72 00:03:26,160 --> 00:03:29,880 Speaker 2: That's that's pretty clear, and that's always there. But it 73 00:03:29,919 --> 00:03:32,960 Speaker 2: does look like with the economy just taking a little 74 00:03:32,960 --> 00:03:34,960 Speaker 2: bit of time, but that's a domestic spending to get 75 00:03:34,960 --> 00:03:37,280 Speaker 2: going that we still need interest rates to go with. 76 00:03:37,240 --> 00:03:40,520 Speaker 1: Them go yet, yeah, but not too low because they 77 00:03:40,520 --> 00:03:42,480 Speaker 1: don't want to overcook things the other way, right, And 78 00:03:42,560 --> 00:03:44,040 Speaker 1: there's a time leg as you say. 79 00:03:44,880 --> 00:03:48,080 Speaker 2: Yep, there's always the art and you're doing it where 80 00:03:48,120 --> 00:03:50,000 Speaker 2: it takes two years for what you do to have 81 00:03:50,080 --> 00:03:51,880 Speaker 2: its full effect as well, so it's not easy. 82 00:03:52,200 --> 00:03:56,080 Speaker 1: Appreciate your time, Nick Nick Tuughly asp Chief Economists. For 83 00:03:56,200 --> 00:03:59,160 Speaker 1: more from earlier edition with Ryan Bridge, listen live to 84 00:03:59,280 --> 00:04:02,440 Speaker 1: News Talk said Be from five am weekdays, or follow 85 00:04:02,520 --> 00:04:04,040 Speaker 1: the podcast on iHeartRadio.