1 00:00:00,160 --> 00:00:03,000 Speaker 1: Six fourteen news talks. There'd be Adrian and All's first 2 00:00:03,040 --> 00:00:06,120 Speaker 1: outing for the year tomorrow, just one more sleep until 3 00:00:06,160 --> 00:00:08,720 Speaker 1: where it's pretty much expected to get a fifty basis 4 00:00:08,760 --> 00:00:12,399 Speaker 1: point cut. So the Reserve Bank the decision tomorrow. Brad 5 00:00:12,400 --> 00:00:15,160 Speaker 1: Olson is the Informetric's principal economist, Brad Good Evening. 6 00:00:15,440 --> 00:00:16,000 Speaker 2: Good Evening. 7 00:00:16,239 --> 00:00:19,000 Speaker 1: So the fifty basis point camp is growing by the 8 00:00:19,040 --> 00:00:21,959 Speaker 1: second ahead of the big day tomorrow. Are you in 9 00:00:22,079 --> 00:00:22,560 Speaker 1: that camp? 10 00:00:23,560 --> 00:00:25,600 Speaker 2: Yes, very much so. I mean, the Reserve Bank made 11 00:00:25,600 --> 00:00:27,400 Speaker 2: a bit of a pretty strong rod for their own 12 00:00:27,440 --> 00:00:30,720 Speaker 2: back back in November and said, look, it would be 13 00:00:30,760 --> 00:00:33,279 Speaker 2: a pretty difficult move for them to not move by 14 00:00:33,400 --> 00:00:37,479 Speaker 2: fifty when they look at the monetary policy settings. And 15 00:00:37,520 --> 00:00:39,040 Speaker 2: I think part of that was because they had a 16 00:00:39,040 --> 00:00:43,080 Speaker 2: big three month break before between November and this review 17 00:00:43,200 --> 00:00:45,520 Speaker 2: in February. They wanted to give a pretty strong level 18 00:00:45,560 --> 00:00:47,760 Speaker 2: of guidance to the market over where they're thinking was 19 00:00:47,800 --> 00:00:50,760 Speaker 2: where they thought the direction of travel has gone. All 20 00:00:50,800 --> 00:00:53,040 Speaker 2: of the data that we've had since then has broadly 21 00:00:53,120 --> 00:00:55,400 Speaker 2: been in the same sort of area. You know, you've 22 00:00:55,400 --> 00:00:59,800 Speaker 2: seen economic activity that declined, some big revisions in those numbers, 23 00:00:59,800 --> 00:01:02,360 Speaker 2: but the likes of the unemployment rate, the likes of 24 00:01:02,400 --> 00:01:04,800 Speaker 2: inflation all broadly coming in at the right level, So 25 00:01:04,880 --> 00:01:08,679 Speaker 2: not enough of a shift from expectations for the Reserve 26 00:01:08,720 --> 00:01:11,399 Speaker 2: Bank to shift from their pretty strong guidance. They don't 27 00:01:11,400 --> 00:01:13,640 Speaker 2: normally give it quite so strong, and so I think 28 00:01:13,640 --> 00:01:16,160 Speaker 2: they'll stick to their word at this point. 29 00:01:16,240 --> 00:01:18,080 Speaker 1: And then the interesting part, of course, will be what 30 00:01:18,200 --> 00:01:21,280 Speaker 1: happens after that three and a half percent was where 31 00:01:21,319 --> 00:01:24,640 Speaker 1: they predicted they might get to by year's end, around 32 00:01:24,680 --> 00:01:27,160 Speaker 1: three percent is neutral. Do you think that that track 33 00:01:27,200 --> 00:01:28,000 Speaker 1: will change? 34 00:01:28,920 --> 00:01:30,720 Speaker 2: Well, I think that's the thing that we're sort of 35 00:01:30,800 --> 00:01:34,200 Speaker 2: a bit unsure about at the moment. Even financial markets 36 00:01:34,200 --> 00:01:36,200 Speaker 2: have started to show a bit of a shift so 37 00:01:36,280 --> 00:01:39,280 Speaker 2: far in twenty twenty five. You know, still pricing in 38 00:01:39,319 --> 00:01:42,080 Speaker 2: an expectation that the sort of bottom would be around 39 00:01:42,080 --> 00:01:45,880 Speaker 2: that three percent mark. But interestingly there's a bit more 40 00:01:45,920 --> 00:01:49,560 Speaker 2: market pricing now picking a slight increase in the official 41 00:01:49,560 --> 00:01:52,240 Speaker 2: cash rate come early twenty twenty six, and that does 42 00:01:52,280 --> 00:01:54,800 Speaker 2: make us wonder, if you know, some of those worries 43 00:01:54,880 --> 00:01:59,040 Speaker 2: about the likes of global inflationary pressures the lower exchange 44 00:01:59,080 --> 00:02:01,840 Speaker 2: rate is a risk. I think if the Reserve Bank 45 00:02:01,880 --> 00:02:05,400 Speaker 2: continues with this expectation of more and more cuts that 46 00:02:05,440 --> 00:02:07,960 Speaker 2: they might well overdo it again, They might cut too 47 00:02:08,000 --> 00:02:10,000 Speaker 2: much and then have to raise things up in twenty 48 00:02:10,000 --> 00:02:12,760 Speaker 2: twenty six. So I think that a smarter move would 49 00:02:12,760 --> 00:02:14,919 Speaker 2: be for the Reserve Bank to go back to their 50 00:02:14,960 --> 00:02:17,720 Speaker 2: sort of watch and worry and wait settings where they 51 00:02:17,800 --> 00:02:20,960 Speaker 2: say that sort of course of least regrets from here 52 00:02:21,200 --> 00:02:23,480 Speaker 2: is being a bit more data dependent and saying, look, 53 00:02:23,520 --> 00:02:26,840 Speaker 2: we might well move a bit slower than we said before. 54 00:02:26,840 --> 00:02:29,480 Speaker 2: We might not cut as much. And I think that overall, 55 00:02:29,600 --> 00:02:32,400 Speaker 2: the tone I think as most appropriate as saying that 56 00:02:32,400 --> 00:02:35,240 Speaker 2: there might not be as many further cuts on the table. 57 00:02:35,280 --> 00:02:37,960 Speaker 1: Which means we got really hurt when they went too 58 00:02:38,000 --> 00:02:40,120 Speaker 1: far one way, and we won't get we won't get 59 00:02:40,160 --> 00:02:41,880 Speaker 1: the benefit of them going too far the other way. 60 00:02:42,720 --> 00:02:45,519 Speaker 2: Well, the question here really is we do interest rates 61 00:02:45,560 --> 00:02:48,120 Speaker 2: sort of settle now what is normal? Because I think 62 00:02:48,120 --> 00:02:50,360 Speaker 2: anyone thinking that interest rates are you know, getting a 63 00:02:50,360 --> 00:02:53,000 Speaker 2: mortgage of two percenters is sort of you know, lost 64 00:02:53,080 --> 00:02:55,240 Speaker 2: their vision a little bit here. I mean that was 65 00:02:55,360 --> 00:02:58,680 Speaker 2: abnormal interest rates for abnormal times. You know, if you 66 00:02:58,720 --> 00:03:00,840 Speaker 2: saw interest rates sort of a round that sort of 67 00:03:01,280 --> 00:03:04,760 Speaker 2: low five high four percent mark, that's probably where I 68 00:03:04,800 --> 00:03:06,400 Speaker 2: think a lot of people. If you look back over 69 00:03:06,480 --> 00:03:09,240 Speaker 2: interest rates over time, that'd be pretty happy with those 70 00:03:09,240 --> 00:03:11,400 Speaker 2: sort of numbers. But of course we've got much high 71 00:03:11,480 --> 00:03:14,160 Speaker 2: house prices than before and similar so I do think 72 00:03:14,200 --> 00:03:16,760 Speaker 2: we're trying to figure out where the new goldilock zone is. 73 00:03:17,000 --> 00:03:19,040 Speaker 2: But I think as well for the Reserve Bank, I 74 00:03:19,080 --> 00:03:21,320 Speaker 2: think surely it would be a bit more appropriate now 75 00:03:21,360 --> 00:03:23,239 Speaker 2: to go. Look, we've done a lot of the heavy 76 00:03:23,360 --> 00:03:26,120 Speaker 2: cutting that they needed to. Now it's about fine chuning 77 00:03:26,120 --> 00:03:28,000 Speaker 2: the process a bit. So let's not be hasty and 78 00:03:28,040 --> 00:03:30,160 Speaker 2: going cap cap cut. Let's have a little bit more 79 00:03:30,160 --> 00:03:32,600 Speaker 2: of a nuanced approach sort of vectoring and all the 80 00:03:32,720 --> 00:03:34,720 Speaker 2: data that's coming through, because there's still a lot of 81 00:03:34,760 --> 00:03:38,480 Speaker 2: moving parts. There's tariff says, exchange rates, their growth around 82 00:03:38,480 --> 00:03:40,480 Speaker 2: the world, all of that will make a difference. 83 00:03:40,840 --> 00:03:42,480 Speaker 1: All right, Brad, thank you very much for that. That's 84 00:03:42,520 --> 00:03:47,280 Speaker 1: Brad Olsen, Informetric's principal economist. For more from Heather Duplessy 85 00:03:47,280 --> 00:03:50,119 Speaker 1: Allen Drive, listen live to news Talks. It'd be from 86 00:03:50,200 --> 00:03:53,800 Speaker 1: four pm weekdays, or follow the podcast on iHeartRadio.