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Speaker 1: Ever duple cels ten past six Now several New Zealand

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Speaker 1: banks have been dropping interest rates again today, mainly the

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Speaker 1: eighteen month and the two year rates, though ki We

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Speaker 1: Bank and be in z also are now both calling

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Speaker 1: for a cut to the OCR next week. Brad olsenism

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Speaker 1: Fortrick's principal economists and with us now Brad.

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Speaker 2: Good evening, are they dreaming? Oh?

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Speaker 3: I think they have a pretty convincing argument for why

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Speaker 3: it should happen. The question now was what was the

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Speaker 3: Reserve bank in May or July and how do they take.

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Speaker 2: All of it? So, I mean, the economic numbers haven't

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Speaker 2: changed as markedly as I think.

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Speaker 3: You know, this big shift would be because it would

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Speaker 3: be effectively the Reserve Bank moving forward their expectations and

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Speaker 3: moving on the official cash rate a year earlier than

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Speaker 3: they were originally thinking.

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Speaker 2: So there will be a pretty heroic shift.

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Speaker 3: But maybe it could happen because we know the economy

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Speaker 3: is going through a lot of ups and downs at

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Speaker 3: the moment.

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Speaker 2: You can see that with the stock markets.

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Speaker 3: We're expecting unemployment rate data out tomorrow to show some

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Speaker 3: darker things as well.

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Speaker 2: So all of that together you.

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Speaker 3: Can start to build an argument for the Reserve Bank

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Speaker 3: moving maybe sooner other major I still feel like it's

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Speaker 3: probably more in that November sort of area where the

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Speaker 3: Reserve Bank might land. But I think there is an

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Speaker 3: increasing argument for why it might be time to move.

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Speaker 3: To be fair here, that that argument's probably been growing

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Speaker 3: for a while, but we're still not sure where the

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Speaker 3: Reserve Bank will actually land on any of this.

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Speaker 1: Yeah, I mean the argument that Kei we Bank make

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Speaker 1: is that interest rates take about eighteen months to filter

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Speaker 1: through anyway, So even if they start cutting now, we're

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Speaker 1: really eighteen months away from feeling the relief fully. So

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Speaker 1: isn't that a fair argument?

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Speaker 2: It is a fair argument. But the Reserve Bank also

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Speaker 2: knows that like that won't be news to them.

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Speaker 3: So again, if they were thinking it was, you know,

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Speaker 3: towards the second half of next year on their official forecast,

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Speaker 3: that they were going to move back when they last

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Speaker 3: put out those forecasts, and they knew at that point

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Speaker 3: that it was still going to take eighteen months, and

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Speaker 3: they still thought that was the right move. So, like

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Speaker 3: I said, what has changed markedly since then? I look

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Speaker 3: at the numbers, and yet they've gotten sort of better

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Speaker 3: on inflation, worse on other parts of the economy, but.

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Speaker 2: Broadly in line what the bank was thinking away.

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Speaker 3: So that's what I'm trying to figure out, is if

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Speaker 3: the bank still thought that back in May, how.

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Speaker 2: Has their shifting, How has their view shifted that much?

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Speaker 3: Again, though, I think we'd actually probably see a slightly

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Speaker 3: sharper amount of that monetary policy change pass through quicker.

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Speaker 2: We know, for example, that about twenty percent.

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Speaker 3: Of new loans over the last couple of months have

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Speaker 3: been people fixing for only six month periods, sort of

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Speaker 3: betting on a cut.

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Speaker 2: Sooner other than later.

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Speaker 3: So you might see a slightly quicker pass through the normal,

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Speaker 3: but look, it will take a while to come through.

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Speaker 2: The economy is obviously in a difficult place.

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Speaker 3: But I think there is a real question amongst economists

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Speaker 3: at the moment over how quickly the Reserve Bank does it,

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Speaker 3: and probably more importantly, how quickly the Reserve Bank should.

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Speaker 2: Do it, And they are still quite a way apart

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Speaker 2: at the moment.

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Speaker 1: What do you make of the market turmoil in the

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Speaker 1: last few days around the world.

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Speaker 3: Well, I think, to be honest, probably a lot of

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Speaker 3: sort of overreaction, everyone losing their minds in the markets,

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Speaker 3: and then maybe coming back a bit to their senses.

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Speaker 2: I mean, you look at the likes of the Japanese market.

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Speaker 3: Yesterday dropped the largest it's ever dropped, worse than the

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Speaker 3: eighty seven crash. Yet today it's up another sort of

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Speaker 3: ten percent, you know, so it's pulled back a lot

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Speaker 3: of those losses. So I think probably what's happened. You've

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Speaker 3: got three broad threat things. The Japanese have raised interest rates,

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Speaker 3: that's pretty unusual. The US economy is looking a little

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Speaker 3: bit worse for wear, and that sort of ringing those

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Speaker 3: recession alarm bells. But I think there's also a part

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Speaker 3: where the market's the last couple of months, particular on tech.

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Speaker 2: Particular on AI, got way over zealous.

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Speaker 3: You know, everyone was thinking that these things were just

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Speaker 3: going to make them, you know, quadtrillions more than they

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Speaker 3: could ever imagine. Now I think we've come crashing back

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Speaker 3: to earth. We're probably a bit more realistic about things,

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Speaker 3: and the outlook just in the general economy and in

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Speaker 3: tech is not as upbeat, So a bit more realism.

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Speaker 3: It's going to sort of be a bit ugly. There's

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Speaker 3: a lot of red.

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Speaker 2: Ink and I think, you know, people probably don't want

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Speaker 2: to check their key. We save as tonight for the

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Speaker 2: next couple of days.

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Speaker 3: But actually I think sort of keep calm and carry

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Speaker 3: on is maybe not the worst idea in the world

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Speaker 3: at the moment.

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Speaker 2: I'm very good advice.

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Speaker 1: Hey, Brad, thank you as always appreciated.

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Speaker 2: Brad.

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Speaker 1: Also informetrics principle economists, Brad is the expert and I'm not.

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Speaker 1: But I'm going to say October and he says November

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Speaker 1: for the first cut. So we'll just put that out

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Speaker 1: there because if I beat Brad on this, it's going

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Speaker 1: to be bragging right for the rest of my life.

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Speaker 1: Let's be honest.

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