1 00:00:00,240 --> 00:00:02,600 Speaker 1: Jack Team and A and Z is forecasting a twenty 2 00:00:02,640 --> 00:00:06,200 Speaker 1: five basis point rate cut from the Reserve Bank in 3 00:00:06,480 --> 00:00:09,800 Speaker 1: November of this year, so they've brought for their previously 4 00:00:09,880 --> 00:00:12,240 Speaker 1: forecasted cut. They thought the first cut was going to 5 00:00:12,240 --> 00:00:14,520 Speaker 1: be coming from the RB and Z to the OCR 6 00:00:14,640 --> 00:00:17,079 Speaker 1: in February of twenty twenty five. It comes off the 7 00:00:17,079 --> 00:00:20,520 Speaker 1: back of today's inflation data, the CPI dipping to a 8 00:00:20,600 --> 00:00:23,960 Speaker 1: three year low three point three percent for the June quarter. 9 00:00:24,239 --> 00:00:28,200 Speaker 1: It still remains outside of the reserves Reserve Banks target band, 10 00:00:28,200 --> 00:00:30,040 Speaker 1: of course one to three percent, but you would have 11 00:00:30,040 --> 00:00:31,760 Speaker 1: to say it's getting very close. Indeed, A and Z 12 00:00:31,920 --> 00:00:35,920 Speaker 1: chief economist sharon's Olner is with us skald A. Good evening. 13 00:00:36,080 --> 00:00:38,160 Speaker 1: Oh you're going to sleep easy tonight. Good news. 14 00:00:38,159 --> 00:00:42,360 Speaker 2: Eh, yeah, everyone was good news. I mean, while it's 15 00:00:42,400 --> 00:00:44,760 Speaker 2: true that domestic inflation was a midch high and the 16 00:00:44,760 --> 00:00:46,920 Speaker 2: Reserve Bank expect that, it looked like it was actually 17 00:00:47,000 --> 00:00:49,680 Speaker 2: just technical factors and the other part of inflation, the 18 00:00:49,720 --> 00:00:52,839 Speaker 2: important bit was lower. So yeah, overall, I think it's 19 00:00:52,880 --> 00:00:56,280 Speaker 2: confirmed the vibes that things are more under control than 20 00:00:56,320 --> 00:00:58,200 Speaker 2: the Reserve Bank feared back in May. 21 00:00:58,200 --> 00:01:01,040 Speaker 1: And it was low enough for you to upgrade your. 22 00:01:00,960 --> 00:01:05,720 Speaker 2: Forecast, Well, yeah, it would roll forward our forecast for 23 00:01:05,760 --> 00:01:06,679 Speaker 2: when the Reserve bankill cut. 24 00:01:06,880 --> 00:01:08,600 Speaker 1: Up grade from our perspective shower. 25 00:01:09,640 --> 00:01:12,240 Speaker 2: Yes, certainly. I think businesses are looking for some light 26 00:01:12,280 --> 00:01:13,720 Speaker 2: at the end of the tunnel, and if that could 27 00:01:13,720 --> 00:01:16,040 Speaker 2: be this year, then I think that would be good. 28 00:01:16,520 --> 00:01:19,240 Speaker 2: The market is convinced that they'll be coming earlier in 29 00:01:19,280 --> 00:01:21,600 Speaker 2: that they're putting fifty odds on a cut as soon 30 00:01:21,640 --> 00:01:25,720 Speaker 2: as next month, maybe getting ahead of themselves there. But 31 00:01:25,760 --> 00:01:28,000 Speaker 2: we'll see what the unemployment rate does in the data 32 00:01:28,080 --> 00:01:29,440 Speaker 2: that's out a week before that. 33 00:01:29,840 --> 00:01:32,160 Speaker 1: So what do you think we would need to see 34 00:01:32,520 --> 00:01:36,240 Speaker 1: to see either a twenty five basis point cut next 35 00:01:36,280 --> 00:01:39,479 Speaker 1: month or fifty basis points across this year. 36 00:01:41,080 --> 00:01:43,280 Speaker 2: So the Reserve Bank will cut when they're convinced that 37 00:01:43,400 --> 00:01:46,240 Speaker 2: information is going to return to two percent and then 38 00:01:46,360 --> 00:01:47,840 Speaker 2: stay with them the band, so they've got a bit 39 00:01:47,880 --> 00:01:51,040 Speaker 2: of a buffer to absorb the inevitable surprises that will 40 00:01:51,080 --> 00:01:54,560 Speaker 2: come along. So for them to cut sooner than November, 41 00:01:54,640 --> 00:01:58,240 Speaker 2: I think we would need them to basically acknowledge a 42 00:01:58,360 --> 00:02:02,560 Speaker 2: mistake that they already should have been cutting by now. 43 00:02:02,680 --> 00:02:06,000 Speaker 2: Possibly they could always cut fifty points later, but if 44 00:02:06,080 --> 00:02:09,760 Speaker 2: say the unemployment rates shot much higher than expectations that 45 00:02:10,200 --> 00:02:12,120 Speaker 2: could do it. That's the only data they'll have really 46 00:02:12,120 --> 00:02:15,320 Speaker 2: before August, apart from the usual monthly reads like the 47 00:02:15,360 --> 00:02:20,720 Speaker 2: business surveys and the like. But before October there'll be 48 00:02:20,760 --> 00:02:22,639 Speaker 2: a bit more data in the bag. Before November, they'll 49 00:02:22,639 --> 00:02:24,520 Speaker 2: have the whole suite of everything. So it's just how 50 00:02:24,560 --> 00:02:27,720 Speaker 2: they weigh up that desire for certainty with the risk 51 00:02:27,880 --> 00:02:30,280 Speaker 2: of holding rates too high for too long and causing 52 00:02:30,360 --> 00:02:31,320 Speaker 2: unnecessary pain. 53 00:02:31,600 --> 00:02:34,400 Speaker 1: You mentioned the non tradeable still at five point four 54 00:02:34,440 --> 00:02:37,119 Speaker 1: percent for you know what we often deem as being 55 00:02:37,160 --> 00:02:40,560 Speaker 1: domestic inflation. Why is that still so high. 56 00:02:40,680 --> 00:02:42,360 Speaker 2: Yeah, the reserve banks thought it would be four point 57 00:02:42,360 --> 00:02:44,680 Speaker 2: one percent by now when they stopped hiking, so that's 58 00:02:44,720 --> 00:02:48,080 Speaker 2: still a big gap. But yeah, there's some key things 59 00:02:48,160 --> 00:02:52,160 Speaker 2: like rents, rates and insurances, for example. But as the 60 00:02:52,280 --> 00:02:55,760 Speaker 2: general price increase across the economy falls and those things 61 00:02:55,840 --> 00:02:58,080 Speaker 2: will to get stranded on the on the top side, 62 00:02:58,120 --> 00:03:00,600 Speaker 2: and if their outliers and there, reserve will be able 63 00:03:00,600 --> 00:03:02,919 Speaker 2: to look through them. So essentially we expect the Reserve 64 00:03:02,960 --> 00:03:06,560 Speaker 2: Bank to stop talking more about the headline level of 65 00:03:06,560 --> 00:03:09,680 Speaker 2: inflation and start to talk more about the core inflation 66 00:03:10,000 --> 00:03:13,360 Speaker 2: measures because they should have a bit more space to 67 00:03:13,400 --> 00:03:15,480 Speaker 2: look through stuff now that it looks like they're winning 68 00:03:15,480 --> 00:03:15,760 Speaker 2: the war. 69 00:03:16,040 --> 00:03:19,960 Speaker 1: Yeah, does anything in today's numbers give you cause for anxiety? 70 00:03:22,160 --> 00:03:26,399 Speaker 2: No, not really. I mean there was some solid progress, 71 00:03:26,440 --> 00:03:28,600 Speaker 2: I would say. I mean, yes, it is disappointing that 72 00:03:28,639 --> 00:03:32,000 Speaker 2: non tradable inflation hasn't fallen more over the last year, 73 00:03:32,040 --> 00:03:34,480 Speaker 2: but there's good science going forward if you look at 74 00:03:34,480 --> 00:03:37,280 Speaker 2: what firms are saying about their costs and their prices, 75 00:03:37,920 --> 00:03:41,320 Speaker 2: that sort of thing. It's still taking a while, but 76 00:03:41,360 --> 00:03:43,480 Speaker 2: there was nothing in today's data that suggested that the 77 00:03:43,520 --> 00:03:46,360 Speaker 2: economy needs to go through more pain than we thought 78 00:03:46,760 --> 00:03:49,120 Speaker 2: to beat inflation, which was definitely the tone of the 79 00:03:49,120 --> 00:03:51,280 Speaker 2: Reserve Bank's Mantras policy statement in May. 80 00:03:51,440 --> 00:03:53,680 Speaker 1: And do you feel confident that in three months time, 81 00:03:53,720 --> 00:03:56,600 Speaker 1: when we're looking back at the September quarterly data, we 82 00:03:56,680 --> 00:03:59,320 Speaker 1: will be comfortably within the Reserve Bank's target band. 83 00:04:00,480 --> 00:04:02,480 Speaker 2: It's looking like it at the moment, But of course 84 00:04:02,760 --> 00:04:05,200 Speaker 2: you never say that with one hundred certainty, because if 85 00:04:05,200 --> 00:04:08,120 Speaker 2: there was a sudden million oil shocks, for example, that 86 00:04:08,680 --> 00:04:11,680 Speaker 2: the headline numbers could move around quite quickly. 87 00:04:12,320 --> 00:04:15,920 Speaker 1: Damn it, Sharon, I shouldn't have put that as my 88 00:04:16,000 --> 00:04:17,960 Speaker 1: last question this eving, But thank you very much for 89 00:04:18,000 --> 00:04:20,320 Speaker 1: your time. We appreciate it. Sharon Zolder, who is of 90 00:04:20,400 --> 00:04:22,520 Speaker 1: course ain Z's chief economists, and she had a nice 91 00:04:22,520 --> 00:04:25,640 Speaker 1: Sharon about this. But ain Z has dropped some of 92 00:04:25,680 --> 00:04:28,640 Speaker 1: its home loan and term deposit rates, and this comes 93 00:04:28,680 --> 00:04:31,599 Speaker 1: after Westpac I think, lowered some of their rates last week. 94 00:04:31,920 --> 00:04:35,880 Speaker 1: So ain Z's decreased its home loans with a thirty 95 00:04:35,920 --> 00:04:38,480 Speaker 1: basis point drop on their two year special rate. That's 96 00:04:38,480 --> 00:04:41,119 Speaker 1: down to six point four to nine perandom of twenty 97 00:04:41,200 --> 00:04:44,320 Speaker 1: nine point basis drop on the one year special rate 98 00:04:44,360 --> 00:04:48,520 Speaker 1: to six point eight five. I've got to reset in October. 99 00:04:48,600 --> 00:04:51,400 Speaker 1: So what do we think end of October? Throw this 100 00:04:51,480 --> 00:04:53,640 Speaker 1: open to the wisdom of the crowds. The thing is 101 00:04:53,680 --> 00:04:55,760 Speaker 1: that once they start cutting, the real question is how 102 00:04:55,839 --> 00:04:57,680 Speaker 1: quickly are they going to cut and how far are 103 00:04:57,720 --> 00:04:59,479 Speaker 1: they going to go? Right, Because even if the Reserve 104 00:04:59,520 --> 00:05:03,560 Speaker 1: Bank does cutting in November of this year, if it's 105 00:05:03,600 --> 00:05:06,360 Speaker 1: only twenty five basis points, and we've got to wait, 106 00:05:07,000 --> 00:05:09,839 Speaker 1: you know, a full year until we see or maybe 107 00:05:09,880 --> 00:05:13,039 Speaker 1: longer until we see one hundred basis points off that 108 00:05:13,240 --> 00:05:15,880 Speaker 1: OCRs that stands right now, then that's still a lot 109 00:05:15,920 --> 00:05:18,120 Speaker 1: more pain in the economy. It's a delicate balance for 110 00:05:18,160 --> 00:05:20,880 Speaker 1: the Reserve Bank as they try and make sure they 111 00:05:20,920 --> 00:05:25,840 Speaker 1: don't breathe too much life back into economic activity. For 112 00:05:25,920 --> 00:05:29,200 Speaker 1: more from Heather Duplicy Alan Drive, listen live to news 113 00:05:29,279 --> 00:05:32,159 Speaker 1: Talks it'd be from four pm weekdays, or follow the 114 00:05:32,200 --> 00:05:33,800 Speaker 1: podcast on iHeartRadio.