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Speaker 1: Some interest rate relief for Ossie's. Finally, the RBA today

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Speaker 1: cutting the official cash rate for the first time since

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Speaker 1: twenty twenty. Governor Michelle Bullock, explaining the quarter percent cut

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Speaker 1: to four point one percent.

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Speaker 2: It's clear that higher interest rates have been working as anticipated,

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Speaker 2: restricting economic activity and putting downward pressure on inflation. The

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Speaker 2: Board judges it's time to reduce a little bit of

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Speaker 2: that restrictiveness. But we cannot declare victory on inflation just yet.

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Speaker 2: It is not good enough for inflation to be back

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Speaker 2: in the target range temporarily. The Board needs to be

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Speaker 2: confident that is returning to the target range sustainably.

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Speaker 1: Paul Blocks from HSBC good evening, Hey, good to have

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Speaker 1: you back. Congratulations you picked that.

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Speaker 3: Right, we did, We got that one right, So I'm

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Speaker 3: definitely happy about that. You know, the cut was part

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Speaker 3: of it, but the real interesting part was just how

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Speaker 3: cautious they were, how much they're really giving guidance that

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Speaker 3: this is one move. But actually they're going to need

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Speaker 3: more evidence of inflation continuing to fall before they we'd

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Speaker 3: consider cutting again. So we don't think that we're thinking

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Speaker 3: that they're going to cut anytime soon again, that it's

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Speaker 3: going to be quite a few months before we get

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Speaker 3: another cut from the.

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Speaker 1: RBA too, really to celebrate. I mean, if you look

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Speaker 1: at we were speaking to Mariol's there Ossie correspondent earlier.

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Speaker 1: He said, it's about one hundred dollars is it? One

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Speaker 1: hundred dollars a fortnight, if you know, on your average mortgage.

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Speaker 1: And when the rates went up it was, you know,

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Speaker 1: fifteen hundred dollars whak to your wallet. So it's come

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Speaker 1: back a little bit, but it's not you know, it's

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Speaker 1: not game changing.

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Speaker 3: Well that's right. So the RBA lifted its cash right

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Speaker 3: by four hundred and twenty five basis points. They stopped

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Speaker 3: doing that in November of twenty twenty three. That was

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Speaker 3: the last hike that was that arrived, and today they

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Speaker 3: took back twenty five basis points at that four hundred

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Speaker 3: and twenty five. So, you know, it's as the governor

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Speaker 3: said in the recording you just played, you know, monetary

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Speaker 3: policy is still restrictive. It's just a little bit less restrictive.

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Speaker 3: And they feel they can make this move because inflation

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Speaker 3: is coming down. But then it's still not back where

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Speaker 3: they need to be in terms of inflation. It's still

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Speaker 3: not quite at the target. And the other thing, of

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Speaker 3: course for Australia is not only is the you know,

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Speaker 3: the inflation coming down, but we're doing this within a

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Speaker 3: labor market that's still very strong. The unemployment rate is

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Speaker 3: still very low. It's coming down a little bit in

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Speaker 3: the last couple of months and the last few months

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Speaker 3: as well, and so we're sort of close to full employment.

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Speaker 3: If you've got a fully employed economy and inflation's coming

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Speaker 3: down gradually, the RBA hasn't got a lot of scope

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Speaker 3: to be able to lower interest rates quickly. Of course,

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Speaker 3: that's in a very big contrast to what's going on

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Speaker 3: in New Zealand, where the unemployment rates risen quite a lot,

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Speaker 3: inflation's come right back to target, and the RB and

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Speaker 3: Z has already delivered a lot of easing and we

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Speaker 3: think tomorrow they'll probably deliver another fifty basis points cut

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Speaker 3: as well.

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Speaker 1: Yeah, and the question is what do they do after that.

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Speaker 1: So just coming back to the Governor Michelle Bollock for

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Speaker 1: a seconds, she made a new comment on the market

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Speaker 1: pricing in future rate cuts.

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Speaker 3: Well absolutely actually today it was very explicit. Not only

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Speaker 3: did she say it, but if you look at the

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Speaker 3: RBA's own forecasts, they are only forecasting that their main

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Speaker 3: the one they focus on, it gets back to two

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Speaker 3: point seven percent and then track cybway, so it doesn't

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Speaker 3: actually get to two and a half percent in their

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Speaker 3: own footcasts. And the reason why it doesn't get all

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Speaker 3: the way back down is because they're working assumption is

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Speaker 3: market pricing, and so market pricing is assuming another eighty

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Speaker 3: four or assuming eighty five basis points worth of cuts altogether.

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Speaker 3: And the governor explicitly said, we think at this point

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Speaker 3: in time that if we were to deliver that many cuts,

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Speaker 3: inflation won't actually get back to two and a half.

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Speaker 3: So they were very explicit about saying the market is

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Speaker 3: pricing in too much easing at the moment.

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Speaker 1: Interesting, what do you reckon about where we end up

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Speaker 1: by years in here in New Zealand pool Because initially

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Speaker 1: the Reserve Bank here was talking about, you know, three

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Speaker 1: and a half odd percent, but we know that neutral

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Speaker 1: is closer to three percent, and they were talking about

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Speaker 1: three and a half by the end of the year.

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Speaker 1: Do you think they're going to have to revise that?

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Speaker 3: So we think you're going to get a fifty basis

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Speaker 3: point cuts tomorrow from the rbn Z, and then we

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Speaker 3: think that we're going to get three more RBNZ basis

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Speaker 3: point moves over the subsequent meetings, and that would get

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Speaker 3: you down to three percent on the cash rate. That's

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Speaker 3: our central case, our working assumption for what is going

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Speaker 3: to be delivered in New Zealand. So this is the

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Speaker 3: last big cut and then the ones that follow will

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Speaker 3: be smaller. And of course the question is going to

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Speaker 3: be do they actually get to deliver all of those cuts?

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Speaker 3: Because the other thing is, although New Zealand has had

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Speaker 3: a big downturn last year, starting to these signs that

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Speaker 3: things are picking up. The PMI is improving, dairy prices

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Speaker 3: are high, there's been a turnaround in some of the

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Speaker 3: sentiment indicators as well, and so you know, how much

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Speaker 3: more does the RBNZ need to deliver. Well, we think

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Speaker 3: fifty tomorrow and then three more twenty fives. But the

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Speaker 3: question is going to be do they need to deliver

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Speaker 3: all of that to get the economy to turn around,

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Speaker 3: given it's already starting to turn around.

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