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Speaker 1: Now it's our day today. That's why I'm all excited

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Speaker 1: and all over the place. Where are those numbers going

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Speaker 1: to go? Twenty five basis point cut is on the cards.

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Speaker 1: That would take us to three point twenty five percent?

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Speaker 1: Westpac chef economist, Kelly, you're cold with me, Kelly?

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Speaker 2: Good morning, Good morning.

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Speaker 1: Hey. They're going to go down, aren't they? How low

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Speaker 1: will they go?

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Speaker 2: Though?

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Speaker 1: That's the question, isn't it?

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Speaker 2: Well? Today I think we get the twenty five point

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Speaker 2: cut from universally expected and had been pretty well signaled previously.

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Speaker 2: After that, though, I think there's quite a bit more debate.

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Speaker 2: Quite a lot of the data that's come out last

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Speaker 2: few months hasn't really surprised negatively the reserve bag very much.

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Speaker 2: It really depends a lot on how much weight they

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Speaker 2: put on that international outlook.

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Speaker 1: That's the big question here, isn't it? Because your non

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Speaker 1: tradable inflation is coming down, You've got CPI within band,

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Speaker 1: so you know, and to what extent? Because below three

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Speaker 1: percent you're starting to get expansionary? Right, to what extent

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Speaker 1: is the reserve that meant to just keep cranking growth?

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Speaker 2: Well, it's not on the mandate at all, right, it's

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Speaker 2: all been changed to be solely focused on inflation. And

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Speaker 2: I think the problem they've got here is in the

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Speaker 2: short term, Like if you look at inflation forecast for

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Speaker 2: the next year, inflation's actually nudging three percent again, So

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Speaker 2: when you're seeing that sort of profile, you wouldn't normally

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Speaker 2: expect them to cut rates very far. So hence, you know,

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Speaker 2: we've got a forecast that suggest that they'll get down

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Speaker 2: to about three percent and finish the year. But after that,

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Speaker 2: if you look through its next year, if this global

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Speaker 2: environment looks really weak, then inflation could fall back quite rapidly.

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Speaker 2: So hence you've got some commentators talking about maybe rates

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Speaker 2: getting to two and a half percent.

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Speaker 1: Then you're into real guessing work, though.

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Speaker 2: Aren't you. Well, we're always in the guessing stage. Now,

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Speaker 2: we've got to remember that this easing cycle was very

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Speaker 2: well advanced. You know, we've had two hundred points of easing.

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Speaker 2: We'll be getting up towards two hundred and twenty five,

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Speaker 2: maybe even a bit more as you go through the

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Speaker 2: next few months. I think it's fair. It's not just

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Speaker 2: simply a case of closing your eyes and picking a

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Speaker 2: rate cat. You're going to have to start thinking about pauses.

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Speaker 2: In some stage it will stop.

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Speaker 1: So what do we do right now if we're waiting

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Speaker 1: for the bottom?

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Speaker 2: Well for borrowers, I mean basically, what usually happens is

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Speaker 2: people go back to picking the lowest rate on the curve,

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Speaker 2: don't they, So all the mortgage rates have adjusted down

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Speaker 2: quite considerably. You know, usually at this stage that's when

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Speaker 2: people start moving sort of out of the very short

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Speaker 2: rates into something a bit longer so that they can

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Speaker 2: lock in current rates for a while. And I don't

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Speaker 2: think there's any prospect of rate hikes coming into the

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Speaker 2: calculations for quite some time. But you know, the idea,

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Speaker 2: for example, that the mortgage rates go down into the

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Speaker 2: very low fours or into the three starts to look

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Speaker 2: a little bit speculative a thing, and there's something really

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Speaker 2: bad happens.

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Speaker 1: Which, as we have learned from history and even recent history,

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Speaker 1: can happen. Kelly, appreciate your time this morning, Kelly Cold

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Speaker 1: Spective Economists with us.

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Speaker 2: For more from Early edition with Ryan Bridge.

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