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Speaker 1: Good afternoon. Banks have immediately started cutting their mortgage rates

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Speaker 1: after the Reserve Bank today cut the official cash rate

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Speaker 1: by fifty basis points, so the ocr is now sitting

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Speaker 1: at four point two five percent. The Reserve Bank Governor

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Speaker 1: Adrian Or acknowledged it's been a tough time for New.

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Speaker 2: Zealand, Terrah has you know, we've been doing it tough

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Speaker 2: over the last couple of years. We've been part responsible

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Speaker 2: for that. But the higher interest rate, you know, inflation

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Speaker 2: is evil. We have been making sure we can squeeze

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Speaker 2: it out of the economy. I know it's been challenging

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Speaker 2: for many many people and will continue to be so

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Speaker 2: overcoming months.

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Speaker 1: Infamatrix principal economist Brad Olson's with me. Now, Hey, Brad,

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Speaker 1: good evening. Are you surprised they didn't think about seventy

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Speaker 1: five basis point cut at all.

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Speaker 3: I'm a little bit surprised they didn't really consider anything

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Speaker 3: apart from fifty. You know, the governor highlighted in his

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Speaker 3: press conference that they sort of thought fifty was the

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Speaker 3: right place, and so they didn't really toss up doing

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Speaker 3: anything different. You know, they didn't toss up going smaller

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Speaker 3: at twenty five. They didn't toss up going larger at

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Speaker 3: seventy five, So fairly confident view from the Reserve Bank

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Speaker 3: that fifty was the right move. And look, I don't

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Speaker 3: think anyone will disagree that it's a healthy decline that's

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Speaker 3: coming through. The question I think for now is we're

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Speaker 3: too next and how quickly there's now a three month

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Speaker 3: break before the Reserve Bank meets again. The Governor sort

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Speaker 3: of seemed to imply or certainly didn't shoot down the

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Speaker 3: view that fifty basis points in February almost seems to

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Speaker 3: be the baseline case or the live option. But a

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Speaker 3: lot of economic forecast is wondering when do we get

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Speaker 3: back to those sort of more normal considered steps, given

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Speaker 3: the economy is already starting to show some early signs

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Speaker 3: of turning around. So right move today, very sensible sort

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Speaker 3: of pick and sort of but looking into the future

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Speaker 3: a bit more uncertain.

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Speaker 1: Yeah, what makes you think that he's considering a fifty

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Speaker 1: because it sounded like a twenty five to me in February.

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Speaker 3: Well, he sort of highlighted that actually, you know, when

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Speaker 3: he looked through the numbers, he sort of said fifty

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Speaker 3: felt right, and particularly considering the forward track that leaves

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Speaker 3: the door open for another fifty point cut. I mean

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Speaker 3: that that was his own words, so I think he

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Speaker 3: sort of opened They've got options, and that is important

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Speaker 3: because for such a long time it sort of felt

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Speaker 3: like we were always sort of on the back foot.

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Speaker 3: I think the Reserve Banks sort of wrestled back a

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Speaker 3: bit more control here, which is important. Inflation are now

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Speaker 3: well under control, the unemployment rate increasing, but not quite

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Speaker 3: as steeply as might have been feared. Again, interest rates

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Speaker 3: coming down, some early signs that spending is turning around,

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Speaker 3: so all of that will be encouraging for the bank.

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Speaker 3: But also, you know, they've cut just how much potential

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Speaker 3: they think is out there in the economy in the future.

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Speaker 3: So still some pretty difficult times, and people won't immediately

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Speaker 3: refix onto those lower mortgage rates. But again looking up

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Speaker 3: over time.

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Speaker 1: Brad kee we Bank's argument is that at four point

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Speaker 1: twenty five, it's still restrictive, and even the Reserve Banks

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Speaker 1: governor said that himself today it's still a restrictive level.

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Speaker 1: He's still strangling the economy to an extent. Kee we

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Speaker 1: Bank reckons you have to get to about three point

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Speaker 1: five before it's neutral. What's the argument for keeping us

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Speaker 1: in a restrictive setting when we are so stuffed at

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Speaker 1: the moment.

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Speaker 3: You know, I think the Reserve Bank is sort of

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Speaker 3: also pretty cool, And they did outline in their statement

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Speaker 3: today as well they're sort of worry about some of

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Speaker 3: those inflationary pressures that could persist, could spike back up,

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Speaker 3: but more importantly some of that sort of more medium

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Speaker 3: term stuff where you don't sort of want to be

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Speaker 3: sort of going through. And we have seen this from

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Speaker 3: the Reserve Bank and you know, years gone past, where

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Speaker 3: they sort of either cut too much, raised too much

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Speaker 3: and then have to reverse out. But I think that

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Speaker 3: the big question, right is that if they go by

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Speaker 3: fifty again in February, that only leaves them maybe one

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Speaker 3: more twenty five basis point cut. And I get the

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Speaker 3: thing for that we're looking at at the moment as

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Speaker 3: economists is that fifty is still like a bigger move.

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Speaker 3: And so to go from sort of you know, fifty

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Speaker 3: then to twenty five then to just nothing would be

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Speaker 3: quite an abrupt maybe endo it. So again that sort

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Speaker 3: of question is does the Reserve Bank here if there's

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Speaker 3: an abrupt end or do they say, actually, look, we've

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Speaker 3: got interest rates back to where we want them to be.

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Speaker 3: And so if it's a fifty and then done, maybe

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Speaker 3: that's it.

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Speaker 1: Okay, Well, Brad, thanks very much. Appreciate a Brad Awsome

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Speaker 1: Informetrix Principle Economist. For more from Heather Duplessy Allen Drive,

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