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Speaker 1: So Anna Bremen Reserve Bank governor yesterday held the ocr

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Speaker 1: reckons will be back in target range for inflation by

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Speaker 1: the end of the year. Cameron Baggery Independent economists with

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Speaker 1: me this morning, Cameron, good morning, good morning. Did they

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Speaker 1: get the tone right?

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Speaker 2: Well? At your markets have been thinking that the reserve

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Speaker 2: banks can be highly possibly two twice before the end

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Speaker 2: of the year. The Reserve Bank pushed back a little

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Speaker 2: bit against that. They said more likely than not, probably one.

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Speaker 2: But the general s what that's what the Reserve Bank

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Speaker 2: is saying is the next move in interest rates is up,

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Speaker 2: but it looks like will be at the back after

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Speaker 2: this year as opposed to first off.

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Speaker 1: And is she right? Are they right, I should say,

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Speaker 1: on the inflation track. Do you think that they're getting

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Speaker 1: that right because that basically predicts what they do with

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Speaker 1: the rates?

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Speaker 2: Right. Yeah, I've got what you call a set of

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Speaker 2: holy guilty of the economic forecast. Growth has up to

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Speaker 2: three percent in place, magically goes back to two percent,

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Speaker 2: the unemployment rate sort of drops, productivities up, their house

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Speaker 2: prices move back up to around four to five percent.

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Speaker 2: There's a little bit of magic and achieving dose of outcomes.

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Speaker 2: If I think there's a problem within their forecast. The

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Speaker 2: problem with theirs is they assume uptick in productivity growth.

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Speaker 2: Now we need that uptick in productivity growth, which is

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Speaker 2: that drives a supply side capacity in your comment, your

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Speaker 2: ability to meet demand. Now we know that demand line

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Speaker 2: is packing up. What the Reserve Bank is assuming is

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Speaker 2: that the supply side capacity via productivity growth is going

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Speaker 2: to improve. And if demand and supply both improved, then

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Speaker 2: we're not going to have an inflation problem over twenty

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Speaker 2: twenty six. If we do not get that supply so

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Speaker 2: or capacity up, then in place is going to prove

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Speaker 2: to be a lot more sticky and it's not going

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Speaker 2: to come down to two percent. As the Reserve Bank are.

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Speaker 1: Saying, productivity very hard thing to fix, isn't it.

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Speaker 2: Yeah, it is, and a lot of the leavers to

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Speaker 2: ten productivity around lots of infrastructure education their long term

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Speaker 2: In nature, what we tend to see though, is that

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Speaker 2: productivity tends to wax and wane with the economic cycle.

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Speaker 2: At the top of the cycle, productivity tends to sort

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Speaker 2: of back off. What you tend to see early in

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Speaker 2: the cycle traditionally is a productivity growth starts to pick up.

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Speaker 2: What We're seen early in this cycle. There's employment growth

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Speaker 2: and ours works have started to pack up pretty early

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Speaker 2: in the economic cycle, so that suggests a face edue.

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Speaker 2: We actually not seen much of what's called a cyclical

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Speaker 2: pickup and productivity growth.

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Speaker 1: Yet interesting stuff. Cameron Cameron Bagri Independent Economists with us

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Speaker 1: this morning. For more from Early Edition with Ryan Bridge,

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