1 00:00:00,080 --> 00:00:04,240 Speaker 1: Brad Olson Informetrics Principal Economists. Hey, Brad Good evening, Brad listen. 2 00:00:04,320 --> 00:00:08,039 Speaker 1: So we've seen the Reserve Bank's Financial Stability Report out today. 3 00:00:08,360 --> 00:00:10,320 Speaker 1: They are still holding out. I think this is interesting. 4 00:00:10,320 --> 00:00:13,520 Speaker 1: Haven't changed their prediction on what the unemployment rate's going 5 00:00:13,560 --> 00:00:15,520 Speaker 1: to do, held it since about August. Haven't that five 6 00:00:15,560 --> 00:00:16,280 Speaker 1: point four percent? 7 00:00:17,280 --> 00:00:19,160 Speaker 2: Yes, that's right, and in a sense, I mean it's 8 00:00:19,160 --> 00:00:21,079 Speaker 2: also important that it still is going to take a 9 00:00:21,079 --> 00:00:23,200 Speaker 2: while to get to that point. That five point four 10 00:00:23,239 --> 00:00:26,439 Speaker 2: percent peak is what they think will get to sort 11 00:00:26,440 --> 00:00:29,000 Speaker 2: of over the first six months of twenty twenty five. 12 00:00:29,040 --> 00:00:32,120 Speaker 2: So again it doesn't come through immediately. What was interesting 13 00:00:32,159 --> 00:00:35,279 Speaker 2: looking through the Financial Stability Report was just how much 14 00:00:35,320 --> 00:00:38,559 Speaker 2: they highlighted that. Look, the domestic economy obviously in a 15 00:00:38,640 --> 00:00:42,440 Speaker 2: challenging position, and even with interest rates coming down and 16 00:00:42,479 --> 00:00:45,080 Speaker 2: starting to fall, the fact that you'll still have further 17 00:00:45,159 --> 00:00:48,960 Speaker 2: increases in unemployment. Obviously it's pretty difficult for households to 18 00:00:48,960 --> 00:00:51,760 Speaker 2: afford their mortgage at that point. So the Reserve banks 19 00:00:51,800 --> 00:00:54,880 Speaker 2: still actually thinking that the proportion of loans that are 20 00:00:54,920 --> 00:00:57,880 Speaker 2: non performing and people that can't pay their loans is 21 00:00:57,920 --> 00:01:01,280 Speaker 2: expected to increase. It's currently at point five percent of 22 00:01:01,320 --> 00:01:03,960 Speaker 2: total loan values. That's the highest it's been since around 23 00:01:04,000 --> 00:01:06,600 Speaker 2: sort of twenty fourteen or so. So you are really 24 00:01:07,000 --> 00:01:09,200 Speaker 2: getting this message from the Reserve Bank, and I think 25 00:01:09,200 --> 00:01:11,800 Speaker 2: it is important that although interest rates are starting to 26 00:01:11,800 --> 00:01:14,399 Speaker 2: come down and there are better times on the horizon, 27 00:01:14,840 --> 00:01:16,840 Speaker 2: the economy is still in a pretty difficult place for 28 00:01:16,880 --> 00:01:19,200 Speaker 2: the next six to nine months until those lower interest 29 00:01:19,280 --> 00:01:20,080 Speaker 2: rates come through. 30 00:01:20,400 --> 00:01:23,160 Speaker 1: Now, we were chatting yesterday to Steve Yeukovich, the CEO 31 00:01:23,240 --> 00:01:27,479 Speaker 1: of Kiwi Bank. He says he's picking later this month 32 00:01:27,560 --> 00:01:30,080 Speaker 1: a fifty basis point cut no more, because it's just 33 00:01:30,120 --> 00:01:31,119 Speaker 1: too much at seventy five. 34 00:01:31,160 --> 00:01:33,800 Speaker 2: What do you think. Look, I think a lot might 35 00:01:33,800 --> 00:01:37,920 Speaker 2: depend on actually on tomorrow, not the US election outcome, 36 00:01:37,959 --> 00:01:40,560 Speaker 2: but the latest labor market data out from stats n Z. 37 00:01:41,120 --> 00:01:44,360 Speaker 2: We're expecting a five percent unemployment rate to come through. 38 00:01:44,760 --> 00:01:48,360 Speaker 2: But I think in a sense, if there is a 39 00:01:48,360 --> 00:01:50,920 Speaker 2: lot of the numbers are pretty consistent at the moment 40 00:01:51,240 --> 00:01:54,080 Speaker 2: that the economy continues to get weaker. If you saw 41 00:01:54,120 --> 00:01:56,320 Speaker 2: the unemployment rate though that sort of was quite a 42 00:01:56,360 --> 00:01:59,520 Speaker 2: bit above where the market and the Reserve Bank we're thinking, 43 00:01:59,760 --> 00:02:02,880 Speaker 2: if you saw wage pressures starting to drop a lot 44 00:02:03,000 --> 00:02:05,760 Speaker 2: quicker than might have been expected. If you see that 45 00:02:05,880 --> 00:02:08,600 Speaker 2: job hiring figure raally come back, and it has started 46 00:02:08,600 --> 00:02:10,880 Speaker 2: two in recent times. We were talking just last week 47 00:02:11,120 --> 00:02:14,160 Speaker 2: about how there are twenty thousand fewer jobs in the economy. 48 00:02:14,320 --> 00:02:17,600 Speaker 2: So if all of that data was particularly weaker, I 49 00:02:17,639 --> 00:02:19,799 Speaker 2: think it could force the bank to still look at 50 00:02:19,800 --> 00:02:21,919 Speaker 2: seventy five, and I sort of hope that they do 51 00:02:22,360 --> 00:02:25,120 Speaker 2: at least toss it up in their meeting coming up 52 00:02:25,160 --> 00:02:27,560 Speaker 2: later this month. But I mean the central view and 53 00:02:27,600 --> 00:02:29,799 Speaker 2: my central view as well, is still around that fifty 54 00:02:29,840 --> 00:02:33,359 Speaker 2: basis points. That would be sort of the current normal expectation. 55 00:02:33,960 --> 00:02:36,079 Speaker 2: But again, I think all eyes are on the data, 56 00:02:36,120 --> 00:02:38,720 Speaker 2: all eyes also on the rest of the world. Not 57 00:02:38,760 --> 00:02:41,040 Speaker 2: only is there an election in the US this week, 58 00:02:41,040 --> 00:02:44,360 Speaker 2: there's also a new announcement from the US Federal Reserve 59 00:02:44,639 --> 00:02:46,400 Speaker 2: over what they want to do with interest rates, So 60 00:02:46,720 --> 00:02:48,960 Speaker 2: all of that, I think we'll go into the reserve 61 00:02:49,000 --> 00:02:51,320 Speaker 2: banks thinking. But yep, at the moment, fifty is still 62 00:02:51,320 --> 00:02:53,520 Speaker 2: I think where the smart money is. Although my Melbourne 63 00:02:53,560 --> 00:02:56,079 Speaker 2: cup pick didn't go well today, so it's always a 64 00:02:56,160 --> 00:02:57,400 Speaker 2: challenging decision, Right. 65 00:02:57,560 --> 00:02:59,120 Speaker 1: Do you want to have a pick at the US election? 66 00:02:59,200 --> 00:03:02,520 Speaker 2: Then? Ah, jeez, I really don't know what way it's 67 00:03:02,560 --> 00:03:05,400 Speaker 2: going to go. I feel like either way, you've got 68 00:03:05,440 --> 00:03:07,919 Speaker 2: some pretty different outcomes that are coming through. I think 69 00:03:07,960 --> 00:03:10,800 Speaker 2: by a slim, slim margin, I think it'll go to Harris. 70 00:03:11,200 --> 00:03:14,040 Speaker 1: What that is wishful thinking, Brad, isn't it? 71 00:03:15,160 --> 00:03:17,160 Speaker 2: Oh? Well? I mean I think put it this way. 72 00:03:17,240 --> 00:03:19,840 Speaker 2: If it goes to Trump, I think there's a huge 73 00:03:20,080 --> 00:03:22,720 Speaker 2: question that can't really be answered tomorrow or even in 74 00:03:22,760 --> 00:03:24,640 Speaker 2: the next couple of weeks as to what that means 75 00:03:24,639 --> 00:03:27,359 Speaker 2: for the New Zealand economy the very least, let alone 76 00:03:27,400 --> 00:03:31,240 Speaker 2: the global economy. Of course, inauguration doesn't happen till twenty 77 00:03:31,800 --> 00:03:34,320 Speaker 2: twentieth of January twenty twenty five, so a lot of 78 00:03:34,320 --> 00:03:36,280 Speaker 2: water to go under the bridge no matter what happens 79 00:03:36,320 --> 00:03:37,320 Speaker 2: in the next twenty four hours. 80 00:03:37,320 --> 00:03:38,880 Speaker 1: So you make a very good point, Hey, Brad, Thank 81 00:03:38,880 --> 00:03:42,440 Speaker 1: you very much. Brad Olson infa Metrics principal economist. Poor Brad, 82 00:03:42,480 --> 00:03:44,880 Speaker 1: I'm just like stabbing at him with that wishful thinking. 83 00:03:45,560 --> 00:03:48,720 Speaker 1: For more from Heather Duplessy Allen Drive, Listen live to 84 00:03:48,840 --> 00:03:51,880 Speaker 1: news Talks the'd be from four pm weekdays, or follow 85 00:03:51,920 --> 00:03:53,680 Speaker 1: the podcast on iHeartRadio.