1 00:00:00,080 --> 00:00:01,600 Speaker 1: You reserve. Being governor gave us a lot to think 2 00:00:01,600 --> 00:00:04,800 Speaker 1: about yesterday. Yes the predicted cash rate came or the cut, 3 00:00:05,240 --> 00:00:06,880 Speaker 1: but where we go is potentially a bit of a 4 00:00:06,880 --> 00:00:09,760 Speaker 1: mystery from here on. In Christin Hawksley's with us, good morning, gooday. 5 00:00:10,000 --> 00:00:13,000 Speaker 1: You talked a lot about the committee yesterday. How much 6 00:00:13,039 --> 00:00:15,960 Speaker 1: of a committee type atmosphere and a range of views 7 00:00:16,680 --> 00:00:19,239 Speaker 1: leads to a lack of decisiveness in times of real 8 00:00:19,280 --> 00:00:20,239 Speaker 1: trouble and difficulty. 9 00:00:22,600 --> 00:00:28,480 Speaker 2: I think a committee is a very strong and supportive 10 00:00:28,520 --> 00:00:31,840 Speaker 2: thing to have in these times. We do need a 11 00:00:31,920 --> 00:00:35,160 Speaker 2: dispersion of views around the table. There's a lot going on. 12 00:00:35,640 --> 00:00:39,879 Speaker 2: We need to draw on the expertise and judgments of 13 00:00:39,920 --> 00:00:43,160 Speaker 2: all six of us around the table. We did come 14 00:00:43,159 --> 00:00:46,519 Speaker 2: to a consensus on the set of projections that we 15 00:00:46,720 --> 00:00:50,720 Speaker 2: set out, and that's one where the official cash rate 16 00:00:50,800 --> 00:00:53,200 Speaker 2: sort of coming down of that and is around three 17 00:00:53,280 --> 00:00:57,400 Speaker 2: percent where we had it. Where we had to come 18 00:00:57,440 --> 00:00:59,720 Speaker 2: to a vote on was what to do with the 19 00:00:59,760 --> 00:01:05,200 Speaker 2: ocean are yesterday and voted in favor five to one 20 00:01:05,200 --> 00:01:05,839 Speaker 2: to two lower. 21 00:01:06,959 --> 00:01:08,800 Speaker 1: Indeed, I'll come back to the boat if I have time, 22 00:01:08,800 --> 00:01:11,360 Speaker 1: but what I got yesterday was blamnge. You don't know 23 00:01:11,400 --> 00:01:13,679 Speaker 1: what's going on. And in a way, I don't blame you. 24 00:01:13,720 --> 00:01:15,959 Speaker 1: No one seems to know what's going on, but drawing 25 00:01:16,040 --> 00:01:18,520 Speaker 1: up a variety of scenarios anyone can do. 26 00:01:20,959 --> 00:01:23,679 Speaker 2: What we're trying to indicate is that we're in a 27 00:01:23,680 --> 00:01:26,080 Speaker 2: different phase now. You know, we had the OCR at 28 00:01:26,120 --> 00:01:28,119 Speaker 2: five and a half percent, and we were a long 29 00:01:28,200 --> 00:01:31,920 Speaker 2: way north of neutral, which is somewhere between maybe three 30 00:01:32,000 --> 00:01:34,720 Speaker 2: and a half and two and a half percent. The 31 00:01:34,760 --> 00:01:36,960 Speaker 2: OCR has come down a long way now we're in 32 00:01:36,959 --> 00:01:41,000 Speaker 2: that sort of zone of neutral. We're in that zone. 33 00:01:41,400 --> 00:01:44,280 Speaker 2: So we're not on a pre programmed path from here. 34 00:01:45,000 --> 00:01:47,319 Speaker 2: You know, we can't say to markets, yep, we're definitely 35 00:01:47,360 --> 00:01:50,840 Speaker 2: doing this or that next time. We are more feeling 36 00:01:51,000 --> 00:01:56,120 Speaker 2: our way. We are more dependent on developments. Things are 37 00:01:56,240 --> 00:01:58,680 Speaker 2: very uncertain, but we're in a really good position just 38 00:01:58,680 --> 00:02:01,560 Speaker 2: to respond to things from here. And by giving that 39 00:02:01,640 --> 00:02:05,680 Speaker 2: signal to markets, you know, that enables them to think 40 00:02:05,680 --> 00:02:11,000 Speaker 2: for themselves as well and assess the situation and move 41 00:02:11,080 --> 00:02:11,600 Speaker 2: things around. 42 00:02:11,800 --> 00:02:14,120 Speaker 1: See, I'm thinking for myself and what I'm thinking in 43 00:02:14,160 --> 00:02:16,640 Speaker 1: the economy. I live and things aren't going well. And 44 00:02:16,680 --> 00:02:19,080 Speaker 1: so you alluded to the obvious things like farmers and 45 00:02:19,120 --> 00:02:21,640 Speaker 1: dairy and exports and all of that's absolutely brilliant, But 46 00:02:21,680 --> 00:02:24,440 Speaker 1: there are large chunks of the economy that are in 47 00:02:24,560 --> 00:02:28,079 Speaker 1: dreadful shape. But because one bit's so good, we're kind 48 00:02:28,120 --> 00:02:31,200 Speaker 1: of neutralized everything and everything appears okay because inflation is 49 00:02:31,200 --> 00:02:32,880 Speaker 1: in the right band, and I'm just wondering if that's 50 00:02:32,880 --> 00:02:36,280 Speaker 1: a problem for us overall. 51 00:02:36,320 --> 00:02:40,040 Speaker 2: Absolutely acknowledge that, you know, there are different speeds in 52 00:02:40,080 --> 00:02:44,720 Speaker 2: the economy at the momentum. We acknowledge that there's actually 53 00:02:44,720 --> 00:02:47,680 Speaker 2: a lot of spare capacity in the economy, and that's 54 00:02:47,720 --> 00:02:51,000 Speaker 2: one of the things that gives us confidence that even 55 00:02:51,040 --> 00:02:53,600 Speaker 2: though inflation is still bouncing around the top half of 56 00:02:53,639 --> 00:02:56,680 Speaker 2: our band, over the medium term, it is likely to 57 00:02:56,720 --> 00:03:01,000 Speaker 2: come down closer and settle around two percent because of 58 00:03:01,040 --> 00:03:05,800 Speaker 2: that spare capacity. We have lowered interest rates a long way, 59 00:03:05,880 --> 00:03:07,840 Speaker 2: and it does take time for that to work its 60 00:03:07,880 --> 00:03:11,040 Speaker 2: way through. You know, you kind of see that in 61 00:03:11,080 --> 00:03:14,440 Speaker 2: the effect of mortgage rates that people feel they are 62 00:03:14,480 --> 00:03:17,600 Speaker 2: going to come down mechanically through the course of this 63 00:03:17,720 --> 00:03:20,760 Speaker 2: year as people shift on old fixed rates onto new 64 00:03:20,800 --> 00:03:23,440 Speaker 2: fixed rates, and so there's there's a bit still to 65 00:03:23,440 --> 00:03:27,880 Speaker 2: come there. In our projections, we have a recovery continuing. 66 00:03:28,400 --> 00:03:31,680 Speaker 2: That's partly supported by the lower interest rates that we'll have, 67 00:03:31,880 --> 00:03:35,520 Speaker 2: do you, But it's a modest one given the global outlook. 68 00:03:35,720 --> 00:03:37,320 Speaker 1: I was going to say, where is it You're seeing 69 00:03:37,360 --> 00:03:39,480 Speaker 1: this recovery park, the farmers and all that stuff that 70 00:03:39,520 --> 00:03:42,920 Speaker 1: we obviously get. Where is this recovery and services? Where 71 00:03:42,960 --> 00:03:45,960 Speaker 1: is it in downtown Auckland, downtown christ dur to downtown Wellington? 72 00:03:45,960 --> 00:03:47,480 Speaker 1: Where is it? Where is it in the jobs? 73 00:03:49,720 --> 00:03:52,960 Speaker 2: It's not, you know, it's this is the art of 74 00:03:53,360 --> 00:03:57,920 Speaker 2: economics and forecasting and projections. You have to look into 75 00:03:57,960 --> 00:04:01,720 Speaker 2: the future and you know, even when things are modest, 76 00:04:02,280 --> 00:04:06,080 Speaker 2: even things when things are reasonably cool, if the conditions 77 00:04:06,280 --> 00:04:09,040 Speaker 2: are there for that to start working its way through, 78 00:04:09,440 --> 00:04:12,160 Speaker 2: you know, that's what we have to base our decisions on. 79 00:04:12,200 --> 00:04:16,480 Speaker 2: We acknowledge that these things take time. Even lowering interest 80 00:04:16,560 --> 00:04:21,040 Speaker 2: rates works through many, many different channels at different speeds. 81 00:04:21,560 --> 00:04:25,080 Speaker 2: But we have confidence that there will be that recovery, 82 00:04:25,480 --> 00:04:28,279 Speaker 2: but it will be a modest one given the global environment. 83 00:04:28,600 --> 00:04:30,720 Speaker 1: Does the dollar worry you because part of the success 84 00:04:30,760 --> 00:04:32,920 Speaker 1: of the export, of course, is the anemic dollar of ours. 85 00:04:32,960 --> 00:04:37,160 Speaker 1: And you don't want an anemic dollar, do you. 86 00:04:37,160 --> 00:04:40,640 Speaker 2: You know, we take the currency, you know as given 87 00:04:40,680 --> 00:04:44,120 Speaker 2: and we just have to work around that. There's a 88 00:04:44,120 --> 00:04:47,680 Speaker 2: lot of chat about the decline of the US dollar 89 00:04:47,720 --> 00:04:49,920 Speaker 2: and it's not going to be the reserve currency anymore, 90 00:04:50,200 --> 00:04:53,120 Speaker 2: and that might mean key we stronger, and that could 91 00:04:53,120 --> 00:04:56,559 Speaker 2: be a headwind. You know, we just need to see 92 00:04:56,560 --> 00:04:58,880 Speaker 2: how that plays out. I think that's more of a 93 00:04:58,880 --> 00:05:02,560 Speaker 2: long term structural thing. Each time we meet, we'll just 94 00:05:02,800 --> 00:05:05,880 Speaker 2: look has the exchange rate worked as a shock absorber 95 00:05:06,480 --> 00:05:08,400 Speaker 2: like it's supposed to do, and if it hasn't, we'll 96 00:05:08,839 --> 00:05:10,000 Speaker 2: have to do something about it. 97 00:05:10,120 --> 00:05:13,280 Speaker 1: Okay, just a really quick explanation for simple people. So 98 00:05:13,520 --> 00:05:16,279 Speaker 1: the general conversation was a cut was baked in yesterday, 99 00:05:16,320 --> 00:05:19,159 Speaker 1: there's another one coming and maybe another one after that. 100 00:05:19,160 --> 00:05:23,120 Speaker 1: That all seemed to change yesterday. Have we been hoodwinked 101 00:05:23,800 --> 00:05:25,880 Speaker 1: or have we not seen what's happening? Or are you 102 00:05:25,920 --> 00:05:29,000 Speaker 1: just seeing the world differently from the rest of us. 103 00:05:29,640 --> 00:05:33,400 Speaker 2: I think we're getting into the area of fine tuning here. 104 00:05:33,440 --> 00:05:35,360 Speaker 2: You know, we've got a. 105 00:05:35,880 --> 00:05:39,640 Speaker 1: Fifty fine tuning Christian fifty points is a lot. 106 00:05:41,279 --> 00:05:43,160 Speaker 2: Oh. What is meaning to say is we've got an 107 00:05:43,240 --> 00:05:46,800 Speaker 2: official cash rate at three point twenty five percent. We've 108 00:05:46,800 --> 00:05:49,960 Speaker 2: got a central projection that's got it somewhere between two 109 00:05:50,040 --> 00:05:54,080 Speaker 2: point nine and three point one over the horizon. You know, 110 00:05:55,120 --> 00:05:57,600 Speaker 2: compared to the range of the official cash rate we've 111 00:05:57,600 --> 00:06:02,440 Speaker 2: seen over history, that's a reasonably tight. Our main message 112 00:06:02,680 --> 00:06:06,080 Speaker 2: is actually around, you know, we're very close to neutral now. 113 00:06:07,200 --> 00:06:09,960 Speaker 2: Our next move is not going to be pre programmed. 114 00:06:10,000 --> 00:06:14,080 Speaker 2: It's going to be about what we're learning about the future. 115 00:06:14,160 --> 00:06:15,240 Speaker 2: Is it unfolds? All right? 116 00:06:15,360 --> 00:06:18,080 Speaker 1: Appreciate your time. New Reserve Bank at least for six months. 117 00:06:19,000 --> 00:06:22,640 Speaker 1: Christian Hawksby. For more from the Mic Asking Breakfast, listen 118 00:06:22,760 --> 00:06:25,720 Speaker 1: live to news talks. It'd be from six am weekdays, 119 00:06:25,960 --> 00:06:28,000 Speaker 1: or follow the podcast on iHeartRadio.