1 00:00:00,400 --> 00:00:01,320 Speaker 1: Brian Bridge. 2 00:00:01,360 --> 00:00:04,000 Speaker 2: The Australian Reserve Bank has ended the year where it began, 3 00:00:04,160 --> 00:00:07,120 Speaker 2: with a cash rate of four point three five percent, 4 00:00:07,320 --> 00:00:10,800 Speaker 2: disappointing many, no more so than Albanzi, who wants to 5 00:00:10,800 --> 00:00:13,880 Speaker 2: get re elected. The bank softened its language a little bit, 6 00:00:13,880 --> 00:00:16,599 Speaker 2: saying the board had gained some confidence that inflation was 7 00:00:16,640 --> 00:00:19,599 Speaker 2: heading back to target. Paul Bloxham is the HSBC Chief 8 00:00:19,600 --> 00:00:22,200 Speaker 2: executive in Sydney. Paul, good evening, Thanks for being with me. 9 00:00:23,079 --> 00:00:25,680 Speaker 2: Good a great to have you on the show. Let's 10 00:00:25,720 --> 00:00:30,440 Speaker 2: start with what the bank was saying. What was the message, Well, the. 11 00:00:30,400 --> 00:00:34,440 Speaker 1: Message was that where they're making progress, inflation is heading 12 00:00:34,479 --> 00:00:37,640 Speaker 1: towards their target, albeit very slowly. It's a very slow 13 00:00:37,720 --> 00:00:41,320 Speaker 1: grind for getting core inflation, the underlying measures that the 14 00:00:41,400 --> 00:00:44,519 Speaker 1: RBA focuses on back to the RBA's target. And so 15 00:00:44,960 --> 00:00:47,800 Speaker 1: because it's a slow grind, they didn't cut interest rates today. 16 00:00:47,840 --> 00:00:50,559 Speaker 1: They didn't feel that they could do that. But they 17 00:00:50,600 --> 00:00:53,240 Speaker 1: are starting to hint that they're getting closer and closer 18 00:00:53,280 --> 00:00:55,959 Speaker 1: and just a bit more confident that inflation will get 19 00:00:55,960 --> 00:00:58,280 Speaker 1: back to where they need it to be, and so 20 00:00:58,680 --> 00:01:00,840 Speaker 1: the next move is more likely to be down and up. Now, 21 00:01:00,920 --> 00:01:04,280 Speaker 1: keep in mind, not long ago the RBA was still 22 00:01:04,280 --> 00:01:07,000 Speaker 1: talking about having options in both directions. They were talking 23 00:01:07,000 --> 00:01:10,480 Speaker 1: about not ruling in anything or ruling out anything, and 24 00:01:10,520 --> 00:01:13,760 Speaker 1: they've dropped that line line of phrasing and they're starting 25 00:01:13,800 --> 00:01:16,160 Speaker 1: to talk more about the idea that rates are likely 26 00:01:16,160 --> 00:01:17,840 Speaker 1: to come down but not quite yet. And then in 27 00:01:17,920 --> 00:01:20,800 Speaker 1: terms of when, well it's likely to be in twenty 28 00:01:20,840 --> 00:01:23,800 Speaker 1: twenty five. Obviously that haven't got another meeting this year. 29 00:01:24,680 --> 00:01:26,399 Speaker 1: But the question then is sort of what is the 30 00:01:26,440 --> 00:01:28,840 Speaker 1: timing in twenty twenty five And that bit is a 31 00:01:28,840 --> 00:01:31,200 Speaker 1: bit harder because there's so much yet to happen, and 32 00:01:31,200 --> 00:01:33,440 Speaker 1: there's so much data flow to happen even before the 33 00:01:33,480 --> 00:01:36,479 Speaker 1: next RBA meeting which is now still ten ten weeks 34 00:01:36,480 --> 00:01:37,800 Speaker 1: away in late February. 35 00:01:37,920 --> 00:01:40,759 Speaker 2: To be fair to the RBA, from our perspective, I mean, 36 00:01:40,800 --> 00:01:45,919 Speaker 2: we went much higher and earlier than they did, right, Yes. 37 00:01:45,840 --> 00:01:48,640 Speaker 1: So the approach that was taken to dealing with the 38 00:01:48,720 --> 00:01:52,200 Speaker 1: high inflation challenge that both New Zealand and Australia face, 39 00:01:52,280 --> 00:01:54,960 Speaker 1: both countries faced the same challenge, the approach was very 40 00:01:54,960 --> 00:01:57,880 Speaker 1: different across both sides of the Tasman So, as you say, 41 00:01:57,920 --> 00:02:00,600 Speaker 1: the RBNZ had lifted interest rates early, they lifted them 42 00:02:00,640 --> 00:02:02,960 Speaker 1: a lot more five hundred and twenty five basis points, 43 00:02:03,000 --> 00:02:05,960 Speaker 1: went hard, pushed the economy into a downturn. You've been 44 00:02:06,000 --> 00:02:09,080 Speaker 1: in a downturn for two years, and that got inflation 45 00:02:09,240 --> 00:02:12,960 Speaker 1: down quite quickly, or quicker at least. And so because 46 00:02:13,000 --> 00:02:15,520 Speaker 1: inflation came down enough after being in a downturn for 47 00:02:15,520 --> 00:02:19,799 Speaker 1: two years, the RBNZ has been able to start cutting rates. 48 00:02:19,800 --> 00:02:21,960 Speaker 1: And they've done it, you know, quite a substantial amount 49 00:02:21,960 --> 00:02:23,960 Speaker 1: of it's cut one hundred and twenty five basis points already. 50 00:02:24,240 --> 00:02:26,880 Speaker 1: The RBA took the slow road. They lifted rates by less. 51 00:02:27,320 --> 00:02:31,720 Speaker 1: They intentionally prioritized trying to stay close to full employment 52 00:02:31,760 --> 00:02:34,080 Speaker 1: and to deliver a soft economic landing and not have 53 00:02:34,200 --> 00:02:37,280 Speaker 1: a recession. And in doing that, of course, the trade 54 00:02:37,280 --> 00:02:39,760 Speaker 1: off was always going to be that inflation would fall 55 00:02:39,800 --> 00:02:42,760 Speaker 1: more slowly, and so it has. Inflation hasn't yet gotten 56 00:02:42,800 --> 00:02:45,320 Speaker 1: down to where the RBA is comfortable, and we're sitting 57 00:02:45,320 --> 00:02:48,280 Speaker 1: here and the RBA still hasn't cut interest rates, and so, yeah, 58 00:02:48,680 --> 00:02:53,919 Speaker 1: very different pathways to sort of achieving their mandates from 59 00:02:53,960 --> 00:02:55,959 Speaker 1: both the RBNZ and the RBA. 60 00:02:56,120 --> 00:02:58,560 Speaker 2: Whose was the better approach or is it too early? 61 00:02:58,919 --> 00:03:00,760 Speaker 2: Is it too early to tell, because I mean you 62 00:03:00,800 --> 00:03:03,440 Speaker 2: look over here, and yes, we are dropping our rates, 63 00:03:03,480 --> 00:03:06,000 Speaker 2: and we're dropping them quicker than you can you know, 64 00:03:06,480 --> 00:03:10,280 Speaker 2: your neckers after a night out going home side. But 65 00:03:10,960 --> 00:03:13,400 Speaker 2: you know, but over here it's like trying to revive 66 00:03:13,440 --> 00:03:17,720 Speaker 2: a corpse. I mean, the economy feels so beaten and 67 00:03:17,800 --> 00:03:20,560 Speaker 2: downtrodden that no matter how low they dropped the rates 68 00:03:20,560 --> 00:03:22,760 Speaker 2: at the moment, we're going to take a while to 69 00:03:22,760 --> 00:03:23,560 Speaker 2: dig our way out of this. 70 00:03:25,000 --> 00:03:28,040 Speaker 1: So two things. I think it's hard to like determining 71 00:03:28,040 --> 00:03:30,440 Speaker 1: which one's a better approach is really it really depends 72 00:03:30,480 --> 00:03:33,160 Speaker 1: on how much weight you put on how much preference 73 00:03:33,160 --> 00:03:35,720 Speaker 1: you've got to keeping full employment everyone in a job, 74 00:03:36,160 --> 00:03:40,800 Speaker 1: versus keeping getting inflation down. So you know, the RBNZ 75 00:03:40,920 --> 00:03:43,720 Speaker 1: decided the priority was getting to get inflation down and 76 00:03:43,760 --> 00:03:45,680 Speaker 1: to get it down quickly, and that was the way 77 00:03:45,720 --> 00:03:47,840 Speaker 1: they approached it. But the cost has been that the 78 00:03:47,880 --> 00:03:50,200 Speaker 1: unemployment rate has gone up a lot more. It's gone 79 00:03:50,200 --> 00:03:52,320 Speaker 1: from three point two to four point six percent. The 80 00:03:52,440 --> 00:03:55,520 Speaker 1: RBA their choice was, well, actually, you know, we want 81 00:03:55,560 --> 00:03:57,720 Speaker 1: to keep the unemployment fairly low, and so it's gone 82 00:03:57,760 --> 00:04:00,440 Speaker 1: from three and a half to four point one, has 83 00:04:00,480 --> 00:04:02,680 Speaker 1: meant that inflation has come down more slowly, so we've 84 00:04:02,680 --> 00:04:05,840 Speaker 1: had more inflation for more persistent inflation for longer. In 85 00:04:05,880 --> 00:04:08,280 Speaker 1: New Zealand you've gone the other direction. So it really 86 00:04:08,280 --> 00:04:12,040 Speaker 1: depends on where which you prioritize. I'm a bit more 87 00:04:12,080 --> 00:04:14,920 Speaker 1: confident about in New Zealand than you're describing. I think the 88 00:04:14,960 --> 00:04:18,560 Speaker 1: primary thing that's been constraining the economy really getting the 89 00:04:18,600 --> 00:04:20,640 Speaker 1: slow down has been the high interest rates, and now 90 00:04:20,640 --> 00:04:24,320 Speaker 1: that they're going quickly in that down in that direction, 91 00:04:24,600 --> 00:04:26,200 Speaker 1: I think it's going to turn around quite quickly. I 92 00:04:26,240 --> 00:04:28,320 Speaker 1: think twenty twenty five you're going to get quite a 93 00:04:28,360 --> 00:04:31,040 Speaker 1: recovery in growth in New Zealand. Are's interest rates come 94 00:04:31,080 --> 00:04:33,719 Speaker 1: down and households respond and the housing market responds and 95 00:04:33,720 --> 00:04:36,719 Speaker 1: so on. So we'll see. But that's my forecast in 96 00:04:36,720 --> 00:04:37,440 Speaker 1: New Zealand, all. 97 00:04:37,400 --> 00:04:40,080 Speaker 2: Right, Paul Brilliant. And for Australia, the swaps are saying 98 00:04:40,080 --> 00:04:42,359 Speaker 2: it's a split chance of a drop in February. 99 00:04:43,560 --> 00:04:47,120 Speaker 1: Well, that's right about that for February. Our central cases 100 00:04:47,120 --> 00:04:49,279 Speaker 1: they won't cut till the second quarter of next year, 101 00:04:49,320 --> 00:04:51,839 Speaker 1: so April or May. But well there's a lot of 102 00:04:51,920 --> 00:04:54,560 Speaker 1: data yet to come between now and then and so 103 00:04:54,920 --> 00:04:57,080 Speaker 1: we'll move towards it and see what happens. But rate 104 00:04:57,160 --> 00:04:59,440 Speaker 1: cuts in twenty twenty five seem likely. 105 00:05:00,080 --> 00:05:02,080 Speaker 2: Brilliant Paul, great, have you on the show as always, 106 00:05:02,080 --> 00:05:06,200 Speaker 2: Paul Block, some hspecies, chief economist out of Sydney. For 107 00:05:06,320 --> 00:05:09,599 Speaker 2: more from Hither Duplessy Allen Drive, listen live to news 108 00:05:09,640 --> 00:05:12,520 Speaker 2: talks it'd be from four pm weekdays, or follow the 109 00:05:12,560 --> 00:05:14,240 Speaker 2: podcast on iHeartRadio.