1 00:00:00,160 --> 00:00:02,440 Speaker 1: Right now, we're going to Sharon Zolner. This is the 2 00:00:02,440 --> 00:00:06,280 Speaker 1: ocr so big call today, all of our big banks 3 00:00:06,280 --> 00:00:08,959 Speaker 1: predicting fifty bases point cut, bringing it to four point 4 00:00:09,039 --> 00:00:11,880 Speaker 1: seventy five percent. There are also some slightly differing views. 5 00:00:11,960 --> 00:00:14,440 Speaker 1: Greg Smith from Devon Funds Management wants to see two 6 00:00:14,720 --> 00:00:17,960 Speaker 1: seventy five point cuts that'd be one and a half 7 00:00:18,040 --> 00:00:22,240 Speaker 1: percent by Christmas. So what's going to happen? Do we think? 8 00:00:22,320 --> 00:00:25,200 Speaker 1: Sharon Zolner, the Ain's and chief economists with me this morning. Sharon, 9 00:00:25,200 --> 00:00:28,320 Speaker 1: good morning, good morning, Good to have you on the show. 10 00:00:29,480 --> 00:00:32,559 Speaker 1: What do you reckon about the idea of a bigger 11 00:00:32,760 --> 00:00:35,240 Speaker 1: cut than fifty, Well. 12 00:00:35,080 --> 00:00:39,879 Speaker 2: It's rapidly become the default expectation. Actually, interestingly, back in August, 13 00:00:40,040 --> 00:00:42,080 Speaker 2: if you look at what the Reserve Bank then thought 14 00:00:42,080 --> 00:00:44,640 Speaker 2: they would do, they thought they'd cut twenty five. That 15 00:00:44,760 --> 00:00:47,360 Speaker 2: was implied by their forecasts, and they haven't actually been 16 00:00:47,400 --> 00:00:50,879 Speaker 2: a huge number of data supply since then. However, was 17 00:00:50,880 --> 00:00:53,120 Speaker 2: nonetheless ended up in a situation with I think on 18 00:00:53,159 --> 00:00:56,160 Speaker 2: the Bloomberg survey, eighteen out of twenty two economists were 19 00:00:56,440 --> 00:00:59,000 Speaker 2: picking a fifth point cut, no one was picking a 20 00:00:59,040 --> 00:01:03,000 Speaker 2: seventy five and the market is certainly pricing accessity, so 21 00:01:03,800 --> 00:01:06,640 Speaker 2: that's certainly become the default. And the single piece of 22 00:01:06,720 --> 00:01:09,959 Speaker 2: data that was most important there was the Quarterly Business Opinion, 23 00:01:10,200 --> 00:01:14,080 Speaker 2: which showed sharply lower pricing intention and other other data 24 00:01:14,160 --> 00:01:16,679 Speaker 2: that would suggest that the reserve thing not necessarily will 25 00:01:16,680 --> 00:01:19,880 Speaker 2: be revising the inflation forecasts down particularly, but that they 26 00:01:19,920 --> 00:01:23,120 Speaker 2: can have more more confidence in them, more confidence that 27 00:01:23,160 --> 00:01:23,839 Speaker 2: the job is done. 28 00:01:23,959 --> 00:01:26,280 Speaker 1: Yeah, because that report that you're talking about, it said that, 29 00:01:26,400 --> 00:01:29,600 Speaker 1: you know, activity and employment was weak currently, but the 30 00:01:29,680 --> 00:01:33,600 Speaker 1: outlook people were feeling optimistic about the future. But the difference, 31 00:01:33,640 --> 00:01:37,199 Speaker 1: the gap between the reality now and the promised land 32 00:01:37,240 --> 00:01:40,120 Speaker 1: of the future is aging or waving his magic wand 33 00:01:40,160 --> 00:01:40,520 Speaker 1: isn't it. 34 00:01:41,680 --> 00:01:44,720 Speaker 2: Yeah, well, certainly, and our business monthly Business survey we 35 00:01:44,800 --> 00:01:47,520 Speaker 2: saw things lift the minute rates started to fall. It's 36 00:01:47,560 --> 00:01:50,200 Speaker 2: in dramatic in your business confidence at a ten year high. 37 00:01:50,920 --> 00:01:52,880 Speaker 2: Of course, it's one thing to say you think things 38 00:01:52,880 --> 00:01:54,800 Speaker 2: will be better in the future. It's it's another to 39 00:01:54,800 --> 00:01:57,760 Speaker 2: actually act on those expectations and higher someone or make 40 00:01:57,800 --> 00:01:59,960 Speaker 2: an investment. So so the bar is a bit higher 41 00:02:00,040 --> 00:02:02,720 Speaker 2: for that. But I mean, it wouldn't have problem necessarily 42 00:02:02,760 --> 00:02:05,560 Speaker 2: if the economy did rebound faster than expected. It would 43 00:02:05,600 --> 00:02:10,120 Speaker 2: be great as long as that fall and inflation and 44 00:02:10,320 --> 00:02:13,400 Speaker 2: inflation staying within the band is baked in. But looking 45 00:02:13,440 --> 00:02:16,280 Speaker 2: at that quarterly surveys opinion, the Reserve Bank will have 46 00:02:16,400 --> 00:02:20,080 Speaker 2: more confidence that there's lots of their capacity in the 47 00:02:20,240 --> 00:02:23,920 Speaker 2: labor market and businesses and the machine sitting idle, et cetera, 48 00:02:24,520 --> 00:02:26,960 Speaker 2: so that we could have a list of growth without 49 00:02:27,080 --> 00:02:31,280 Speaker 2: inflation igniting. That said, it's not risk free because in 50 00:02:31,360 --> 00:02:35,120 Speaker 2: both surveys costs were still very very high. Firms are 51 00:02:35,160 --> 00:02:37,799 Speaker 2: saying that their margins has been squeezed. But there is 52 00:02:37,840 --> 00:02:41,680 Speaker 2: a scenario still where the economy rebounds quickly and firms 53 00:02:41,800 --> 00:02:44,800 Speaker 2: use that recovery and demand to push through the price increases. 54 00:02:44,880 --> 00:02:47,600 Speaker 2: Have actually been wanting to do for ages that haven't 55 00:02:47,639 --> 00:02:51,400 Speaker 2: been able to yees. 56 00:02:51,440 --> 00:02:55,360 Speaker 1: Okay, So final question, is there a scenario here? Is 57 00:02:55,360 --> 00:02:58,560 Speaker 1: there a possibility where the retail banks have already priced 58 00:02:58,560 --> 00:03:02,720 Speaker 1: in a fifty point cut fifty basis point cut, the 59 00:03:03,240 --> 00:03:08,200 Speaker 1: Reserve Bank comes out with twenty five and retail banks 60 00:03:08,240 --> 00:03:10,160 Speaker 1: have to increase mortgage rates again. 61 00:03:11,280 --> 00:03:14,000 Speaker 2: Well, twenty five point cut would be the surprise now, 62 00:03:14,040 --> 00:03:16,920 Speaker 2: and you would certainly see the swap rates the wholesale 63 00:03:17,000 --> 00:03:19,399 Speaker 2: rates left I think on the day, and then over 64 00:03:19,440 --> 00:03:21,840 Speaker 2: sort of the one year horizon because it's baking in 65 00:03:21,960 --> 00:03:25,280 Speaker 2: quite a lot of cuts. But whether it's a mortgage 66 00:03:25,320 --> 00:03:28,600 Speaker 2: rates rise though, I think I think there's still enough 67 00:03:29,560 --> 00:03:31,040 Speaker 2: of a buffer there that banks have been sort of 68 00:03:31,080 --> 00:03:33,000 Speaker 2: waiting to see. Most banks so waiting to see what 69 00:03:33,040 --> 00:03:36,720 Speaker 2: happens today. So obviously I'm not part of those decisions, 70 00:03:36,760 --> 00:03:39,000 Speaker 2: but you'd have to I think you'd have to see 71 00:03:39,000 --> 00:03:41,160 Speaker 2: a bigger surprise than just at twenty five, because even 72 00:03:41,160 --> 00:03:43,160 Speaker 2: if they just cut twenty five, they're still likely to 73 00:03:43,280 --> 00:03:45,280 Speaker 2: concern that they're going to keep cutting in the future. 74 00:03:45,760 --> 00:03:48,440 Speaker 2: You need to see something quite extreme in the rhetoric, 75 00:03:48,920 --> 00:03:51,840 Speaker 2: I think, suggesting that they're getting very nervous about inflation. 76 00:03:51,960 --> 00:03:54,000 Speaker 2: That would definitely be one out of left field. That's 77 00:03:54,040 --> 00:03:55,520 Speaker 2: not something anyone's anticipating. 78 00:03:55,640 --> 00:03:57,760 Speaker 1: Sharon, Zolna A and Z thanks so much for your time. 79 00:03:57,800 --> 00:04:00,320 Speaker 1: Just gone seven away from six. That announcement due out 80 00:04:00,400 --> 00:04:03,520 Speaker 1: at two o'clock this afternoon. For more from News Talk 81 00:04:03,560 --> 00:04:06,839 Speaker 1: st B, listen live on air or online, and keep 82 00:04:06,880 --> 00:04:09,640 Speaker 1: our shows with you wherever you go with our podcasts 83 00:04:09,680 --> 00:04:10,760 Speaker 1: on iHeartRadio.