1 00:00:00,240 --> 00:00:02,960 Speaker 1: Togever Do for c l Let's talk about the OCA. 2 00:00:03,040 --> 00:00:05,480 Speaker 1: The Reserve Bank is widely expected to cut it tomorrow. 3 00:00:05,519 --> 00:00:07,720 Speaker 1: It sits at three point twenty five percent. Major banks 4 00:00:07,720 --> 00:00:10,280 Speaker 1: have already been dropping their mortgage interest rates in anticipation. 5 00:00:10,840 --> 00:00:14,080 Speaker 1: HSBC's chief economist Paul Bloxham is with us from Sydney. Hay, Paul, 6 00:00:15,560 --> 00:00:16,959 Speaker 1: so what do you reckon? Do you reckon? They'll have 7 00:00:17,000 --> 00:00:18,360 Speaker 1: consensus around the table on this. 8 00:00:20,320 --> 00:00:22,960 Speaker 2: I think that it's fairly clear that the case should 9 00:00:22,960 --> 00:00:25,760 Speaker 2: be made that, you know, cutting by twenty five basis 10 00:00:25,760 --> 00:00:29,040 Speaker 2: points makes sense. I think, you know, the economy is 11 00:00:29,080 --> 00:00:32,840 Speaker 2: still quite sluggish, and the data that the labor markets 12 00:00:32,880 --> 00:00:35,239 Speaker 2: particularly soggy at the moment, and so the case for 13 00:00:35,280 --> 00:00:38,640 Speaker 2: supporting growth is probably stronger than the case for being 14 00:00:38,680 --> 00:00:40,960 Speaker 2: worried that inflation has picked up a bit. And it 15 00:00:41,000 --> 00:00:42,879 Speaker 2: has picked up a bit, So I think I think 16 00:00:42,920 --> 00:00:46,040 Speaker 2: they should get over the line fairly comfortably for delivering 17 00:00:46,080 --> 00:00:46,720 Speaker 2: a cup tomorrow. 18 00:00:47,120 --> 00:00:48,800 Speaker 1: And what do you reckon that the do the cut 19 00:00:48,800 --> 00:00:51,199 Speaker 1: and then do they indicate more easing after that? 20 00:00:52,520 --> 00:00:55,120 Speaker 2: I think that they're likely to be a bit circumspected 21 00:00:55,080 --> 00:00:58,560 Speaker 2: about what's coming next. Actually, I mean, I think although 22 00:00:59,200 --> 00:01:01,720 Speaker 2: as I say they is still looking a bit sluggish, 23 00:01:01,760 --> 00:01:05,160 Speaker 2: and still the labor market SOGI inflation having picked up 24 00:01:05,160 --> 00:01:07,160 Speaker 2: a bit is something that will be I think in 25 00:01:07,959 --> 00:01:10,400 Speaker 2: their focus they'll know about that. And then I think 26 00:01:10,600 --> 00:01:12,360 Speaker 2: the other thing to watch out for is we've had 27 00:01:12,360 --> 00:01:15,160 Speaker 2: some wobbles in the data over the past couple of months, 28 00:01:15,200 --> 00:01:18,600 Speaker 2: obviously the PMIS and arrange of the sort of timely indicators, 29 00:01:18,720 --> 00:01:20,920 Speaker 2: but they have come back a bit in the last print, 30 00:01:21,600 --> 00:01:23,560 Speaker 2: and I do think that these wobbles are going to 31 00:01:23,600 --> 00:01:25,720 Speaker 2: prove to be just temporary. I think the two big 32 00:01:25,760 --> 00:01:27,920 Speaker 2: forces at work that are going to lift growth in 33 00:01:27,959 --> 00:01:30,120 Speaker 2: New Zealand are going to be interest rates have come 34 00:01:30,120 --> 00:01:31,679 Speaker 2: down a long way already and I think they'll go 35 00:01:31,720 --> 00:01:34,640 Speaker 2: down another twenty five basis points. And dairy prices are 36 00:01:34,640 --> 00:01:36,720 Speaker 2: at high levels and that's boosting the agricultural sector. So 37 00:01:37,040 --> 00:01:40,000 Speaker 2: I think they should be quite circumspect about what they 38 00:01:40,040 --> 00:01:42,480 Speaker 2: do next, even though I'm fairly confident they're going to 39 00:01:42,520 --> 00:01:43,440 Speaker 2: deliver a cut tomorrow. 40 00:01:43,880 --> 00:01:46,120 Speaker 1: Do you think that given that, I mean, you're a 41 00:01:46,160 --> 00:01:48,360 Speaker 1: bit more glass half full than glass half MD, right, 42 00:01:48,400 --> 00:01:50,680 Speaker 1: and you think we're probably actually already on our way up. 43 00:01:50,720 --> 00:01:52,680 Speaker 1: Do we need to change our attitude in this country 44 00:01:52,680 --> 00:01:54,440 Speaker 1: and stop being so moody about it. 45 00:01:55,960 --> 00:01:58,360 Speaker 2: Oh look, I think that when you look at the 46 00:01:58,480 --> 00:02:01,480 Speaker 2: economy from a distance, I do. I watch New Zealand 47 00:02:01,560 --> 00:02:04,960 Speaker 2: very carefully, but I watch it from Australia. I think 48 00:02:05,000 --> 00:02:07,400 Speaker 2: I can see the big picture forces at work that 49 00:02:07,960 --> 00:02:10,880 Speaker 2: are supporting the economy, and I think it does feel 50 00:02:11,160 --> 00:02:12,639 Speaker 2: on the ground. I was in New Zealand a few 51 00:02:12,639 --> 00:02:15,240 Speaker 2: weeks back. It does feel still a bit a bit sluggish. 52 00:02:15,240 --> 00:02:17,760 Speaker 2: But the thing is we're not We're not trying to 53 00:02:17,760 --> 00:02:20,000 Speaker 2: work out where the economy is right now. We're trying 54 00:02:20,000 --> 00:02:21,320 Speaker 2: to work out whether the economy is going to be 55 00:02:21,320 --> 00:02:23,440 Speaker 2: in six or twelve months time. We're trying to forecast, 56 00:02:23,760 --> 00:02:26,359 Speaker 2: and so I think, don't get too caught up in 57 00:02:26,600 --> 00:02:28,239 Speaker 2: the things that are the fact that things are a 58 00:02:28,240 --> 00:02:31,040 Speaker 2: bit sluggish at the moment. The forces at work are 59 00:02:31,080 --> 00:02:34,120 Speaker 2: in play for getting growth to lift over the next 60 00:02:34,160 --> 00:02:36,760 Speaker 2: six to twelve months, and that's how we've framed our view. 61 00:02:37,280 --> 00:02:39,720 Speaker 1: Am I right in thinking that Michelle Bullock was being 62 00:02:39,760 --> 00:02:42,240 Speaker 1: a little bit cagy about where she thinks neutral is. 63 00:02:43,760 --> 00:02:46,040 Speaker 2: I don't think the RBA wants to be very specific 64 00:02:46,080 --> 00:02:48,120 Speaker 2: about where they think neutral is. In fact, They've been 65 00:02:48,240 --> 00:02:52,040 Speaker 2: quite clear in their published work in their statement that 66 00:02:52,080 --> 00:02:54,680 Speaker 2: there are lots of models, and those models all show 67 00:02:54,800 --> 00:02:57,600 Speaker 2: quite you know, are varied estimates as to where neutral is, 68 00:02:57,960 --> 00:02:59,840 Speaker 2: and so you know, they look at them all and 69 00:03:00,080 --> 00:03:02,480 Speaker 2: they take some information from them. But I don't think 70 00:03:02,520 --> 00:03:05,600 Speaker 2: they're being guided in terms of what they do month 71 00:03:05,680 --> 00:03:07,720 Speaker 2: to month with their or you know, meeting to meeting 72 00:03:07,760 --> 00:03:10,240 Speaker 2: with their policy setting at the RBA, by where they 73 00:03:10,280 --> 00:03:13,000 Speaker 2: are relative to neutral. I think it's just one of 74 00:03:13,000 --> 00:03:15,959 Speaker 2: the many things that goes into the mix about the discussion, 75 00:03:15,960 --> 00:03:18,280 Speaker 2: but it's not actually the thing that's driving the decision. 76 00:03:18,360 --> 00:03:21,480 Speaker 2: So I think, you know, they've been fairly clear that 77 00:03:21,520 --> 00:03:23,919 Speaker 2: they don't. They think that it's you know, it's there's 78 00:03:23,919 --> 00:03:26,560 Speaker 2: a large range of estimates where neutral is. 79 00:03:26,919 --> 00:03:31,200 Speaker 1: So why not actually say where they think neutralism? Is 80 00:03:31,240 --> 00:03:33,080 Speaker 1: it not helpful to people to have an idea of 81 00:03:33,120 --> 00:03:33,720 Speaker 1: what they think? 82 00:03:35,000 --> 00:03:37,040 Speaker 2: Well, but I think this is the point that they are. 83 00:03:37,120 --> 00:03:39,400 Speaker 2: I don't think they set policy in that way. I 84 00:03:39,400 --> 00:03:42,400 Speaker 2: think the way they go about setting policy is primarily 85 00:03:42,560 --> 00:03:45,000 Speaker 2: by doing it by feel, is the way I describe. Right. 86 00:03:45,200 --> 00:03:47,839 Speaker 2: They're data dependent. They're watching the data as it comes out. 87 00:03:47,880 --> 00:03:49,640 Speaker 2: If the data are a bit weak or a bit 88 00:03:49,640 --> 00:03:52,560 Speaker 2: stronger relative to their forecast than that sort of conditions 89 00:03:52,560 --> 00:03:55,760 Speaker 2: how they're going to respond, And it's about doing it 90 00:03:55,800 --> 00:03:58,600 Speaker 2: that way rather than having a really strong view about 91 00:03:58,640 --> 00:04:00,680 Speaker 2: where they think neutral is and then setting it based 92 00:04:00,720 --> 00:04:03,440 Speaker 2: on a model framework, because the risk of doing that, 93 00:04:03,520 --> 00:04:05,840 Speaker 2: of course, is you could be wrong. You might not 94 00:04:05,920 --> 00:04:08,760 Speaker 2: get your neutral estimate particularly right. And I guess the 95 00:04:08,880 --> 00:04:11,080 Speaker 2: RBA is being quite clear about the fact that actually 96 00:04:11,080 --> 00:04:13,960 Speaker 2: there's a lot of variability, and the models all come 97 00:04:14,040 --> 00:04:16,240 Speaker 2: up with sort of you know, model estimates that can 98 00:04:16,279 --> 00:04:19,080 Speaker 2: be quite variable. So better to do it by feel 99 00:04:19,200 --> 00:04:22,080 Speaker 2: better to go about setting monetary policy based on the 100 00:04:22,160 --> 00:04:24,040 Speaker 2: data as we see it, rather than putting a lot 101 00:04:24,040 --> 00:04:26,440 Speaker 2: of weight on a very uncertain forecast. 102 00:04:27,200 --> 00:04:29,360 Speaker 1: What do you think, now that we've had the tariff 103 00:04:29,360 --> 00:04:31,840 Speaker 1: stuff largely sorted out and it's settled down a wee bit, 104 00:04:31,920 --> 00:04:34,599 Speaker 1: where do you see the international economic situation sitting. 105 00:04:35,680 --> 00:04:37,919 Speaker 2: I think we still yet to see the full effect 106 00:04:38,080 --> 00:04:41,440 Speaker 2: of the tariff uncertainty that came through. I think a 107 00:04:41,440 --> 00:04:44,120 Speaker 2: lot of what's actually held up the economic indicators over 108 00:04:44,160 --> 00:04:47,080 Speaker 2: the past six months or so has been a lot 109 00:04:47,080 --> 00:04:49,479 Speaker 2: of front loading, you know, there's been a lot of 110 00:04:49,480 --> 00:04:52,919 Speaker 2: pull forward of activity ahead of the arrival of those tariffs, 111 00:04:53,120 --> 00:04:54,800 Speaker 2: a lot of imports into the US, a lot of 112 00:04:54,839 --> 00:04:57,479 Speaker 2: exports out of other economies into the US, and I 113 00:04:57,480 --> 00:04:59,680 Speaker 2: think we're yet to see that front loading roll off, 114 00:04:59,680 --> 00:05:01,839 Speaker 2: and I think as it does roll off, it's actually 115 00:05:01,880 --> 00:05:04,680 Speaker 2: going to weaken the global economic cycle, both the US 116 00:05:05,080 --> 00:05:07,360 Speaker 2: and the one in Asia. So I think I think 117 00:05:07,360 --> 00:05:09,800 Speaker 2: we still haven't seen the full effect of that, the 118 00:05:09,880 --> 00:05:13,640 Speaker 2: uncertainty that was created by all of those trade developments, 119 00:05:13,680 --> 00:05:17,120 Speaker 2: and also the impact it's had in terms of driving 120 00:05:17,120 --> 00:05:19,520 Speaker 2: front loading. So we've still got in mind that global 121 00:05:19,520 --> 00:05:22,640 Speaker 2: growth slows in the coming months and into the early 122 00:05:22,680 --> 00:05:23,520 Speaker 2: part of next year. 123 00:05:23,680 --> 00:05:25,320 Speaker 1: Good stuff. Hey, it's always good to talk to you, Paul. 124 00:05:25,320 --> 00:05:28,080 Speaker 1: Thanks so much. Paul Bloxham, HSPECIES Chief Economists. 125 00:05:28,600 --> 00:05:31,800 Speaker 2: For more from Hither Duplessy Alan Drive, listen live to 126 00:05:31,839 --> 00:05:34,880 Speaker 2: news talks. It'd be from four pm weekdays, or follow 127 00:05:34,920 --> 00:05:36,680 Speaker 2: the podcast on iHeartRadio.