1 00:00:00,040 --> 00:00:02,840 Speaker 1: The Reserve Bank has cut twenty five points to three 2 00:00:02,840 --> 00:00:05,560 Speaker 1: and a half percent. On the question of tariffs and 3 00:00:05,600 --> 00:00:08,320 Speaker 1: how they might impact the economy going forward, they basically 4 00:00:08,360 --> 00:00:11,440 Speaker 1: said it's too soon to say, but they did say 5 00:00:11,480 --> 00:00:14,239 Speaker 1: there is room to move lower should they need to. 6 00:00:14,360 --> 00:00:17,200 Speaker 1: Kelly Echol's Westpac chief economists with US tonight. Hi Kelly, 7 00:00:18,000 --> 00:00:20,240 Speaker 1: hi yah, are you good? Thank you? So they've taken 8 00:00:20,280 --> 00:00:22,919 Speaker 1: the steady as she goes option, which is probably the 9 00:00:23,000 --> 00:00:24,120 Speaker 1: right one given the times. 10 00:00:25,280 --> 00:00:28,920 Speaker 2: Yeah, I think that's right. There was certainly no sense 11 00:00:28,960 --> 00:00:32,880 Speaker 2: of undue, anguish or panic there, which is appropriate given 12 00:00:32,960 --> 00:00:34,760 Speaker 2: things of moving quite quickly right now. 13 00:00:35,520 --> 00:00:38,240 Speaker 1: How they mentioned they do have room to go lower. 14 00:00:38,760 --> 00:00:41,320 Speaker 1: Three Adrian noise to say that was the sort of 15 00:00:41,320 --> 00:00:43,960 Speaker 1: bottom of neutral. Would they go lower than that? 16 00:00:45,120 --> 00:00:48,319 Speaker 2: Well, I think there's a possibility that could happen. They 17 00:00:48,320 --> 00:00:51,559 Speaker 2: didn't really say anything like that in this statement. They 18 00:00:51,680 --> 00:00:57,320 Speaker 2: just more pointed to the downside risks for growth, particularly 19 00:00:57,600 --> 00:01:00,840 Speaker 2: into inflation. To some extent, you don't have to be 20 00:01:01,280 --> 00:01:03,760 Speaker 2: very much of a rocket scientist to believe that. When 21 00:01:03,840 --> 00:01:06,600 Speaker 2: they'd give us the next set of forecasts in May, 22 00:01:07,160 --> 00:01:09,959 Speaker 2: that will forecast to interest rate being a bit lower 23 00:01:10,000 --> 00:01:12,880 Speaker 2: than it was and where it was had a bottom 24 00:01:12,959 --> 00:01:14,959 Speaker 2: of the OCA about three point one percent. 25 00:01:15,560 --> 00:01:17,240 Speaker 1: So where do you reckon the bottom might be now? 26 00:01:17,480 --> 00:01:19,120 Speaker 1: I guess we've got too soon to say are you 27 00:01:19,200 --> 00:01:21,080 Speaker 1: are you sticking to their line on Thatt Kelly or 28 00:01:21,080 --> 00:01:22,480 Speaker 1: are you going to go further for us? 29 00:01:23,120 --> 00:01:26,000 Speaker 2: I think it's a little bit hard to say. I mean, 30 00:01:26,040 --> 00:01:30,200 Speaker 2: it's pretty clear to me that there's downside risks to know, 31 00:01:30,360 --> 00:01:33,360 Speaker 2: certainly the forecast that we've had for a couple of 32 00:01:33,360 --> 00:01:35,200 Speaker 2: months now that the bottom of the cycle will be 33 00:01:35,200 --> 00:01:39,720 Speaker 2: at three point two five percent, But exactly the extent 34 00:01:39,760 --> 00:01:42,720 Speaker 2: of those I think is genuinely very hard to assess. 35 00:01:42,959 --> 00:01:44,800 Speaker 2: And if you just take a casual look at the 36 00:01:44,840 --> 00:01:47,039 Speaker 2: news flow you can see why. I mean, there's no 37 00:01:48,120 --> 00:01:51,600 Speaker 2: clarity really about how long and that the extent to 38 00:01:51,640 --> 00:01:53,480 Speaker 2: which these tariffs are going to be in place, how 39 00:01:53,520 --> 00:01:57,280 Speaker 2: countries are going to respond, and importantly how this impacts 40 00:01:57,280 --> 00:02:00,400 Speaker 2: on New Zealand as well, because there's quite a few 41 00:02:00,680 --> 00:02:02,880 Speaker 2: changes happening every day in that regard. 42 00:02:03,480 --> 00:02:05,880 Speaker 1: Your colleagues are at Kirybank, I said, I saw a 43 00:02:05,920 --> 00:02:08,000 Speaker 1: note from them. They want a quick reduction, they want 44 00:02:08,000 --> 00:02:09,840 Speaker 1: the ocr down, they want two and a half percent 45 00:02:09,880 --> 00:02:12,000 Speaker 1: by the end of the year. Do you think that's 46 00:02:12,560 --> 00:02:13,680 Speaker 1: rushing things? 47 00:02:14,600 --> 00:02:16,680 Speaker 2: Well, the end of the year is a long way here. 48 00:02:17,000 --> 00:02:20,520 Speaker 2: So if it does turn out that a meaningful adjustment 49 00:02:20,680 --> 00:02:23,480 Speaker 2: in interest rates is required, I would agree with them 50 00:02:23,480 --> 00:02:25,360 Speaker 2: that it will occur by the end of the year. 51 00:02:25,919 --> 00:02:28,360 Speaker 2: But what we don't really know here is how large 52 00:02:28,360 --> 00:02:31,560 Speaker 2: an adjustment is actually going to be required. All due 53 00:02:31,560 --> 00:02:33,320 Speaker 2: respect to them, they've decided to have a bit of 54 00:02:33,320 --> 00:02:35,040 Speaker 2: a guest here and they put a number on it. 55 00:02:35,520 --> 00:02:38,080 Speaker 2: But I'm also looking at the exchange rate here, and 56 00:02:38,120 --> 00:02:40,800 Speaker 2: I expect that it will continue to fall, potentially by 57 00:02:40,919 --> 00:02:43,959 Speaker 2: quite a lot. And the extent to which it falls, 58 00:02:44,160 --> 00:02:46,360 Speaker 2: and the extent to which some of these things we 59 00:02:46,400 --> 00:02:50,880 Speaker 2: see globally actually impact on things like export prices is 60 00:02:50,919 --> 00:02:51,720 Speaker 2: going to really. 61 00:02:51,520 --> 00:02:54,480 Speaker 1: Matter massively to us. I mean, we're an export nation. 62 00:02:55,440 --> 00:02:58,800 Speaker 1: What about the risks? So we've spoken a lot about 63 00:02:58,800 --> 00:03:03,200 Speaker 1: the downside risk too of recession potential recession in the States, 64 00:03:03,240 --> 00:03:07,800 Speaker 1: and you know our exports, et cetera. But what about inflation, 65 00:03:08,040 --> 00:03:15,000 Speaker 1: And like, surely the growth downside is riskier or more 66 00:03:15,120 --> 00:03:16,960 Speaker 1: likely than the inflation downside. 67 00:03:17,040 --> 00:03:20,720 Speaker 2: Right, Yeah, I think it's much more clear that we've 68 00:03:20,760 --> 00:03:23,840 Speaker 2: got a lower growth outlook coming out of this than 69 00:03:24,360 --> 00:03:27,960 Speaker 2: with inflation, where there's things pushing and pulling in different directions. 70 00:03:28,760 --> 00:03:30,480 Speaker 1: Kelly, great to have you on the show. Thank you, Kelly, 71 00:03:30,480 --> 00:03:34,200 Speaker 1: you're cold Westpac Chief Economist. For more from Heather Duplessy 72 00:03:34,200 --> 00:03:37,040 Speaker 1: Allen Drive, listen live to news Talks. It'd be from 73 00:03:37,120 --> 00:03:40,720 Speaker 1: four pm weekdays, or follow the podcast on iHeartRadio.