1 00:00:00,160 --> 00:00:04,240 Speaker 1: So first OCR decision today post operation epic fury. This 2 00:00:04,280 --> 00:00:06,880 Speaker 1: is from the rbn Z economists. Reckon they'll hold steady 3 00:00:06,880 --> 00:00:09,319 Speaker 1: at two point twenty five percent. Sharon zolma A and 4 00:00:09,360 --> 00:00:11,440 Speaker 1: Z Chief economs with me this morning. Sharon, good morning, 5 00:00:12,440 --> 00:00:14,320 Speaker 1: good morning. So crouch and hold today. 6 00:00:15,760 --> 00:00:18,840 Speaker 2: Yeah, what else are you going to do? Yeah? Yeah, 7 00:00:18,880 --> 00:00:22,000 Speaker 2: it's still actually ambiguous how Mountroy policy should respond to this. 8 00:00:22,079 --> 00:00:26,880 Speaker 2: It's clearly bad, but it's also clearly inflationary, bad for growth. 9 00:00:26,960 --> 00:00:30,840 Speaker 2: There is no right answer for Mountry policy really in 10 00:00:30,880 --> 00:00:33,760 Speaker 2: the sort of scenario I sort of do no additional 11 00:00:33,800 --> 00:00:35,640 Speaker 2: harm is kind of the best you can hope for. 12 00:00:36,320 --> 00:00:39,640 Speaker 2: So until it's clear whether it's going to require higher 13 00:00:39,720 --> 00:00:44,000 Speaker 2: interest rates to head off persistent inflation or not, absolutely 14 00:00:44,080 --> 00:00:45,920 Speaker 2: the best thing for the Reserve Bank to do is 15 00:00:46,440 --> 00:00:48,559 Speaker 2: just stay, wait and see mode. 16 00:00:48,920 --> 00:00:52,199 Speaker 1: The journist asking about seven percent inflation, I'm assuming they're 17 00:00:52,240 --> 00:00:55,800 Speaker 1: picking that number because that's how high we got, actually 18 00:00:55,880 --> 00:00:59,080 Speaker 1: north of seven percent after the COVID years. But is 19 00:00:59,120 --> 00:01:03,240 Speaker 1: there any reason to think it will go that high? 20 00:01:03,600 --> 00:01:06,160 Speaker 2: No? Well, I mean not at this point here and 21 00:01:06,200 --> 00:01:08,360 Speaker 2: now today, ask us again tomorrow. You know, we're in 22 00:01:08,400 --> 00:01:12,839 Speaker 2: that kind of world. We made assumptions just to put 23 00:01:12,959 --> 00:01:16,360 Speaker 2: something in our updated forecasts, and we came up with 24 00:01:16,400 --> 00:01:18,280 Speaker 2: the number. But if you assume the oil price peaks 25 00:01:18,319 --> 00:01:20,600 Speaker 2: at one hundred and gradually declines from here, that gives 26 00:01:20,600 --> 00:01:23,120 Speaker 2: you something like three point six. Now, obviously that's looking 27 00:01:23,959 --> 00:01:26,200 Speaker 2: at that hierarque. At this point, it's looking like the 28 00:01:26,240 --> 00:01:30,920 Speaker 2: oil price will be higher for longer. We have trumped 29 00:01:31,480 --> 00:01:35,120 Speaker 2: sending posts that there's going to be civilizational destruction today, 30 00:01:35,280 --> 00:01:37,680 Speaker 2: So I mean that they're oft in terms of your 31 00:01:37,720 --> 00:01:41,200 Speaker 2: forecasting sees your inflation at that point. So it's really 32 00:01:41,600 --> 00:01:44,480 Speaker 2: absolutely a matter of wait and see. But for the 33 00:01:44,520 --> 00:01:48,120 Speaker 2: Reserve Bank, it's really not the point how high inflation goes. 34 00:01:48,200 --> 00:01:51,240 Speaker 2: It's how high it stays, how quickly it comes down, 35 00:01:51,520 --> 00:01:54,720 Speaker 2: whether it becomes a medium term problem, or whether people 36 00:01:55,080 --> 00:01:57,800 Speaker 2: just accept it that it's a one off shift in 37 00:01:57,840 --> 00:02:00,480 Speaker 2: the price level and that things will get back normal. 38 00:02:00,560 --> 00:02:02,480 Speaker 2: That's the key question from where they sit. 39 00:02:02,520 --> 00:02:05,040 Speaker 1: And are we somewhat insulated by the fact we haven't 40 00:02:05,040 --> 00:02:06,960 Speaker 1: been doing as well over the last few years as 41 00:02:06,960 --> 00:02:07,960 Speaker 1: other countries have been. 42 00:02:09,800 --> 00:02:12,120 Speaker 2: There's no good time for something like this to happen. 43 00:02:12,760 --> 00:02:15,440 Speaker 2: But if you're economy strong, that has advantages but if 44 00:02:15,480 --> 00:02:18,040 Speaker 2: your economy has been weak, then you know that's got 45 00:02:18,080 --> 00:02:21,600 Speaker 2: some upsides as well. In particular, they're not in a 46 00:02:21,800 --> 00:02:24,640 Speaker 2: very frothy time for asset prices. For example, all the 47 00:02:24,680 --> 00:02:28,120 Speaker 2: heats come out of house prices already, so you know, 48 00:02:28,200 --> 00:02:31,560 Speaker 2: the chances of a crash there is obviously lower from 49 00:02:31,560 --> 00:02:35,240 Speaker 2: the fact that the starting point is lower. We're not 50 00:02:35,360 --> 00:02:36,920 Speaker 2: in the world where firms are going to find it 51 00:02:36,960 --> 00:02:40,760 Speaker 2: particularly easy to pass cost increases through the prices. That's 52 00:02:40,919 --> 00:02:44,080 Speaker 2: bad news for them, but good news for the Reserve 53 00:02:44,160 --> 00:02:47,320 Speaker 2: Bank in terms of keeping in slate, we're not keeping 54 00:02:47,320 --> 00:02:49,520 Speaker 2: inflation low, but making sure it stays low in the 55 00:02:49,560 --> 00:02:53,440 Speaker 2: medium term, for example. But yeah, we're seeing different countries 56 00:02:53,480 --> 00:02:57,160 Speaker 2: at different points of the cycle. Yeah, being more or 57 00:02:57,280 --> 00:03:01,400 Speaker 2: less worried about inflation for exactly those kinds of reasons. 58 00:03:01,760 --> 00:03:04,280 Speaker 2: But it's also true that our official cash rate is 59 00:03:04,320 --> 00:03:08,400 Speaker 2: starting from a very low point. So there is a 60 00:03:08,440 --> 00:03:12,040 Speaker 2: scenario where the Reserve Bank could decide a little bit 61 00:03:12,080 --> 00:03:14,120 Speaker 2: sooner than otherwise that maybe they should get it back 62 00:03:14,160 --> 00:03:17,920 Speaker 2: to something closer to neutral. We'll have to wait and see. 63 00:03:17,919 --> 00:03:20,760 Speaker 2: We're still forecasting to send that. But honestly, the range 64 00:03:20,760 --> 00:03:24,360 Speaker 2: of plausible scenarios is obviously much much wider than it 65 00:03:24,440 --> 00:03:25,639 Speaker 2: was six weeks ago. 66 00:03:25,639 --> 00:03:29,040 Speaker 1: And changes on every truth social post from a certain 67 00:03:29,240 --> 00:03:32,720 Speaker 1: man in the White House, Sharon Zolmer, Ain's chief economists 68 00:03:32,720 --> 00:03:33,880 Speaker 1: with us for. 69 00:03:33,919 --> 00:03:35,960 Speaker 2: More from early edition with Ryan Bridge. 70 00:03:36,040 --> 00:03:39,640 Speaker 1: Listen live to News Talks it'd be from five am weekdays, 71 00:03:39,760 --> 00:03:41,800 Speaker 1: or follow the podcast on iHeartRadio.