1
00:00:00,160 --> 00:00:02,360
Speaker 1: So here is your reserve bank and underum most economists

2
00:00:02,400 --> 00:00:04,240
Speaker 1: want a fifty point cut today. That's a big cut.

3
00:00:04,280 --> 00:00:06,240
Speaker 1: That's a cut that might indicate the reserve bank wreck

4
00:00:06,280 --> 00:00:08,119
Speaker 1: the economy a little bit much. Last time we heard

5
00:00:08,119 --> 00:00:10,239
Speaker 1: from Adria and he was talking twenty five points of course.

6
00:00:10,240 --> 00:00:12,080
Speaker 1: So what happens today and what effect does it have?

7
00:00:12,480 --> 00:00:15,120
Speaker 1: Former Reserve Bank economist Michael Radell's with us. Michael, morning

8
00:00:15,120 --> 00:00:19,760
Speaker 1: to you. If you're on the Monetary Policy Committee and

9
00:00:19,800 --> 00:00:22,319
Speaker 1: you hear all the economists so far this week, do

10
00:00:22,400 --> 00:00:24,800
Speaker 1: you go all geez, I wonder do are you affected

11
00:00:24,840 --> 00:00:25,079
Speaker 1: by that?

12
00:00:25,200 --> 00:00:28,960
Speaker 2: Or not? Really? Well? So maybe conscious of it. I mean,

13
00:00:29,000 --> 00:00:30,360
Speaker 2: you know, when I used to sell on the Monitary

14
00:00:30,360 --> 00:00:34,040
Speaker 2: Policy Committee, we've got standard advice as to what markets

15
00:00:34,040 --> 00:00:37,239
Speaker 2: were expecting, what economists were expecting. I don't think it

16
00:00:37,320 --> 00:00:40,960
Speaker 2: ever sort of swaders very much, because ultimately you've been

17
00:00:41,000 --> 00:00:43,920
Speaker 2: driven by your own analysis and your own forecast, and

18
00:00:44,000 --> 00:00:46,120
Speaker 2: quite a few of those market economists to say, as

19
00:00:46,159 --> 00:00:48,200
Speaker 2: I am, that today is the fifty fifty call.

20
00:00:48,520 --> 00:00:51,400
Speaker 1: It's pretty close, pretty close to to see. I've got

21
00:00:51,400 --> 00:00:55,120
Speaker 1: Greg Smith, who argues cogently at Debon Funds for seventy

22
00:00:55,240 --> 00:00:58,160
Speaker 1: five and you've got enziar at twenty five. That's a

23
00:00:58,280 --> 00:01:01,360
Speaker 1: huge gap. How come we've got such divergence.

24
00:01:02,640 --> 00:01:05,240
Speaker 2: Because interest rates are so high relative to what's the

25
00:01:05,280 --> 00:01:07,360
Speaker 2: normal levels, So the Reserve Bank thinks to normal and

26
00:01:07,440 --> 00:01:10,319
Speaker 2: natural rates about three point eight percent. We're at five

27
00:01:10,360 --> 00:01:12,440
Speaker 2: point two five at the moment. So we're going to

28
00:01:12,480 --> 00:01:15,160
Speaker 2: get back there and close that gap. The question is

29
00:01:15,400 --> 00:01:18,679
Speaker 2: how rapidly, how much? So that it comes back to

30
00:01:18,720 --> 00:01:21,080
Speaker 2: the uncertainty that inflation, you know, the inflation others don't

31
00:01:21,080 --> 00:01:22,920
Speaker 2: come out for next week. Some people are a lot

32
00:01:22,920 --> 00:01:24,680
Speaker 2: more confident about them than others.

33
00:01:24,720 --> 00:01:27,200
Speaker 1: So they would have some good intel in that. Some

34
00:01:27,280 --> 00:01:30,240
Speaker 1: suggestion is that it could print in a low two,

35
00:01:30,680 --> 00:01:33,520
Speaker 1: which means they've overcooked this, they've squeezed too tight.

36
00:01:35,360 --> 00:01:37,880
Speaker 2: Not necessarily on its own, because what will be affecting

37
00:01:37,920 --> 00:01:40,080
Speaker 2: the headline number next week is petrol prices have been

38
00:01:40,080 --> 00:01:42,000
Speaker 2: coming down, and as you now, oil prices go all

39
00:01:42,000 --> 00:01:43,640
Speaker 2: over the place. They'll be looking at the sort of

40
00:01:43,640 --> 00:01:48,640
Speaker 2: core measures, the ones excluding volatile items. So I think

41
00:01:48,680 --> 00:01:51,200
Speaker 2: it's more like the core numbers may still be around

42
00:01:51,280 --> 00:01:54,080
Speaker 2: three or just under, but still probably heading down, and

43
00:01:54,120 --> 00:01:55,960
Speaker 2: it's just a question for them of a how much

44
00:01:56,440 --> 00:01:59,440
Speaker 2: can they take from their forecast. Now they won't have

45
00:01:59,440 --> 00:02:02,120
Speaker 2: any advance information. And how consistent do they want to

46
00:02:02,160 --> 00:02:04,000
Speaker 2: be with what they said in August, because, as you

47
00:02:04,080 --> 00:02:08,200
Speaker 2: noted back in August, Asianman's numbers were very clear. Twenty

48
00:02:08,240 --> 00:02:11,080
Speaker 2: five month, do I read the dark haven't shifted that

49
00:02:11,160 --> 00:02:11,960
Speaker 2: much in the meantime?

50
00:02:12,120 --> 00:02:15,079
Speaker 1: Okay, So if he goes fifty, do we assume automatically

51
00:02:15,080 --> 00:02:17,040
Speaker 1: there's another fifty or we can't go that far?

52
00:02:18,120 --> 00:02:19,840
Speaker 2: I don't think so, And I don't think they will

53
00:02:19,880 --> 00:02:21,760
Speaker 2: quite have that in their minds either because they don't

54
00:02:21,800 --> 00:02:24,079
Speaker 2: do a full set of forecast or one of these reviews.

55
00:02:24,120 --> 00:02:26,720
Speaker 2: They do the full forecast only every quarter, and they

56
00:02:26,720 --> 00:02:28,760
Speaker 2: do have two bits of crucial information coming out in

57
00:02:28,760 --> 00:02:31,480
Speaker 2: the next couple of weeks CPI next week and the

58
00:02:31,560 --> 00:02:33,880
Speaker 2: unemployment and wage numbers the first week of November.

59
00:02:34,320 --> 00:02:37,000
Speaker 1: Does it work if he goes fifty today with the

60
00:02:37,040 --> 00:02:40,240
Speaker 1: twenty five already and possibly another fifty? Is that material

61
00:02:40,320 --> 00:02:44,160
Speaker 1: and things we can see change.

62
00:02:44,200 --> 00:02:46,000
Speaker 2: At that sort of scale one hundred point one hundred

63
00:02:46,000 --> 00:02:49,400
Speaker 2: and twenty five points. Yes, that does become material. Macroeconomically,

64
00:02:49,800 --> 00:02:52,680
Speaker 2: you're already seeing some business confidence surveys picking up and

65
00:02:52,720 --> 00:02:55,000
Speaker 2: I'm pretty sure that some of that is because people

66
00:02:55,040 --> 00:02:59,040
Speaker 2: are now expecting that there will be big cuts, so

67
00:02:59,200 --> 00:03:01,560
Speaker 2: you know, that's already some of the benefits. But martial

68
00:03:01,600 --> 00:03:04,120
Speaker 2: policy works with a way. It takes twelve thirty months.

69
00:03:04,400 --> 00:03:07,480
Speaker 2: Current things have been affected by decisions early last year,

70
00:03:08,360 --> 00:03:10,919
Speaker 2: so we're not going to see an immediate bounce back

71
00:03:10,960 --> 00:03:12,239
Speaker 2: to normal economic editions.

72
00:03:12,360 --> 00:03:14,920
Speaker 1: All right, Always enjoy your expertise. Michael Michaeldell, former Reserve

73
00:03:14,960 --> 00:03:17,360
Speaker 1: Bank economists. Just do I work you through it very quickly. Ah,

74
00:03:17,400 --> 00:03:20,000
Speaker 1: the major banks, this is your asb's and your Kiwi banks.

75
00:03:20,000 --> 00:03:22,240
Speaker 1: They're all arguing fifty points. Some of them are arguing

76
00:03:22,240 --> 00:03:25,520
Speaker 1: fifty and fifty. Jared kur at Kuebank argues very strongly

77
00:03:25,600 --> 00:03:28,760
Speaker 1: for that Westpact, they say fifty points, B and Z

78
00:03:29,120 --> 00:03:31,480
Speaker 1: they're looking at the same sort of numbers. So the

79
00:03:31,480 --> 00:03:33,160
Speaker 1: major banks are all on fifty. But then you've got

80
00:03:33,200 --> 00:03:36,840
Speaker 1: the A N Z. Sharon Zolner, they penciled fifty, but

81
00:03:36,960 --> 00:03:40,000
Speaker 1: they think it's line ball could easily be twenty five.

82
00:03:40,080 --> 00:03:42,080
Speaker 1: Then you got your independence, you got your infometrics and

83
00:03:42,080 --> 00:03:45,160
Speaker 1: New Zealand economic research. They say twenty five doesn't mean

84
00:03:45,160 --> 00:03:47,240
Speaker 1: that they want twenty five doesn't mean they're just saying

85
00:03:47,320 --> 00:03:50,160
Speaker 1: that's what we see happening today. So she is an

86
00:03:50,200 --> 00:03:53,440
Speaker 1: interesting time and an interesting cause. For more from the

87
00:03:53,480 --> 00:03:56,560
Speaker 1: Mic Asking Breakfast, listen live to news talks it'd be

88
00:03:56,680 --> 00:03:59,960
Speaker 1: from six am weekdays, or follow the podcast on iHeart

89
00:04:00,080 --> 00:04:00,360
Speaker 1: Radio