1 00:00:00,120 --> 00:00:02,440 Speaker 1: Better than expected, but still bad. That seems to be 2 00:00:02,480 --> 00:00:05,000 Speaker 1: the vert on our GDP data out yesterday, one point 3 00:00:05,000 --> 00:00:07,600 Speaker 1: two percent for the June quarter. Will that hinder our 4 00:00:07,720 --> 00:00:11,040 Speaker 1: chances of more and maybe bigger rate cuts this year 5 00:00:11,080 --> 00:00:14,360 Speaker 1: before Christmas? Nick Touughley is asb's chief economist. Nick, good morning, 6 00:00:15,000 --> 00:00:17,720 Speaker 1: Good morning, what do you reckon? Well, what does it 7 00:00:17,760 --> 00:00:21,640 Speaker 1: affect what you've seen yesterday our chances of cuts this year? 8 00:00:23,640 --> 00:00:27,360 Speaker 2: No, it doesn't. The Reserve Bank will be cutting anyway. 9 00:00:27,720 --> 00:00:30,200 Speaker 2: The Reserve Bank was expecting the slightly weakened number, but 10 00:00:30,240 --> 00:00:32,720 Speaker 2: it's not going to go fuel. Let's keep rates where 11 00:00:32,720 --> 00:00:34,639 Speaker 2: they are now. It's of the view that it's got 12 00:00:34,640 --> 00:00:37,479 Speaker 2: inflation under control, and the thing is that we need 13 00:00:37,520 --> 00:00:40,320 Speaker 2: to see the cash rate get from over five percent 14 00:00:40,400 --> 00:00:43,000 Speaker 2: down to something but over three percent, which is a 15 00:00:43,000 --> 00:00:46,839 Speaker 2: more neutral level, reasonably quickly. So they'll keep cutting rates. 16 00:00:47,159 --> 00:00:50,200 Speaker 1: How soon do you reckon? We'll get to that three. 17 00:00:49,560 --> 00:00:54,320 Speaker 2: Percent if they cut at a quarter percent every single meeting. 18 00:00:54,320 --> 00:00:56,440 Speaker 2: They've only got seven meetings a year, then we're talking 19 00:00:56,480 --> 00:01:01,320 Speaker 2: about say about this time next year, around around October 20 00:01:01,400 --> 00:01:04,400 Speaker 2: next year now, because that's a long time to have 21 00:01:04,520 --> 00:01:07,800 Speaker 2: rates essentially still with the foot on the break, there 22 00:01:07,880 --> 00:01:11,320 Speaker 2: is that possibility that we do get a larger cut, 23 00:01:11,800 --> 00:01:14,360 Speaker 2: say later this year or early next year. But it's 24 00:01:14,400 --> 00:01:17,960 Speaker 2: really going to depend on whether inflation starts to look 25 00:01:18,080 --> 00:01:21,319 Speaker 2: like it's falling a lotier than what the Rezero Bank's 26 00:01:21,360 --> 00:01:23,080 Speaker 2: been anticipating. 27 00:01:22,560 --> 00:01:26,360 Speaker 1: That potential for a fifty basis point cut. How does 28 00:01:26,400 --> 00:01:28,480 Speaker 1: the summer break, because obviously they go away for some 29 00:01:28,560 --> 00:01:30,559 Speaker 1: of them went back to February. How does that affect 30 00:01:30,600 --> 00:01:32,560 Speaker 1: the potential for it to be either this side or 31 00:01:32,600 --> 00:01:33,880 Speaker 1: the other side of Christmas. 32 00:01:34,480 --> 00:01:37,240 Speaker 2: Well, it does mean that you have this chance that 33 00:01:37,280 --> 00:01:39,839 Speaker 2: you do get a bigger cut, and that's what financial 34 00:01:39,840 --> 00:01:43,160 Speaker 2: markets have been building it, and financial markets have been 35 00:01:43,160 --> 00:01:47,280 Speaker 2: building in a very strong chance that you get large cuts. 36 00:01:47,920 --> 00:01:50,880 Speaker 2: It's either or both of those meetings. It's got a 37 00:01:50,960 --> 00:01:54,880 Speaker 2: huge amount built in over that period, so look at 38 00:01:54,880 --> 00:01:56,760 Speaker 2: it's certainly a risk. It's going to depend on what 39 00:01:56,800 --> 00:01:59,000 Speaker 2: the data is looking like, particularly some of the labor 40 00:01:59,000 --> 00:02:01,720 Speaker 2: market data that we get early November ahead of the 41 00:02:01,800 --> 00:02:05,280 Speaker 2: Reserve banks last decision of the year, and also the 42 00:02:05,280 --> 00:02:08,200 Speaker 2: inflation figures that it seems before that last decision of 43 00:02:08,240 --> 00:02:08,560 Speaker 2: the year. 44 00:02:08,800 --> 00:02:12,120 Speaker 1: Immigration. How worried are you about because obviously it props 45 00:02:12,160 --> 00:02:14,920 Speaker 1: up our GDP. How worried are you about potential for 46 00:02:15,040 --> 00:02:17,799 Speaker 1: net zero migration to New Zealand next year? 47 00:02:19,360 --> 00:02:23,639 Speaker 2: Well, from an inflation point of view, it's probably potentially 48 00:02:23,680 --> 00:02:27,720 Speaker 2: a bit helpful, and we don't need the people in 49 00:02:27,760 --> 00:02:29,919 Speaker 2: the workforce like we did a couple of years where 50 00:02:29,919 --> 00:02:31,880 Speaker 2: we sort of went from sort of like fam to 51 00:02:31,960 --> 00:02:34,840 Speaker 2: feast and now we do face some pretty weak need 52 00:02:34,880 --> 00:02:38,480 Speaker 2: immigration next year. But look, the thing about net immigration 53 00:02:38,639 --> 00:02:41,919 Speaker 2: is it's about the pace and the type of people 54 00:02:41,919 --> 00:02:46,160 Speaker 2: that we are getting as well and looking over longer term, 55 00:02:46,160 --> 00:02:48,920 Speaker 2: having migration that's not going in such big swims so 56 00:02:49,120 --> 00:02:51,639 Speaker 2: you can cope better from the infrastructure is really important, 57 00:02:52,000 --> 00:02:54,600 Speaker 2: and also who's coming and who's going out. It's really 58 00:02:54,600 --> 00:02:56,919 Speaker 2: important as well from the sorts of skills that we need. 59 00:02:56,960 --> 00:02:58,720 Speaker 1: All right, Nick, thank you very much for that update. 60 00:02:58,760 --> 00:03:00,520 Speaker 1: Great to have you on. The show is always Toughly 61 00:03:00,560 --> 00:03:04,239 Speaker 1: Cheap Economist at ASP. For more from Newstalk st B, 62 00:03:04,520 --> 00:03:07,760 Speaker 1: listen live on air or online, and keep our shows 63 00:03:07,800 --> 00:03:11,080 Speaker 1: with you wherever you go with our podcasts on iHeartRadio.