1 00:00:00,080 --> 00:00:02,240 Speaker 1: Now, all eyes are on the Reserve Bank tomorrow afternoon, 2 00:00:02,600 --> 00:00:05,200 Speaker 1: when the Acting Reserve Bank Governor, Christian Hawksby will announce 3 00:00:05,280 --> 00:00:07,880 Speaker 1: any changes to the OCR and inn talk to media 4 00:00:07,920 --> 00:00:09,719 Speaker 1: for the first time as the governor. Paul Bloxham is 5 00:00:09,840 --> 00:00:14,160 Speaker 1: hspci's chief economist. Hey Paul Good aim twenty five basis 6 00:00:14,160 --> 00:00:14,720 Speaker 1: point cut. 7 00:00:16,200 --> 00:00:18,560 Speaker 2: I think that's likely. That's certainly what we think's going 8 00:00:18,640 --> 00:00:21,920 Speaker 2: to arrive, and that's the consensus obviously in the market 9 00:00:21,920 --> 00:00:24,040 Speaker 2: as well. I mean, there's always a possibility it doesn't, 10 00:00:24,040 --> 00:00:27,160 Speaker 2: but I think that the way the economy is still 11 00:00:27,240 --> 00:00:30,159 Speaker 2: quite sluggish and growth is still weak enough that the 12 00:00:30,280 --> 00:00:33,680 Speaker 2: ARBENZ is likely to be focused on that weaker growth story, 13 00:00:34,320 --> 00:00:37,240 Speaker 2: and inflation is low enough at least on the last 14 00:00:37,280 --> 00:00:39,080 Speaker 2: print to allow them to be able to ease a 15 00:00:39,080 --> 00:00:41,440 Speaker 2: bit further. But the key question is going to be 16 00:00:41,600 --> 00:00:43,960 Speaker 2: what they have to say about what's coming after that. 17 00:00:44,040 --> 00:00:47,040 Speaker 2: I think that's where you can have a much sort 18 00:00:47,080 --> 00:00:48,880 Speaker 2: of more vivid debate about what's next. 19 00:00:49,120 --> 00:00:51,120 Speaker 1: Why not cut fifty basis points. 20 00:00:52,720 --> 00:00:55,200 Speaker 2: Well? I think the RBNZ has done a lot of 21 00:00:55,240 --> 00:00:58,000 Speaker 2: easy already, is the answer. They've already cut their cash 22 00:00:58,040 --> 00:01:00,880 Speaker 2: right by two hundred basis points over a pretty small 23 00:01:00,920 --> 00:01:02,600 Speaker 2: amount of time, if you think about it. I mean, 24 00:01:02,720 --> 00:01:04,640 Speaker 2: the first cut came in August of last year. We're 25 00:01:04,640 --> 00:01:07,000 Speaker 2: sitting here in May of this year. I mean, I 26 00:01:07,000 --> 00:01:09,440 Speaker 2: think so that's one reason there's a lot of easing 27 00:01:09,480 --> 00:01:12,080 Speaker 2: that's already been put in place. I think the second 28 00:01:12,120 --> 00:01:14,360 Speaker 2: one is that you are seeing some signs that it's 29 00:01:14,360 --> 00:01:17,640 Speaker 2: starting to get a bit of traction. You know, the 30 00:01:17,680 --> 00:01:19,800 Speaker 2: retail numbers last week, we're a bit on the stronger 31 00:01:19,840 --> 00:01:22,959 Speaker 2: side for the first quarter. You're seeing some signs of 32 00:01:22,959 --> 00:01:25,200 Speaker 2: stability in the housing market, a turnaround in some of 33 00:01:25,240 --> 00:01:28,440 Speaker 2: the sentiment indicators in the business sector. And we know 34 00:01:28,840 --> 00:01:32,280 Speaker 2: monetary policy operates with lags. You cut interest rates, it 35 00:01:32,319 --> 00:01:34,440 Speaker 2: takes time for it to feed through. So you've put 36 00:01:34,480 --> 00:01:37,240 Speaker 2: a lot of stimulus into the economy. You're seeing some 37 00:01:37,280 --> 00:01:40,120 Speaker 2: signs it's getting some traction. I think there's probably enough 38 00:01:40,160 --> 00:01:42,399 Speaker 2: evidence that you might want to ease just a bit further. 39 00:01:42,520 --> 00:01:44,720 Speaker 2: But that's where it's going to start to become a 40 00:01:44,800 --> 00:01:47,640 Speaker 2: question as to how much more beyond that needs to 41 00:01:47,640 --> 00:01:50,320 Speaker 2: be done to get the economy to turn around and 42 00:01:50,360 --> 00:01:52,880 Speaker 2: to still keep inflation consistent with target. 43 00:01:53,000 --> 00:01:54,800 Speaker 1: So the thing is, Paul, I mean everybody agrees that 44 00:01:54,840 --> 00:01:56,840 Speaker 1: we're sitting above neutral at the moment, right that is, 45 00:01:56,880 --> 00:01:59,760 Speaker 1: still that OCR at that level is still strangling to 46 00:01:59,800 --> 00:02:03,480 Speaker 1: some extent. Given how bad the economy is, surely you 47 00:02:04,040 --> 00:02:07,160 Speaker 1: should actually be at neutral, if not below, and providing 48 00:02:07,200 --> 00:02:07,680 Speaker 1: some stimulus. 49 00:02:07,720 --> 00:02:12,519 Speaker 2: So why not, Well, I think two things. One, neutral 50 00:02:12,600 --> 00:02:15,280 Speaker 2: is an estimate. We don't actually know where neutral lives. 51 00:02:15,320 --> 00:02:18,240 Speaker 2: We don't know, you know, it's always an estimated concept. 52 00:02:18,280 --> 00:02:21,200 Speaker 2: And there are large ara bands around where that neutral 53 00:02:21,320 --> 00:02:25,119 Speaker 2: estimate lies as well. And you know, so I think 54 00:02:25,120 --> 00:02:27,120 Speaker 2: for the moment, it pays the Arbenz that to be 55 00:02:27,120 --> 00:02:29,400 Speaker 2: a little bit more cautious in terms of the pace 56 00:02:29,440 --> 00:02:31,760 Speaker 2: at which they deliver rate cuts. We've already seen them 57 00:02:31,760 --> 00:02:34,600 Speaker 2: pivot out of the fifty basis point moves they were 58 00:02:34,639 --> 00:02:36,640 Speaker 2: doing to the last time, they moved to a twenty 59 00:02:36,639 --> 00:02:39,360 Speaker 2: five basis point move, and I think you're seeing signs 60 00:02:39,360 --> 00:02:42,240 Speaker 2: that the domestic economy stabilizing. One other remark would be 61 00:02:43,200 --> 00:02:47,040 Speaker 2: you have seen in their most recent reading of inflation expectations. 62 00:02:47,080 --> 00:02:49,280 Speaker 2: So they do their own They've got a survey that 63 00:02:49,360 --> 00:02:52,480 Speaker 2: looks at what consumers think inflation will do going forward, 64 00:02:52,760 --> 00:02:54,680 Speaker 2: a bit of a lift. It's picked up a little bit, 65 00:02:54,760 --> 00:02:56,839 Speaker 2: so that might be something that the arbens that will 66 00:02:56,840 --> 00:02:58,080 Speaker 2: just want to keep a bit of an eye on 67 00:02:58,120 --> 00:03:02,080 Speaker 2: that inflation does remain on target and well embedded and 68 00:03:02,120 --> 00:03:04,680 Speaker 2: anchored at the middle point of their target band. 69 00:03:04,960 --> 00:03:06,720 Speaker 1: Paul, it's good to talk to you. I appreciate your 70 00:03:06,720 --> 00:03:09,079 Speaker 1: time and enjoy it. Tomorrow it's Paul Bloxhom, Hspecies Chief 71 00:03:09,080 --> 00:03:12,520 Speaker 1: Economists for more from Hither Duplessy Allen Drive. 72 00:03:12,680 --> 00:03:16,120 Speaker 2: Listen live to news talks it'd be from four pm weekdays, 73 00:03:16,200 --> 00:03:18,400 Speaker 2: or follow the podcast on iHeartRadio.