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Speaker 1: You're listening to a podcast from News Talks'd be follow

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Speaker 1: this and our wide range of podcasts now on iHeartRadio.

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Speaker 2: Well, the Reserve Band cams cut the official cash rate

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Speaker 2: by fifty bases points from five point two five percent

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Speaker 2: to four point seven five percent. Bank economists had predicted

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Speaker 2: it but thought a twenty five point drop was just

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Speaker 2: as likely. So in studio we do have New Zealand

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Speaker 2: Heeral Business Editor at Large Liam dan get Alam.

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Speaker 3: Hey, guys, Lamb, what does this mean for the economy, Well.

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Speaker 4: It means it's quite bad. I mean, we were celebrating here,

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Speaker 4: but they're cutting it because the economy is in terrible shape.

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Speaker 4: So that's probably worth remembering. But it is probably good

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Speaker 4: news really for people like me who are fixing their

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Speaker 4: mortgage next week. So that's sort of money in the

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Speaker 4: pocket for mortgage holders and a lot of businesses that

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Speaker 4: are struggling with really high debt levels. So there's two

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Speaker 4: things for businesses. One is their own debt, you know,

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Speaker 4: and then the other one is if consumers have a

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Speaker 4: bit more money in their pocket, they might perk up

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Speaker 4: and spend a bit more. But yeah, I mean I

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Speaker 4: think it's a it's a fairly. You know, there was

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Speaker 4: a lot of expectation that it was going to be

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Speaker 4: fifteen basis points this time and people would have been disappointed.

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Speaker 3: So yeah, how much does that affect the decision? The talk,

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Speaker 3: because I feel like fifty basis points was just repeated

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Speaker 3: by everyone. A couple of people said twenty five actually,

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Speaker 3: and some people said seventy five.

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Speaker 2: You said seventy five.

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Speaker 3: I was hoping for seventy. It was of a similar

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Speaker 3: position as you.

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Speaker 4: There was one commentator on here on the Herald who

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Speaker 4: said seventy five and probably did the rounds. But it

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Speaker 4: shouldn't affect things at all market pricing does. They do

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Speaker 4: pay attention to market pricing, and the markets are always

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Speaker 4: very excited about, you know, looking forward, and so there's

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Speaker 4: a lot of expectation about fifty this time and then

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Speaker 4: fifty next time in November, going into the summer, you know.

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Speaker 4: Having I think they've been really tight lipped about that.

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Speaker 4: They just say they'll watch and do what market conditions require,

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Speaker 4: no clues as to what's coming up. Yeah, I don't

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Speaker 4: think that expectations should have too much impact. To be fair,

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Speaker 4: the bank economists all went fifty, but they all said

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Speaker 4: it was a lineball call, so they would have been

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Speaker 4: now going, Oh well, it wasn't such a surprise if

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Speaker 4: they'd gone the other way. So it's a bit of

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Speaker 4: a game all of that. To some extent, It.

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Speaker 2: Certainly is how fast do you think the banks will

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Speaker 2: move on this? I know some banks moved pretty early,

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Speaker 2: which he might have been a bit of a gamble,

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Speaker 2: maybe not, but well, a marketing ployer.

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Speaker 4: I mean, you know, you can see in the meeting

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Speaker 4: asb put out a statement and cut some rates right

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Speaker 4: before it, and then they put another one out five

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Speaker 4: like one minute after that, So you know, there's a

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Speaker 4: lot of gamesmanship there, and there's a lot of competition.

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Speaker 4: But yeah, hopefully it passes through. And if the markets

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Speaker 4: keep pushing towards expectations and more cuts, and the banks

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Speaker 4: also get money offshore, and the us Fed's expected to

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Speaker 4: cut again, then we should start to see, you know,

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Speaker 4: a good chunk of this passed through. They're always a

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Speaker 4: bit quicker at getting the deposit rates down. Of course,

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Speaker 4: if you're an older listener and you've got savings, it's

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Speaker 4: not all good news. And you know, so I'm usually

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Speaker 4: comfortable there. It does take a while for it to

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Speaker 4: flow through the economy because people are fixed and they

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Speaker 4: don't necessarily have their rates coming up next week.

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Speaker 3: Yeah, well, I guess an economy's perception, isn't it, And

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Speaker 3: I'm feeling richer all of a sudden, I'm feeling better off,

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Speaker 3: so I'll probably spend more. And that's really the thing,

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Speaker 3: isn't it.

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Speaker 1: Well, well, that is it.

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Speaker 4: I mean, so it's how much of a bump we

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Speaker 4: get from that confidence knowing that the direction is right,

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Speaker 4: Knowing that, okay, it might not be until people are fixing,

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Speaker 4: and you know, December or whatever, they can still see,

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Speaker 4: oh there's an extra fifty bucks or extra.

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Speaker 1: And see the future.

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Speaker 3: You can see that the future looks brighter in terms

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Speaker 3: of your repaintment.

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Speaker 4: So I think you know, we're, at the very least

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Speaker 4: we're coming out of this awful, long, grinding economic cycled.

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Speaker 4: You know, through COVID and the inflation. There'll be something

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Speaker 4: else come along and freak us out soon.

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Speaker 3: But Liam, I've got a slightly deeper and potentially more

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Speaker 3: punishing question. I read your fantastic book Barbecue Economics, I

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Speaker 3: massively recommended to anyone, and I think I actually sent

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Speaker 3: you a text on this issue because I still couldn't

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Speaker 3: understand it. Now, does the official cash rate actually influence

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Speaker 3: the banks because their money anyway you explain it.

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Speaker 4: This is a good question, a good question. It's actually

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Speaker 4: gets very complicated that when you do when you do

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Speaker 4: a transaction, you buy or sell anything, usually you know,

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Speaker 4: it's one bank to another. So the banks to all

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Speaker 4: these transactions with each other, and at the end of

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Speaker 4: the night, it doesn't all match up, right, I'm really

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Speaker 4: paraphrasing this. I hope there's no serious economy something, but yeah,

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Speaker 4: and so whatever it doesn't match up to, like, they'll

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Speaker 4: either need to borrow some or you know, to make

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Speaker 4: it match up. Overnight, so there's an overnight lending rate

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Speaker 4: and that is set by the Reserve Bank, which effectively

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Speaker 4: has a state sanctioned monopoly on the wholesale interest rate. Basically,

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Speaker 4: so the government says, you've got the monopoly on the

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Speaker 4: wholesale instrate you can set this overnight bank rate. So

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Speaker 4: whatever that is, that's the lowest rate going in New Zealand.

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Speaker 4: So the OCIA is the lowest rate going in New Zealand.

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Speaker 4: Anything else on the top of that is what businesses

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Speaker 4: decide to do with it.

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Speaker 2: So very interesting clear as much for me as a

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Speaker 2: non economist, but yeah, and it made seems good to

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Speaker 2: go deep. Yeah that's right, Liam Dan, Thank you very much.

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Speaker 2: We'll catch you again soon.

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Speaker 4: Cool. Thanks guys.

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Speaker 2: That is New Zealand here or Business Editor at Large

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Speaker 2: Liam Dan. Well, I suppose the big question we want

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Speaker 2: to put to the audience now is how you're feeling.

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Speaker 2: I mean, Heath, you're ready to go spend some time.

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Speaker 3: I'm ready. I'm ready to get loose. I'm ready to

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Speaker 3: open the purse strings. I'm ready to buy some linen sheets.

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Speaker 3: I'll be booking into several restaurants. I'll be going loose.

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Speaker 3: But I've timed it really well. I was talking about

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Speaker 3: it before. It's kind of like the Ta b and actually,

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Speaker 3: going back to your book, New Zealand does not all countries,

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Speaker 3: do you know a lot of countries just float all

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Speaker 3: the time. But it's quite a thing in New Zealand,

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Speaker 3: isn't it where we're worried about that. It's we love it.

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Speaker 3: It's like betting yea and you feel like you're either

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Speaker 3: win or you lose. And right now I'm feeling like

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Speaker 3: i made the right decisions. So I've got a huge

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Speaker 3: amount of dopamine running through the system that I feel

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Speaker 3: like I've cracked the system.

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Speaker 2: I have a big casino night, I have you.

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Speaker 3: I'm still working to pay the mortgage constantly, but right

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Speaker 3: now I feel like I've cracked the system.

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Speaker 2: Just a final question for you each year, because Adrian

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Speaker 2: or made a point that he wanted unemployment to go

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Speaker 2: up to try and rebalance the economy. So he's pretty

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Speaker 2: happy at this stage. He's feeling like that those things

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Speaker 2: are sitting about right, that he can make these carts

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Speaker 2: and a.

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Speaker 4: Monte to go up. But there is a sort of

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Speaker 4: correlation between unemployment and inflation. They need inflation to go down.

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Speaker 4: It's all about slack in the economy, you know, really,

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Speaker 4: it's just and they're removing they remove the slack and

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Speaker 4: the economy with high interest rates. Now they're letting a

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Speaker 4: little bit more slack in the economy. But unemployment takes longer.

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Speaker 4: Those businesses that are struggling, they don't want to sack

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Speaker 4: people that those decisions tend to be at the end

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Speaker 4: of the economic cycle. So you probably see that get

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Speaker 4: a bit worse for a while.

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Speaker 3: And of course some inflation is necessary for an economy

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Speaker 3: to grow.

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Speaker 4: Yeah, don't get me started on what happens when prices

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Speaker 4: start going down. Deflation sounds great, it's not good.

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Speaker 3: Start roller coaster. It sounds like New Zealand Citizen.

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Speaker 2: Absolutely for more.

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