1
00:00:00,080 --> 00:00:02,160
Speaker 1: Now there are strong calls for the Reserve Bank here

2
00:00:02,160 --> 00:00:04,680
Speaker 1: in New Zealand to cut the ocr by half a

3
00:00:04,760 --> 00:00:07,480
Speaker 1: percent double cut when it meets on October eight. The

4
00:00:07,520 --> 00:00:10,120
Speaker 1: economy contracted much more than predicted, with a zero point

5
00:00:10,200 --> 00:00:12,200
Speaker 1: nine percent fall and GDP in the second quarter of

6
00:00:12,280 --> 00:00:16,760
Speaker 1: the year. Calia cold is the chief economist at Westpac. Hey, Kelly, Hi,

7
00:00:17,040 --> 00:00:19,360
Speaker 1: so what are you calling for fifty basis points next month?

8
00:00:19,400 --> 00:00:20,400
Speaker 1: Twenty five in November?

9
00:00:21,320 --> 00:00:25,280
Speaker 2: That's right, we upgraded our October call from a twenty

10
00:00:25,280 --> 00:00:27,080
Speaker 2: five point cut to a fifty point cup.

11
00:00:28,160 --> 00:00:28,400
Speaker 1: Why.

12
00:00:30,080 --> 00:00:32,360
Speaker 2: Well, the GDP number was quite a bit weaker than

13
00:00:32,440 --> 00:00:36,120
Speaker 2: everybody's predictions, certainly the Reserve banks projections, which in this

14
00:00:36,280 --> 00:00:39,960
Speaker 2: game are the only ones that really matter. Last week,

15
00:00:40,159 --> 00:00:44,360
Speaker 2: the governor had indicated that after data suggested they needed

16
00:00:44,400 --> 00:00:46,680
Speaker 2: to go faster, they would, So we're taking them at

17
00:00:46,680 --> 00:00:47,240
Speaker 2: his word there.

18
00:00:47,840 --> 00:00:50,800
Speaker 1: Okay, but isn't it historic, Cali. I mean, it's happened

19
00:00:50,800 --> 00:00:54,160
Speaker 1: in Q two. Q three is already better. Therefore, you know,

20
00:00:54,240 --> 00:00:58,840
Speaker 1: are we doing doesn't actually necessitate the to fifty basis points?

21
00:00:59,320 --> 00:01:02,040
Speaker 2: Well, I think it's going to take them more quickly

22
00:01:02,080 --> 00:01:04,280
Speaker 2: to the same point. I mean, I think it is

23
00:01:04,400 --> 00:01:07,880
Speaker 2: right that the Q three indicators look better than Q two,

24
00:01:08,400 --> 00:01:10,240
Speaker 2: but we didn't when we looked at the data have

25
00:01:10,319 --> 00:01:12,200
Speaker 2: a reason to think that it was all going to

26
00:01:12,200 --> 00:01:17,560
Speaker 2: totally unwind immediately. So hence, you know, it does make

27
00:01:17,640 --> 00:01:19,720
Speaker 2: sense that if the Reserve Bank thought they had a

28
00:01:19,720 --> 00:01:22,360
Speaker 2: lot of too much excess capacity in the economy back

29
00:01:22,400 --> 00:01:25,399
Speaker 2: in August, they're only going to think there's more now.

30
00:01:25,600 --> 00:01:28,640
Speaker 1: Yeah, do you think that, I mean, are you at

31
00:01:28,720 --> 00:01:30,760
Speaker 1: all worried about the impact this is going to have

32
00:01:30,840 --> 00:01:34,240
Speaker 1: on consumer confidence? Well?

33
00:01:34,319 --> 00:01:38,120
Speaker 2: I think in that sense, it's already old data, and

34
00:01:38,160 --> 00:01:41,520
Speaker 2: we did release our own long running consumer confidence survey

35
00:01:41,640 --> 00:01:45,560
Speaker 2: earlier this week, which showed that consumers we're not feeling

36
00:01:45,600 --> 00:01:49,800
Speaker 2: particularly chirpy compared to the last time that we did

37
00:01:49,840 --> 00:01:52,400
Speaker 2: the did the survey three months ago. So I think

38
00:01:52,440 --> 00:01:55,680
Speaker 2: people already know that. I think what they perhaps may

39
00:01:55,720 --> 00:01:59,040
Speaker 2: be heartened by is that lower interest rates come in

40
00:01:59,080 --> 00:01:59,800
Speaker 2: a bit sooner.

41
00:02:00,120 --> 00:02:03,440
Speaker 1: Yeah, Well, this is the thing, isn't It's I feel

42
00:02:03,480 --> 00:02:05,360
Speaker 1: like what's going on right now in this country is

43
00:02:05,360 --> 00:02:08,320
Speaker 1: that everybody is so nervy and so scared about what's

44
00:02:08,320 --> 00:02:10,320
Speaker 1: going to happen and whether we're actually through the worst

45
00:02:10,320 --> 00:02:11,880
Speaker 1: of it, that any bit of bad news just kind

46
00:02:11,880 --> 00:02:14,200
Speaker 1: of sets that off again. And so is the case

47
00:02:14,280 --> 00:02:16,680
Speaker 1: that if you cut the OCR by fifty basis points,

48
00:02:16,760 --> 00:02:18,520
Speaker 1: you just boost the confidence a little bit more.

49
00:02:19,639 --> 00:02:22,840
Speaker 2: That was the Reserve Bank's argument back in August that

50
00:02:22,880 --> 00:02:26,040
Speaker 2: they needed to move more aggressively to put in those

51
00:02:26,080 --> 00:02:29,400
Speaker 2: guard rails to try to break through that caution that

52
00:02:29,520 --> 00:02:33,160
Speaker 2: businesses and households were feeling, particularly I think in the

53
00:02:33,200 --> 00:02:36,560
Speaker 2: major urban areas where they just haven't been the beneficiary

54
00:02:36,680 --> 00:02:39,639
Speaker 2: so far of the big gaining term to trade there

55
00:02:39,639 --> 00:02:41,000
Speaker 2: with head Kelly, can.

56
00:02:40,880 --> 00:02:43,720
Speaker 1: We explain how the Reserve Bank got the so monumentally wrong.

57
00:02:45,400 --> 00:02:47,919
Speaker 2: In terms of the GDP forecast. I think they got

58
00:02:47,919 --> 00:02:52,320
Speaker 2: it the same way wrong as we all did, where

59
00:02:52,360 --> 00:02:55,280
Speaker 2: it's just really difficult in the last couple of years

60
00:02:55,320 --> 00:02:58,200
Speaker 2: to forecast call the GENP numbers. You were a call

61
00:02:58,280 --> 00:03:00,200
Speaker 2: in the middle of last year, for example, you all

62
00:03:00,240 --> 00:03:01,960
Speaker 2: got blown out of the water in terms of what

63
00:03:02,000 --> 00:03:05,720
Speaker 2: happened in Q two or Q three. You know, I

64
00:03:05,760 --> 00:03:09,359
Speaker 2: think that you would have expected with two hundred and

65
00:03:09,400 --> 00:03:13,400
Speaker 2: fifty points of easing in the TIN that the economy

66
00:03:13,600 --> 00:03:15,800
Speaker 2: would be more resilient to some of the shocks that

67
00:03:15,800 --> 00:03:18,720
Speaker 2: have been going on out there. At the moment, and

68
00:03:18,919 --> 00:03:21,560
Speaker 2: hence they thought reasonably I thought at the time that

69
00:03:21,600 --> 00:03:23,960
Speaker 2: they should be slowing down and seeing the effect of

70
00:03:24,000 --> 00:03:28,880
Speaker 2: what they've done. I appreciate that in hindsight it probably

71
00:03:28,880 --> 00:03:30,639
Speaker 2: looks like they could have gone a bit faster and

72
00:03:30,680 --> 00:03:33,359
Speaker 2: a bit sooner. But you know, the measure of these

73
00:03:33,400 --> 00:03:36,840
Speaker 2: situations is that when you recognize that you've made a mistake,

74
00:03:36,920 --> 00:03:39,720
Speaker 2: that you'd take quick corrective action. And I think that

75
00:03:39,840 --> 00:03:42,720
Speaker 2: fifty point cut in October will certainly fit that bill.

76
00:03:42,760 --> 00:03:45,200
Speaker 1: Now, I mean, look, the thing about it is, though Kelly,

77
00:03:45,400 --> 00:03:48,680
Speaker 1: I understand that this is a difficult thing to get right. However,

78
00:03:48,760 --> 00:03:50,880
Speaker 1: all of the data or heaps of the data through

79
00:03:51,000 --> 00:03:53,600
Speaker 1: Q two was showing us that there was problem a problem.

80
00:03:53,640 --> 00:03:56,800
Speaker 1: We've had such bad manufacturing numbers, we've had such bad

81
00:03:56,800 --> 00:04:00,480
Speaker 1: consumer confidence numbers. And then they held in July. Is

82
00:04:00,480 --> 00:04:04,480
Speaker 1: that can we explain that away? When this is the

83
00:04:04,520 --> 00:04:06,640
Speaker 1: lot who are supposed to be you have their finger

84
00:04:06,720 --> 00:04:08,119
Speaker 1: on the pulse of what's going on here.

85
00:04:09,240 --> 00:04:12,120
Speaker 2: Yeah, well, I mean they have an outcasting framework for

86
00:04:12,200 --> 00:04:14,600
Speaker 2: working out where they think the economy is in time,

87
00:04:14,680 --> 00:04:17,960
Speaker 2: and at that stage, it wasn't telling them that two

88
00:04:18,480 --> 00:04:20,800
Speaker 2: two was going to be a minus zero point nine.

89
00:04:21,080 --> 00:04:23,760
Speaker 2: It was probably telling them that we might have had

90
00:04:23,760 --> 00:04:26,560
Speaker 2: a minus point one or something like that, so they

91
00:04:26,600 --> 00:04:30,680
Speaker 2: embodied that into their forecast at the time. But you know,

92
00:04:30,720 --> 00:04:33,479
Speaker 2: it's just to end up being worse than that, So

93
00:04:33,800 --> 00:04:35,400
Speaker 2: you know, it's one of those kind of Harry Hyde

94
00:04:35,400 --> 00:04:36,360
Speaker 2: sight things, isn't it.

95
00:04:37,000 --> 00:04:39,400
Speaker 1: Perhaps so, Kelly Listen, thanks very much, appreciate it. Kelly

96
00:04:39,400 --> 00:04:42,760
Speaker 1: are called chief economist at Westpac. For more from Heather

97
00:04:42,839 --> 00:04:45,880
Speaker 1: Duplessy Allen Drive, listen live to news talks. It'd be

98
00:04:46,000 --> 00:04:49,880
Speaker 1: from four pm weekdays, or follow the podcast on iHeartRadio.