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Speaker 1: So the Reserve Bank in Australia held its official cash

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Speaker 1: rate at four point three five percent for the seventh

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Speaker 1: time today in a row. Of course if the FED sorry,

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Speaker 1: and the Reserve Bank here in New Zealand have both

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Speaker 1: dropped their rates in recent times, but the RBA said

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Speaker 1: it will be sometime yet before inflation is sustainably in

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Speaker 1: the target range. Paul Bloxham is agspc's chief economist. Hey, Paul, great, Paul, listen,

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Speaker 1: you tell me if I'm wrong. But I thought that

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Speaker 1: you guys with headline and inflation are expected to very

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Speaker 1: shortly actually be within the margin, aren't you.

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Speaker 2: Headline inflation is going to fall, and probably tomorrow when

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Speaker 2: we get the CPI indicator this is not the CPI

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Speaker 2: that it's our new timely monthly version. It's going to

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Speaker 2: show headline inflation falling quite strongly actually, But this is

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Speaker 2: not the key. The key is that headline inflation is

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Speaker 2: likely to come down simply because the government has given

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Speaker 2: energy subsidies, they've lowered people's electricity bills, and so that

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Speaker 2: doesn't really constitute a sustainable fall and inflation. That's a

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Speaker 2: policy measure, and so the RBA has made it absolutely clear,

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Speaker 2: and today they were very very clear in this statement

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Speaker 2: that they are going to focus on the underlying measures

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Speaker 2: of inflation, not the headline rate of inflation, because that's

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Speaker 2: being affected by these temporary policy changes, and so it'll

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Speaker 2: be key to watch out for what the underlying measures do.

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Speaker 2: But our take is the underlying measures that the trimmed mean,

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Speaker 2: for example, is still are still going to be well

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Speaker 2: above where the RBA is comfortable, well above the RBA's

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Speaker 2: target band. And we saw that today in the tone

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Speaker 2: of what they delivered, they remained on hold. They talked

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Speaker 2: about the idea that they've not ruled anything in or

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Speaker 2: anything out, and they've noted that near term rate cuts

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Speaker 2: are really not on the cards at the moment.

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Speaker 1: Does it get awkward for Michelle Bollock to have the

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Speaker 1: FED cutting by fifty, the Reserve Bank cutting maybe even

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Speaker 1: by fifty at some stage at herders sitting.

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Speaker 2: There, It certainly raises the bar. It raises the bar

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Speaker 2: for them to think about where they're at and say

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Speaker 2: to themselves, why are we different? You know, why is

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Speaker 2: Australia in a different spot. And the argument we've been

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Speaker 2: putting forward for a while is Australia is in a

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Speaker 2: different spot. We're in a different spot for a number

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Speaker 2: of reasons. One of them is that the RBA didn't

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Speaker 2: lift interest rates as much as everyone else. I've talked

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Speaker 2: about this all year along with you. I know, you

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Speaker 2: know they did four hundred and twenty five basis points

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Speaker 2: of hiking, whereas the FED did five twenty five. The

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Speaker 2: arbiens they did five twenty five, just did less, They

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Speaker 2: did less tightening, and so one of the consequences is

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Speaker 2: they haven't had quite as much disinflation. And then the

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Speaker 2: other really big factor is that the supply side productivity

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Speaker 2: has been really quite quite quite weak, quite weak in Australia,

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Speaker 2: and so we're not getting as much disinflation. We do

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Speaker 2: look different to everyone else, but they're going to with

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Speaker 2: other central banks now cutting rates across the world, it's

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Speaker 2: going to be that bar is higher for them to

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Speaker 2: convince themselves continually that we are different. We don't think

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Speaker 2: rate cuts are coming through for a while though. We

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Speaker 2: think rate cuts aren't coming into a well into twenty

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Speaker 2: twenty five in Australia.

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Speaker 1: What do you think about the feed having cut by

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Speaker 1: fifty basis points and the impact it's going to have

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Speaker 1: on the Reserve Bank in New Zealand at the next decision.

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Speaker 2: Well, I think the first thing to take from it

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Speaker 2: is that, actually, this is what a soft landing looks like.

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Speaker 2: You know, the reason why the Fed's been able to

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Speaker 2: cut this because inflation's coming down quite quickly and they

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Speaker 2: feel that they can deliver more support, and they've done that.

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Speaker 2: The economy is actually the US economy is still got

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Speaker 2: positive momentum, growth is still holding up pretty well. You

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Speaker 2: want to be able to cut interest rates before growth

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Speaker 2: slows down to prevent it from slowing down by very much.

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Speaker 2: This is, again, what a soft landing looks like. I

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Speaker 2: don't think it's a bad story. I think it's a

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Speaker 2: good story. I don't think it has that much bearing

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Speaker 2: on the RBNZA. I think the RBNZ, like the RBA,

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Speaker 2: gets to run its own race and said it's policy

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Speaker 2: based on domestic conditions. And I think the RBNZ will

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Speaker 2: cut rates further twenty five in the next meeting twenty

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Speaker 2: five at the one after. We think that the RBNZ

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Speaker 2: has broad inflation down enough to be able to continue

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Speaker 2: to ease its policy setting a lot like the FED,

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Speaker 2: but not necessarily because of the FED Yeah.

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Speaker 1: Paul, Hey, thank you. As always, really appreciate your take.

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Speaker 1: That's Paul Bloxham.

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