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Speaker 1: Now the Reserve Bank, as we know, have cut interest

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Speaker 1: rates by zero point two five of eight percentage point

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Speaker 1: to three point eight five percent. It is the second

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Speaker 1: cut to rates this year, providing some further relief to

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Speaker 1: home loan borrowers. Joining me on the line is Associate

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Speaker 1: Professor Mark Humphrey Jenna from the School of Banking and

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Speaker 1: Finance at the University of New South Wales. Good morning to.

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Speaker 2: You, Mark, morning greeping with you.

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Speaker 1: Yeah, lovely to have you on the show. Now, Mark,

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Speaker 1: what will this interest rate cut mean for Australians with mortgages.

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Speaker 2: Well, it's definitely good news because with this twenty five

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Speaker 2: based point cut, well now the mortgage is very likely

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Speaker 2: to go down. Like most of the banks are going

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Speaker 2: to pass this on, but not necessarily immediately. So for

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Speaker 2: example Westpac I believe has deleted through to our June,

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Speaker 2: but most of them will eventually pass on the twenty

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Speaker 2: five base point cut. And as good news because it

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Speaker 2: looks like we may get some more later this year

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Speaker 2: as well.

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Speaker 1: Yeah, I think we're all hoping that, Mark, is that

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Speaker 1: how it's sort of looking as though it will meet

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Speaker 1: that there could be further.

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Speaker 2: Cuts certainly so apparently the RBA was debating a fifty

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Speaker 2: base point cut, so that's a whole half percentage point

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Speaker 2: cut this meeting, but they decided to go with twenty five.

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Speaker 2: And now that suggests we've got at least one more

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Speaker 2: this year, but most people are looking at probably about

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Speaker 2: two more this year, bringing us to a total one

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Speaker 2: percentage point cut throughout twenty twenty five.

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Speaker 1: I mean, that would be wonderful news, and I think

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Speaker 1: it'd be wonderful news for so many homeowners with mortgages.

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Speaker 1: What will it mean, I guess more generally, when we

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Speaker 1: look at the economy and some of the stress that

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Speaker 1: mortgage holders have been living under.

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Speaker 2: Yeah, absolutely be good news for mortgage holders because, let's

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Speaker 2: face it, mortgages have gotten incredibly expensive. There were thirteen

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Speaker 2: interest rate hikes, which means that in reality, many people's

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Speaker 2: mortgage payments doubled, if not more, and many will be

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Speaker 2: under stressed. Many will have already actually sold their properties

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Speaker 2: for course of this. So definitely great news. But not

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Speaker 2: only that, it's good news for small business because small

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Speaker 2: business will often need to borrow at least some money,

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Speaker 2: some of which we guaranteed against the home of the

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Speaker 2: founder of that business. So we'll make that debt a

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Speaker 2: lot cheaper and a lot easier to get, which will

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Speaker 2: to some extent help with growth. There's some other issues

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Speaker 2: in the economy with productivity and growth, but at least

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Speaker 2: the interest rates will remove some pressure.

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Speaker 1: Now, in terms of the housing market, do you think

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Speaker 1: that that interest rate cut is going to mean much

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Speaker 1: of a change to the housing market.

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Speaker 2: It will mean a bit of a change, but perhaps

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Speaker 2: not as much as some people might fear if they're

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Speaker 2: perhaps looking at entering in the market now. The reason

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Speaker 2: they say that is when the infrast rates are cust

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Speaker 2: it makes it easier to service a mortgage, so of

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Speaker 2: course people can go out and borrow more money. Usually

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Speaker 2: it's been estimated a few percentage points more, which can

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Speaker 2: add up to quite a lot of money. But anyway,

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Speaker 2: they'll be able to borrow a little bit more. However,

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Speaker 2: wages have been rather sluggish, which means that even if

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Speaker 2: the interest rates to cut, there's just a limit to

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Speaker 2: how much people can afford, and deposits also get in

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Speaker 2: the way. There's also the fact that well, house prices

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Speaker 2: will go up a bit, but there's only so high

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Speaker 2: they can really go really, given what people are earning

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Speaker 2: Now this isn't to say that those increases are necessarily bad, right,

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Speaker 2: So say, for example, you add due to one hundred

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Speaker 2: thousand dollars to buy a million dollar house, so ten

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Speaker 2: percent deposit there. Now see those houses then four by

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Speaker 2: ten percent, we're not underwater, or at least you've lost

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Speaker 2: all of your net worth. So your network went from

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Speaker 2: one hundred back down to zero because you've lost one

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Speaker 2: hundred thousand of the house. So you do want them

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Speaker 2: to grow steadily in any sustainable way. And they suspect

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Speaker 2: the interest rates aren't good to create house prices skyrocketing.

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Speaker 2: The biggest impact they think will be easier for people

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Speaker 2: to sell properties that it mayage being slow moving.

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Speaker 1: However, Yeah, I mean you spoke about the wage growth

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Speaker 1: not really or you know, maybe not seeing that wage

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Speaker 1: growth in the way that we might like. And despite

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Speaker 1: the fact that then the interest rates are coming down,

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Speaker 1: you're still sort of not maybe getting paid as much

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Speaker 1: as you might like. When do you think we'll start

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Speaker 1: to like, I don't know what the right way to

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Speaker 1: say it is, but when do you think we'll sort

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Speaker 1: of start to see that kind of thing turned to

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Speaker 1: some degree or change a little bit?

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Speaker 2: I think will be a long time coming. That we're

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Speaker 2: seeing some wage growth at the lower ends, often because

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Speaker 2: of either darthmental union pressure. However that doesn't really filter

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Speaker 2: through into above minimum wages. There's a lot of peep

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Speaker 2: compression going on, which means that it is going to

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Speaker 2: remain sluggish for a long time. Things have been talked

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Speaker 2: about have included productivity growth, which basically means getting more

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Speaker 2: units of output per hour work and that might come

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Speaker 2: through AI, but in reality we haven't really seen a

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Speaker 2: lot of that really occur at the moment, and in

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Speaker 2: reality itself, of that it might just mean fewer people

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Speaker 2: are being hired rather than people are actually working more effectively.

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Speaker 2: I think in reality for productivity growth to OCCODE, we

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Speaker 2: probably need a few factors. First. We probably do need, actually,

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Speaker 2: as bad as it sounds, human capital and financial capital

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Speaker 2: to well be mobile because at least then that means

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Speaker 2: that companies need to compete in the global labor force

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Speaker 2: for talent. What that basically means is that the US

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Speaker 2: is paying more and companies need to compete for US

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Speaker 2: labor They need to pay more as well. That's part

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Speaker 2: of it. The other part of it as well is

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Speaker 2: companies are as well, many small businesses in particular are

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Speaker 2: struggling with costs, and costs are going up and their

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Speaker 2: book set to continue to increase. And these costs of

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Speaker 2: regulatory costs, they're taxes, they're various other things that eat

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Speaker 2: into even their ability to pay more.

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Speaker 1: Well, it's going to be interesting. I mean it is.

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Speaker 1: The main thing I suppose is for a lot of Territorians,

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Speaker 1: a lot of Aussies, that interest rate card is going

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Speaker 1: to have a big impact. And I think if we

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Speaker 1: see another one that'll make a lot of people pretty happy.

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Speaker 1: I dare say, Mark.

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Speaker 2: Yeah, absolutely, that's definitely true.

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Speaker 1: Yeah. Well, good to catch up with you this morning.

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Speaker 1: I really appreciate your time. University of New South Wales

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Speaker 1: Associate Professor Mark Humphrey Jenna, thank you so much for

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Speaker 1: joining us.

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Speaker 2: Thanks for having me.

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Speaker 1: Thank you