Latest / Best of Business / Paul Bloxham: HSBC chief economist outlines predictions for final OCR decision of the year

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Paul Bloxham: HSBC chief economist outlines predictions for final OCR decision of the year · Best of Business

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  Speaker 1: Ever do for c ellens?
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  Speaker 2: All right, So the Reserve Bank is going to make
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  Speaker 2: the final decision on the OCR tomorrow, and the consensus
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  Speaker 2: is that it's going to be a cut of fifty
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  Speaker 2: basis points or half a percent. Paul Bloxham's ahhbc's chief
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  Speaker 2: economist Ay Paul Goday, Right, do you reckon fifty basis
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  Speaker 2: points as well?
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  Speaker 3: Yeah, we do. We think that that's the right balance.
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  Speaker 3: We think the RBNZ will consider possibly even three options.
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  Speaker 3: They could look at the economy and say, look, actually
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  Speaker 3: conditions are starting to look a little tiny bit better
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  Speaker 3: just in the recent indicators, and maybe judge that they
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  Speaker 3: only need to do twenty five. But on the other hand,
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  Speaker 3: in plations come down a long way. The economy is
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  Speaker 3: being quite weak for quite some time, and so they
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  Speaker 3: could even go as far as saying, well, actually, maybe
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  Speaker 3: we should deliver seventy five. But we think on balance
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  Speaker 3: they'll net the two out and go, Look, fifty basis
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  Speaker 3: points is a right about the right move for them.
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  Speaker 3: It's obviously another bigger than usual move. And that would
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  Speaker 3: reflect the fact that inflations come down, growth has been
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  Speaker 3: very weak. They need to focus on lifting growth from here.
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  Speaker 3: And the other factor, of course, is that they don't
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  Speaker 3: have another meeting now for three months, so it's more
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  Speaker 3: than it's double the normal amount of time. So they'd
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  Speaker 3: be effectively delivering what would be twenty five at each
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  Speaker 3: of two meetings all together in a fifty basis point move.
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  Speaker 3: I don't think we can rule out the possibility that
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  Speaker 3: tomorrow they could do seventy five, but I think fifty
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  Speaker 3: is more likely, and so yes, that's the camp we're
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  Speaker 3: in as well.
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  Speaker 2: How is it even possible to be considering twenty five
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  Speaker 2: basis point cut when you consider the fact that Treasury
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  Speaker 2: has just come out and see the economy's worse than
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  Speaker 2: even they thought.
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  Speaker 3: Well, we think that they're going to weigh up all
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  Speaker 3: of these different options in terms of the way they
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  Speaker 3: look they look at things, and as I say, look,
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  Speaker 3: our central case is that they are they'll say to themselves, no,
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  Speaker 3: we need to do a bit more than that. It
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  Speaker 3: needs to be an outsized move. We haven't got another
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  Speaker 3: meeting happening for another three months, and so it is
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  Speaker 3: likely that they'll do one that's a bit bigger than normal,
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  Speaker 3: so they'll do fifty. But to get yourself into the
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  Speaker 3: campus saying they're going to go seventy five, I think
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  Speaker 3: it's a bit harder because that's a really, really large move.
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  Speaker 3: And yes, we've got some indications the card spending numbers
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  Speaker 3: have started to look a little bit better in the
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  Speaker 3: last couple of months. The housing market, some early sales
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  Speaker 3: tell source signs that things are starting to stabilize, not
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  Speaker 3: pick up, just starting to stabilize. The business surveys, they're
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  Speaker 3: telling us that businesses are seeing on the horizon they
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  Speaker 3: can see that well. With rate cuts coming, the economy
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  Speaker 3: looks as though it'll start to turn around. And let's
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  Speaker 3: keep in mind the main thing that's been suppressing the
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  Speaker 3: economy has been those interest rate rises that were delivered earlier.
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  Speaker 3: The elevated level of interest rates has been the main
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  Speaker 3: thing suppressing things and with purpose to get inflation to
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  Speaker 3: come down. But as that gets taken away, the economy
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  Speaker 3: should start to revive.
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  Speaker 2: Yeah, now tell me what you read on inflation in
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  Speaker 2: New Zealand, because I see around the world there are
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  Speaker 2: still little uptechs that should be causing some concern.
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  Speaker 3: Well, this is something else to keep in mind, which
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  Speaker 3: is that primarily so far, the disinflation, so inflation coming down,
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  Speaker 3: the extent to which inflation has come down, has been
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  Speaker 3: largely about goods prices coming down. It's been about that.
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  Speaker 3: It hasn't been services inflation that's slowed substantially. There's still
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  Speaker 3: some domestic pockets of inflation that are still holding up,
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  Speaker 3: and so this might be just another thing that would
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  Speaker 3: temper the Arbenz's willingness to deliver an exceptionally large move,
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  Speaker 3: you know, to go seventy five. So that's another factor
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  Speaker 3: that we've got in mind is that, you know, globally,
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  Speaker 3: look around the world, we're starting to get a few
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  Speaker 3: little upside surprises for some inflation prints. And the primary
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  Speaker 3: thing that's been driving things so far has been this
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  Speaker 3: goods price coming down. Domestic inflation in New Zealand has
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  Speaker 3: still not quite come down enough to be to be
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  Speaker 3: completely comfortable.
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  Speaker 2: Very interesting, Paul, Thanks very much, man, appreciate it. Puul
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  Speaker 2: Block some AGSPC chief economists.
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