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Liam Dann: NZ Herald Business Editor at Large on the impact of the RBNZ cutting the OCR · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks'd be follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: The Reserve Bank has cut the OCR fifty basis points,
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  Speaker 2: taking it from three percent to two point five percent.
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  Speaker 2: For analysis, we joined once again by a New Zealand
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  Speaker 2: Hero Business Editor at Large, Liam Dan Happy days ly
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  Speaker 2: very exciting.
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  Speaker 3: Yeah, well, I mean, you know, something happened. Yeah, it
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  Speaker 3: feels exciting, doesn't it.
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  Speaker 4: Yeah.
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  Speaker 5: It feels like some sort of positive decision, even though
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  Speaker 5: it suggests that we're in a bad state.
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  Speaker 1: Yeah.
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  Speaker 4: Yeah, I feel like people are crying out for that
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  Speaker 4: if the government's listening, you know, that sort of that
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  Speaker 4: sort of vibe.
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  Speaker 1: Yeah.
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  Speaker 3: I mean, let's.
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  Speaker 4: Remember that there are probably some listeners who have their
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  Speaker 4: mortgage paid off or don't have a mortgage and have
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  Speaker 4: some money in a bank and bank deposits going.
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  Speaker 3: Those people are coming through on the nine two nine
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  Speaker 3: two around our woos.
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  Speaker 4: So it's important to mention them. But I guess in
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  Speaker 4: terms of putting money back in the pockets of a
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  Speaker 4: large chunk of New Zealand, this will do that. The
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  Speaker 4: Monetary Policy Committee talked a lot about inflation risks and
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  Speaker 4: then sort of talked about why they could look through them.
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  Speaker 4: So they did warn that, you know, inflation is currently
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  Speaker 4: two point seven, might go to three, might even go
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  Speaker 4: above it. And so they really had to sort of
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  Speaker 4: make the case that they think things like food prices
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  Speaker 4: and power prices and the rates and so on will ease,
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  Speaker 4: and that they're confident that there is what they call
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  Speaker 4: enough spare capacity in the economy, which what we would
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  Speaker 4: say is the economy is stuffed enough to mean that
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  Speaker 4: inflation will keep coming down.
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  Speaker 5: So a lot of people, myself included, was saying fifty
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  Speaker 5: points should have been the amount last time, including members
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  Speaker 5: of the Monetary Policy Committe. Obviously they were unanimous last time.
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  Speaker 5: So were they slow? Yeah, did they miss a trick.
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  Speaker 4: Maybe, you know, like they don't always get it right,
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  Speaker 4: And part of it is, I mean it certainly that
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  Speaker 4: second quarter was uglier than people thought. But they did
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  Speaker 4: actually say that they haven't adjusted their you know, that
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  Speaker 4: ugly second quarter GDP minus zero point nine. They say
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  Speaker 4: they haven't adjusted their view on that as much as
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  Speaker 4: they might have because there is some weird accounting stuff
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  Speaker 4: in that they think it will reverse out. And they
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  Speaker 4: said a few positive things about the recovery getting underway.
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  Speaker 4: Did they get it wrong?
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  Speaker 3: Yeah? Probably, But I mean.
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  Speaker 4: With hindsighth it's not for you that because you called it,
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  Speaker 4: but you know, they do have to look at inflation
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  Speaker 4: quite seriously. But I think what's certainly what's happened since
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  Speaker 4: that last call is there's been nothing, nothing, much to
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  Speaker 4: make them feel more heartened that the economy is coming
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  Speaker 4: back on its own. They feel like it needs that
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  Speaker 4: fuel and Genetah.
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  Speaker 2: Yeah, just on that inflation question, I mean, isn't it
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  Speaker 2: the case now that in general, we're older, we're wiser,
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  Speaker 2: We're not going to be going out spending to the
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  Speaker 2: same level that we were when inflation started a skyrocket.
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  Speaker 2: It's just not those same dangers exist in the economy
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  Speaker 2: that is going to see those levels again.
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  Speaker 4: I would like to think that, but I sort of
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  Speaker 4: almost can remember even in that post COVID phase, people
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  Speaker 4: going oh, well, this is different, this is going to
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  Speaker 4: be a short term inflationary spike. We can look through
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  Speaker 4: this one, and it just kept going and going. So
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  Speaker 4: you have to be a bit careful, you know, and
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  Speaker 4: you are always vulnerable to you know, we still don't
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  Speaker 4: know quite what the final impact of tariffs and things
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  Speaker 4: will be whether that's inflationary or the opposite, because you know,
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  Speaker 4: we might be getting cheap goods out of China and things,
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  Speaker 4: but some of those big things, I think power prices
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  Speaker 4: should start to ease, or at least the rate of
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  Speaker 4: increase will ease. Food prices we've already seen, you know,
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  Speaker 4: dairy prices coming down. I think you'll start to see
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  Speaker 4: butter come down in the supermarket finally, and so that
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  Speaker 4: should ease. And then the more core inflation in the economy,
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  Speaker 4: which is, you know, the amount we pay each other
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  Speaker 4: for services and get things done. You know that's that's
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  Speaker 4: coming off because people basically are more desperate for work. Then,
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  Speaker 4: you know, that's what they mean by spare capacity. We're
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  Speaker 4: just not running. The economy is not running at full
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  Speaker 4: steam by any stretch.
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  Speaker 3: How much lower can they go? The Reserve Bank must
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  Speaker 3: be running out of wiggle room pretty soon.
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  Speaker 4: Well, it's not bad. I mean two point five they
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  Speaker 4: could go. Well, they've implied that they'll go to two
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  Speaker 4: point two five and that's sort of priced and expected
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  Speaker 4: by the end of the year. They could go to two.
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  Speaker 4: If things don't really pull up, they could go to zero.
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  Speaker 4: They could go to Actually, you know, if you look
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  Speaker 4: at what Sweden did in like the two thousand and
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  Speaker 4: sixteen era or something like that, you can go negative,
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  Speaker 4: which it gets very very weird. They start paying you
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  Speaker 4: to take money.
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  Speaker 3: I think, yeah, what's stagflation.
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  Speaker 4: Stagflation, Well, that is when you've got the two worst
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  Speaker 4: things in the economy happening at once, which is higher
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  Speaker 4: unemployment and higher inflation. And we've kind of got a
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  Speaker 4: little bit of that at the moment, and you don't
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  Speaker 4: you know, that's a bad place to be because you'd
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  Speaker 4: like to think the Reserve Bank can sort of move
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  Speaker 4: the lever to pull one up and one down when
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  Speaker 4: both are you know, when both are happening at once,
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  Speaker 4: that is pretty ugly because dropping the dropping the ocr
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  Speaker 4: does probably help inflation get a foothold.
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  Speaker 2: Yeah, early early days. At the moment, it's only released
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  Speaker 2: forty minutes ago, but any word from the bank shit
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  Speaker 2: about dropping some of those deposit rates, those interest rates
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  Speaker 2: a little bit further.
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  Speaker 4: I haven't seen anything yet. I would say they did
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  Speaker 4: move a little bit in advance of this. We saw
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  Speaker 4: some of the one year and two year fixed rates
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  Speaker 4: come down, so we might not see the fixed move
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  Speaker 4: too fast. Until I get a bit of a feeling
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  Speaker 4: the market. It's a feeling for where things go next.
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  Speaker 4: Floating rates should move quickly and we should start to
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  Speaker 4: see that come through. Sometimes the banks are quicker with
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  Speaker 4: those press releases. I don't know. They must be here, yeah.
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  Speaker 2: Yeah, breather, yeah, absolutely, Thank you very much. Liam. There's
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  Speaker 2: a bit of excitement out there in the newsroom, so
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  Speaker 2: we'll see what happens over the next quarter.
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  Speaker 4: But great to get your analysis as always, good stuff.
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  Speaker 4: Cheers guys.
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  Speaker 2: That is Liam Dan New Zealand Heeral Business Editor at
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  Speaker 2: Large and just repeating that news. The Reserve Bank cut
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  Speaker 2: the official cash rate fifty basis points, taking it from
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  Speaker 2: three percent to two point five percent.
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