Latest / Best of Business / Paul Bloxham: HSBC chief economist ahead of Australia's GDP figures being released

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Paul Bloxham: HSBC chief economist ahead of Australia's GDP figures being released · Best of Business

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  Speaker 1: Brian Bridge.
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  Speaker 2: Now, Big Debate. Obviously it's been happening here, We've been
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  Speaker 2: doing it on air. It's about which reserve bank New
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  Speaker 2: Zealand or Australia fared better and trying to tackle inflation.
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  Speaker 2: Paul Bloxham, the HSBC Economists, the rock Star Economists, has
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  Speaker 2: been looking at this and he's done a paper on
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  Speaker 2: it which I've been perusing this afternoon. Paul, good evening.
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  Speaker 3: Good Ay, Hey, great to.
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  Speaker 2: Have you on the show. Tell me about the report
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  Speaker 2: that you guys have done from HSBC. Who did better?
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  Speaker 2: Who fared better?
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  Speaker 3: Yeah, So we've been comparing the Australian and the New
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  Speaker 3: Zealand experience post pandemic. So as we know, both countries
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  Speaker 3: had this surge in inflation, and inflation picked up a
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  Speaker 3: lot in twenty twenty two. It got to somewhere between
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  Speaker 3: seven and eight percent, depending on which economy you're talking about,
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  Speaker 3: and of course both central banks took slightly different approaches
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  Speaker 3: in terms of managing it. The RBA lifted rates by
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  Speaker 3: four hundred and twenty five basis points and really intentionally
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  Speaker 3: try to not slow the economy as much, take longer
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  Speaker 3: about getting inflation down, but stay close to full employment.
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  Speaker 3: And they seem to have delivered that. And the RBNZ
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  Speaker 3: took the approach of needing to get inflation down fast,
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  Speaker 3: they lifted interest rates by more and in the end
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  Speaker 3: pushed the economy into a bigger downturn to get to
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  Speaker 3: get inflation down. And so they're both different choices and
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  Speaker 3: they both have had different outcomes. You know, in New
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  Speaker 3: Zealand's case, inflation has come down faster and it's back
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  Speaker 3: where the RBNZ needs it to be. And after those
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  Speaker 3: rate rises, well, of course you've had one hundred and
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  Speaker 3: seventy five basis points of rate cuts so far. In
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  Speaker 3: Australia's case, having not lifted rates as much, the economy
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  Speaker 3: is still pretty full, close to full employment, and the
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  Speaker 3: RBA of course has only been able to cut interest
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  Speaker 3: rates twenty five basis points. So it really depends on
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  Speaker 3: what weight you put on the importance of getting inflation
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  Speaker 3: down fast, how important you think it is for the
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  Speaker 3: employment rate to stay low which and what weight you
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  Speaker 3: put on that, and how much weight you put on
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  Speaker 3: the sort of the idea that interest rates come down
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  Speaker 3: as well. You know, the two are very very close.
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  Speaker 3: We found in the studies. It depends on which weight
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  Speaker 3: you put on those things. But on the margin, I
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  Speaker 3: think if you're prioritizing stabilizing your economy as well and
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  Speaker 3: minimizing the volatility, then Australia probably bears a little bit better.
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  Speaker 2: The answer surely is in the number of economic refugees
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  Speaker 2: that fled this country to head you to the other one.
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  Speaker 3: You know, well, it's part of the adjustment mechanism. Certainly
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  Speaker 3: that the labor market's been stronger in Australia and it's
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  Speaker 3: been weaker in New Zealand, and it's meant that people
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  Speaker 3: have moved from New Zealand to Australia to get jobs.
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  Speaker 3: And so if you're measuring it purely on the labor
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  Speaker 3: market performance, you would definitely say Australia has been in
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  Speaker 3: better shape. We've had an unemployment rate that's gone up
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  Speaker 3: by only point six percentage points. It's picked up from
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  Speaker 3: three and a half percent to four point one over
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  Speaker 3: the last two and a half years. And in New
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  Speaker 3: Zealand the unemployment rates picked up by almost two percentage point.
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  Speaker 3: It's gone up from three point two to five point one.
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  Speaker 3: So you know, if it's just on the labor market, yes,
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  Speaker 3: Australia is in better shape. If it's on the inflation performance, well,
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  Speaker 3: New Zealand's got its inflation down faster than Australia has.
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  Speaker 2: And you guys are still starting a bit closer to
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  Speaker 2: the wind I suppose, and with Trump's terrorists, et cetera,
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  Speaker 2: things could get a bit herey So we'll have to
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  Speaker 2: wait and see how that plays out GDP figures. You've
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  Speaker 2: got the figures out tomorrow. What are you expecting.
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  Speaker 3: Well, we think GDP growth will have picked up pace.
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  Speaker 3: This is the fourth quarter print for last year and
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  Speaker 3: we think that it'll run at half a percent in
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  Speaker 3: the quarter, and that'll be up from running at point
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  Speaker 3: twos and point threes over the previous quarter. So we're
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  Speaker 3: in a modest consumer upswing. We've already seen it in
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  Speaker 3: better retail numbers. We've seen it in improving consumer confidence
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  Speaker 3: and that's because well, inflation's coming down, so cost of
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  Speaker 3: living is improving a bit, and we've seen tax cups
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  Speaker 3: in Australia in the second half of last year. Cost
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  Speaker 3: of living measures as well, and we've got very strong employment.
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  Speaker 3: You know, we're fully employed. The employment to population ratio
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  Speaker 3: is at its highest level on record at them. So
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  Speaker 3: people are spending a bit more because they're quite confident.
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  Speaker 3: They're becoming more confident, and that we think is what's
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  Speaker 3: going to lift growth and show up into Morrow's Prince.
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  Speaker 2: How are just outside of the headline figures that we're expecting.
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  Speaker 2: How are Australians feeling about the economy, the state of
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  Speaker 2: how things are well?
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  Speaker 3: The consumer sentiment numbers have improved, so the pick up.
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  Speaker 3: The low point was September last year, and then in
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  Speaker 3: October and November they jumped quite a lot and then
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  Speaker 3: they sort of held onto that level and they've approved
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  Speaker 3: a little bit since the RBA delivered its first rate
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  Speaker 3: cut as well. So I would say they're a lot
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  Speaker 3: better than they were, but we're still not above average.
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  Speaker 3: You know, the consumers are still pretty cautious, but certainly
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  Speaker 3: better than it was, you know, late last year.
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  Speaker 2: Paul, thank you very much for that. Great to have
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  Speaker 2: you on as always, Paul Blocks on the HSBC Chief Economists.
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