Latest / Best of Business / Paul Bloxham: HSBC chief economist on the RBA moving to hold the OCR at 4.1 percent

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Paul Bloxham: HSBC chief economist on the RBA moving to hold the OCR at 4.1 percent · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk ZEDB. Follow
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• 0:17
  Speaker 2: Bryan Bridge, Let's go to Australia. The Australian Reserve Bank
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  Speaker 2: has held their official cash rate at four point one.
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  Speaker 2: This is this afternoon. Interest rates heads started to come
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  Speaker 2: down in February, but the bank today decided to hold
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  Speaker 2: off on going any further. Paul Blocks from HSBC's twop
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  Speaker 2: Economists with me.
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  Speaker 3: Hi Paul, good evening.
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  Speaker 2: Good to have you on the show. So why is
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  Speaker 2: the bank paused, Well.
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  Speaker 3: We kind of thought they would for a start, we
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  Speaker 3: had in mind that the market thought that they wouldn't
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  Speaker 3: be doing anything today. They've given guidance back in February
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  Speaker 3: that you know, although they could get over the line
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  Speaker 3: of delivering that interest rate cup that we saw back
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  Speaker 3: then on the eighteenth of February, they weren't likely to
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  Speaker 3: deliver back to back cut that the economy wasn't disinflating
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  Speaker 3: quite quickly enough, And since then the domestic data at
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  Speaker 3: least have come in line with what they had been expecting.
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  Speaker 3: Growth is on a modest upswing. The labor market is
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  Speaker 3: still quite tight, with the unemployment rates sideways, and inflation's
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  Speaker 3: gradually easy. So they said today, you know, inflation's coming down,
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  Speaker 3: and that's a good thing. But they weren't quite convinced
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  Speaker 3: yet to be able enough that it was going to
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  Speaker 3: get back to target for them to be able to
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  Speaker 3: deliver another cup today.
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  Speaker 2: Hell of a time to be making a big call
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  Speaker 2: like that, the day before Trump's liberation Day. We will
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  Speaker 2: find out about the tariffs. Do you think that played
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  Speaker 2: into it at all? I mean, you know, not wanting
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  Speaker 2: to pre empt a potential tariff war and what that
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  Speaker 2: might mean for a recession or dare I say it inflation.
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  Speaker 3: So I think today's decision was largely grounded on what
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  Speaker 3: was happening domestically and how the domestic story is traveling.
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  Speaker 3: But I think in this statement that we got from
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  Speaker 3: the RBA today, it's very clear. It's a short statement,
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  Speaker 3: it had a lot of information about the fact that
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  Speaker 3: they were very uncertain about the global picture and what
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  Speaker 3: that might mean. So it certainly was something that the
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  Speaker 3: RBA board would be watching very carefully and they'd be
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  Speaker 3: thinking about all they relayed that. You know, their own
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  Speaker 3: take is that this was going to be downside risk
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  Speaker 3: to global activity downside risk to global growth. But they
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  Speaker 3: were quite clear in their statement as well, saying that
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  Speaker 3: they weren't sure what it might mean for inflation, whether
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  Speaker 3: it was upside or downside for inflation. So they're watching
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  Speaker 3: very carefully like the rest of us, in terms of
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  Speaker 3: these global developments. They're very relevant and they may drive
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  Speaker 3: a munkey polity in one direction or another. But they're
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  Speaker 3: also pretty clear today that they don't really know until
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  Speaker 3: they've seen more information exactly which way inflation is likely
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  Speaker 3: to drive inflation. That's the view that they portrayed today.
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  Speaker 2: Yeah, the other problem of courses that could go both ways.
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  Speaker 2: We could have a recession and we could have stagflation.
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  Speaker 3: Well, certainly that's a risk and we need to watch
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  Speaker 3: it very carefully. I think it's a risk probably more
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  Speaker 3: for the US economy that we need to there. But
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  Speaker 3: I think you know, if you think about what tends
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  Speaker 3: to happen when there's a global downturn, it tends to
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  Speaker 3: be disinflationary. And I think I think that's the main
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  Speaker 3: way we're thinking about it at least, is that the
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  Speaker 3: direction of risk is more likely that if it goes
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  Speaker 3: poorly and the global economy slows down and more it's
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  Speaker 3: more likely to be downside risk for inflation in Australia
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  Speaker 3: and New Zealand. Actually that's the way we would think
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  Speaker 3: about it for New Zealand as well, in part because
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  Speaker 3: there'll be a lot of manufactured goods that might not
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  Speaker 3: be going to the markets that they previously would have
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  Speaker 3: out of China and Asia and so on, and they'll
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  Speaker 3: be looking to put those sell those manufactured goods into
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  Speaker 3: another market. And our countries are large importers of manufactured goods,
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  Speaker 3: so we may very well see there's a risk, we
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  Speaker 3: think at least of more disinflation rather than the other
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  Speaker 3: way round.
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  Speaker 2: Michelle Bullock, the Governor, indicated last time we spoke there
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  Speaker 2: would be two cuts this year. Did they give any
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  Speaker 2: ford given all that uncertain did they give any ford forecast?
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  Speaker 3: So the RBA doesn't actually articulate a view on what
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  Speaker 3: they are going to do with monetary policy. So the
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  Speaker 3: last time around, what they did was they always have
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  Speaker 3: a working assumption in their set of forecasts about what
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  Speaker 3: the market is currently pricing at that point in time,
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  Speaker 3: and that's what you're relying that. That's what they did
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  Speaker 3: last time. But this time around they didn't publish any
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  Speaker 3: forecasts because this is a media that's sort of in
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  Speaker 3: between the two that had so there's no there was
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  Speaker 3: no explicit guidance. I think actually, if anything, they were
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  Speaker 3: pretty light on in terms of the guidance, and a
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  Speaker 3: part of that reflects, of course, this global risk that
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  Speaker 3: we're talking about that actually it's difficult to know which
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  Speaker 3: way things are going to go on the inflation outlook,
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  Speaker 3: and so they really didn't provide very much that much
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  Speaker 3: a forward guidance.
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  Speaker 2: All right, Paul, interesting stuff. Thanks for your analysis, Paul
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  Speaker 2: Blocks and hsb C chief economist out of Sydney.
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