Latest / Early Edition with Ryan Bridge / Sharon Zollner: ANZ Chief Economist on the predicted cut to the Official Cash Rate

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Sharon Zollner: ANZ Chief Economist on the predicted cut to the Official Cash Rate · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Right now, we're going to Sharon Zolner. This is the
• 0:02
  Speaker 1: ocr so big call today, all of our big banks
• 0:06
  Speaker 1: predicting fifty bases point cut, bringing it to four point
• 0:09
  Speaker 1: seventy five percent. There are also some slightly differing views.
• 0:11
  Speaker 1: Greg Smith from Devon Funds Management wants to see two
• 0:14
  Speaker 1: seventy five point cuts that'd be one and a half
• 0:18
  Speaker 1: percent by Christmas. So what's going to happen? Do we think?
• 0:22
  Speaker 1: Sharon Zolner, the Ain's and chief economists with me this morning. Sharon,
• 0:25
  Speaker 1: good morning, good morning, Good to have you on the show.
• 0:29
  Speaker 1: What do you reckon about the idea of a bigger
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  Speaker 1: cut than fifty, Well.
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  Speaker 2: It's rapidly become the default expectation. Actually, interestingly, back in August,
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  Speaker 2: if you look at what the Reserve Bank then thought
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  Speaker 2: they would do, they thought they'd cut twenty five. That
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  Speaker 2: was implied by their forecasts, and they haven't actually been
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  Speaker 2: a huge number of data supply since then. However, was
• 0:50
  Speaker 2: nonetheless ended up in a situation with I think on
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  Speaker 2: the Bloomberg survey, eighteen out of twenty two economists were
• 0:56
  Speaker 2: picking a fifth point cut, no one was picking a
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  Speaker 2: seventy five and the market is certainly pricing accessity, so
• 1:03
  Speaker 2: that's certainly become the default. And the single piece of
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  Speaker 2: data that was most important there was the Quarterly Business Opinion,
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  Speaker 2: which showed sharply lower pricing intention and other other data
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  Speaker 2: that would suggest that the reserve thing not necessarily will
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  Speaker 2: be revising the inflation forecasts down particularly, but that they
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  Speaker 2: can have more more confidence in them, more confidence that
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  Speaker 2: the job is done.
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  Speaker 1: Yeah, because that report that you're talking about, it said that,
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  Speaker 1: you know, activity and employment was weak currently, but the
• 1:29
  Speaker 1: outlook people were feeling optimistic about the future. But the difference,
• 1:33
  Speaker 1: the gap between the reality now and the promised land
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  Speaker 1: of the future is aging or waving his magic wand
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  Speaker 1: isn't it.
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  Speaker 2: Yeah, well, certainly, and our business monthly Business survey we
• 1:44
  Speaker 2: saw things lift the minute rates started to fall. It's
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  Speaker 2: in dramatic in your business confidence at a ten year high.
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  Speaker 2: Of course, it's one thing to say you think things
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  Speaker 2: will be better in the future. It's it's another to
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  Speaker 2: actually act on those expectations and higher someone or make
• 1:57
  Speaker 2: an investment. So so the bar is a bit higher
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  Speaker 2: for that. But I mean, it wouldn't have problem necessarily
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  Speaker 2: if the economy did rebound faster than expected. It would
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  Speaker 2: be great as long as that fall and inflation and
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  Speaker 2: inflation staying within the band is baked in. But looking
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  Speaker 2: at that quarterly surveys opinion, the Reserve Bank will have
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  Speaker 2: more confidence that there's lots of their capacity in the
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  Speaker 2: labor market and businesses and the machine sitting idle, et cetera,
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  Speaker 2: so that we could have a list of growth without
• 2:27
  Speaker 2: inflation igniting. That said, it's not risk free because in
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  Speaker 2: both surveys costs were still very very high. Firms are
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  Speaker 2: saying that their margins has been squeezed. But there is
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  Speaker 2: a scenario still where the economy rebounds quickly and firms
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  Speaker 2: use that recovery and demand to push through the price increases.
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  Speaker 2: Have actually been wanting to do for ages that haven't
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  Speaker 2: been able to yees.
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  Speaker 1: Okay, So final question, is there a scenario here? Is
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  Speaker 1: there a possibility where the retail banks have already priced
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  Speaker 1: in a fifty point cut fifty basis point cut, the
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  Speaker 1: Reserve Bank comes out with twenty five and retail banks
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  Speaker 1: have to increase mortgage rates again.
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  Speaker 2: Well, twenty five point cut would be the surprise now,
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  Speaker 2: and you would certainly see the swap rates the wholesale
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  Speaker 2: rates left I think on the day, and then over
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  Speaker 2: sort of the one year horizon because it's baking in
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  Speaker 2: quite a lot of cuts. But whether it's a mortgage
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  Speaker 2: rates rise though, I think I think there's still enough
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  Speaker 2: of a buffer there that banks have been sort of
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  Speaker 2: waiting to see. Most banks so waiting to see what
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  Speaker 2: happens today. So obviously I'm not part of those decisions,
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  Speaker 2: but you'd have to I think you'd have to see
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  Speaker 2: a bigger surprise than just at twenty five, because even
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  Speaker 2: if they just cut twenty five, they're still likely to
• 3:43
  Speaker 2: concern that they're going to keep cutting in the future.
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  Speaker 2: You need to see something quite extreme in the rhetoric,
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  Speaker 2: I think, suggesting that they're getting very nervous about inflation.
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  Speaker 2: That would definitely be one out of left field. That's
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  Speaker 2: not something anyone's anticipating.
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  Speaker 1: Sharon, Zolna A and Z thanks so much for your time.
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  Speaker 1: Just gone seven away from six. That announcement due out
• 4:00
  Speaker 1: at two o'clock this afternoon. For more from News Talk
• 4:03
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• 4:06
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• 4:09
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