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Robert MacCulloch: Auckland University economics professor warns against cutting the OCR · Best of Business

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  Speaker 1: You're listening to a podcast from news Talk said be
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  Speaker 1: follow this and our wide range of podcasts now on iHeartRadio,
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  Speaker 1: Ray and Bridge.
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  Speaker 2: Most economists expecting the official cash right to be cut
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  Speaker 2: this week fifty basis points to three point seventy five percent.
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  Speaker 2: Inflation currently running at two point two percent, so inside
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  Speaker 2: the range. Interestingly, though not crucially, food price inflation is
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  Speaker 2: actually on the rise again. Economics professor Robert McCulloch is
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  Speaker 2: with me, Robert, Good evening, Good evening. There's two questions,
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  Speaker 2: Will they cut? And then should they cut?
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  Speaker 3: Will they cut? Probably? That's what most of the big
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  Speaker 3: bank monopoly economists are saying. And Liam Dan at the
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  Speaker 3: Herald said they're going to cut, so they you know,
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  Speaker 3: that's what they're all saying.
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  Speaker 2: Well, if Lillam says it, it's true.
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  Speaker 3: If Liam says it must be true. That the Herald
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  Speaker 3: says it's true, it has to be true.
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  Speaker 2: Exactly. We love Liam. Should they cut?
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  Speaker 1: No?
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  Speaker 3: I think they probably shouldn't cut. No. Why Well, Nicola
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  Speaker 3: Willis changed the Reserve Bank Act the Finance Minister when
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  Speaker 3: she came to power, and the sole manmate of the
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  Speaker 3: Reserve Bank by law is price stability and that's to
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  Speaker 3: find as getting inflation in that one to three percent bracket.
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  Speaker 3: And like you said in your introduction, where is it now,
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  Speaker 3: it's exactly at the midpoint, it's two percent. Well, it's
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  Speaker 3: quite hard to argue with the one line argument. We're
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  Speaker 3: exactly at the midpoint, inflation is there, and yet the
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  Speaker 3: bank and the big bank economists are all baying for
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  Speaker 3: even more cuts. So one has to ask why.
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  Speaker 2: Well, they're also I suppose got an eye on the
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  Speaker 2: wider economy and the fact that we're up Shite Creek
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  Speaker 2: without a paddle.
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  Speaker 3: I think that's the answer. Exactly. They're panicking and they
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  Speaker 3: think the economy is in a terrible state, is it? Well,
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  Speaker 3: you asked me the question should they cut? And by law,
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  Speaker 3: the Reserve Bank Act, which was passed by the incoming Coalition,
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  Speaker 3: says you should only consider the rate of inflation when
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  Speaker 3: you make these decisions. That's the law of the country. Now.
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  Speaker 3: Before it said you could consider the state of the economy,
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  Speaker 3: it said maximum sustainable employment as well as price stability.
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  Speaker 3: So by law they're only meant to look at inflation.
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  Speaker 3: But I think you're exactly right. What are they doing.
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  Speaker 3: They're not looking at the inflation rate, it's exactly two percent,
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  Speaker 3: but they're panicking about the state of the economy. That's
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  Speaker 3: the truth. I think that's what is actually going on.
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  Speaker 2: Robert, thank you. Robert McCulloch, who's an economics professor with US.
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  Speaker 2: A contrary, Well, I suppose it's not so much of
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  Speaker 2: a contrarian view. He's just saying, yes, he thinks they
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  Speaker 2: will cut, like everybody else is saying, but technically, by
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  Speaker 2: the letter of the law, they really shouldn't.
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