Latest / Best of Business / Kelly Eckhold: Westpac Chief Economist on the OCR getting cut by 25 basis points amid tariff uncertainty

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Kelly Eckhold: Westpac Chief Economist on the OCR getting cut by 25 basis points amid tariff uncertainty · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks'd be follow
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  Speaker 2: The Reserve Bank has cut twenty five points to three
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  Speaker 2: and a half percent. On the question of tariffs and
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  Speaker 2: how they might impact the economy going forward, they basically
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  Speaker 2: said it's too soon to say, but they did say
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  Speaker 2: there is room to move lower should they need to.
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  Speaker 2: Kelly Echol's Westpac chief economist with US tonight. Hi Kelly, Hi, Yeah,
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  Speaker 2: are you good? Thank you? So they've taken the steady
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  Speaker 2: as she goes option, which is probably the right one
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  Speaker 2: given the times.
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  Speaker 3: Yeah, I think that's right. There was certainly no sense
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  Speaker 3: of undue, anguish or panic there, which is appropriate given
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  Speaker 3: things of moving quite quickly right now.
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  Speaker 2: How they mentioned they do have room to go lower
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  Speaker 2: three Adrian noised to say that was the sort of
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  Speaker 2: bottom of neutral. Would they go lower than that?
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  Speaker 3: Well, I think there's a possibility that could happen. They
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  Speaker 3: didn't really say anything like that in this statement. They
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  Speaker 3: more pointed to the downside risks for growth, particularly and
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  Speaker 3: inflation to some extent. So you don't have to be
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  Speaker 3: very much of a rocket scientist to believe that when
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  Speaker 3: they give us the next set of forecasts in May
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  Speaker 3: that will forecast to interest rate being a bit lower
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  Speaker 3: than it was, and where it was had a bottom
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  Speaker 3: of the oco about three point one percent.
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  Speaker 2: So where do you reckon the bottom might be now?
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  Speaker 2: I guess we got too soon to say, are you
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  Speaker 2: are you sticking to their line on that, Kelly, or
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  Speaker 2: are you going to go further for us?
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  Speaker 3: I think it's a little bit hard to say. I mean,
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  Speaker 3: it's pretty clear to me that there's downside risks to know,
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  Speaker 3: certainly the forecast that we've had for a couple of
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  Speaker 3: months now that the bottom of the cycle will be
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  Speaker 3: at three point two five percent, But exactly the extent
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  Speaker 3: of those I think is genuinely very hard to assess.
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  Speaker 3: And if you just take a casual look at the
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  Speaker 3: newsflow you can see why. I mean, there's no clarity
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  Speaker 3: really about how long and the extent to which these
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  Speaker 3: tariffs are going to be in place, how countries are
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  Speaker 3: going to respond, and importantly how this impacts on New
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  Speaker 3: Zealand as well, because there's quite a few changes happening
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  Speaker 3: every day in that regard.
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  Speaker 2: Your colleagues are at Kirybank, I said, I saw a
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  Speaker 2: note from them. They want a quick reduction, they want
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  Speaker 2: the ocr down, they want two and a half percent
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  Speaker 2: by the end of the year. Do you think that's
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  Speaker 2: rushing things?
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  Speaker 3: Well, the end of the year is a long way here.
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  Speaker 3: So if it does turn out that a meaningful adjustment
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  Speaker 3: in interest rates is required, I would agree with them
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  Speaker 3: that it will occur by the end of the year.
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  Speaker 3: But what we don't really know here is how large
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  Speaker 3: an adjustment is actually going to be required. All due
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  Speaker 3: respect to them, they've decided to have a bit of
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  Speaker 3: a guest here and they put a number on it.
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  Speaker 3: But I'm also looking at the exchange rate here, and
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  Speaker 3: I expect that it will continue to fall, potentially by
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  Speaker 3: quite a lot. And the extent to which it falls,
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  Speaker 3: and the extent to which some of these things we
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  Speaker 3: see globally actually impact on things like export prices is
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  Speaker 3: going to really.
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  Speaker 2: Matter massively to us. And when we're an export nation.
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  Speaker 2: What about the risks? So we've spoken a lot about
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  Speaker 2: the downside risk of too of recession, potential recession in
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  Speaker 2: the States, and you know our exports, et cetera. But
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  Speaker 2: what about inflation, and like, surely the growth downside is
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  Speaker 2: riskier or more likely than the inflation downside, right, Yeah.
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  Speaker 3: I think it's much more clear that we've got a
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  Speaker 3: lower growth outlook coming out of this than with inflation,
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  Speaker 3: where there's things pushing and pulling in different directions.
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  Speaker 2: Kelly, great to have you on the show. Thank you, Kelly,
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  Speaker 2: You're cold Westpac Chief Economist.
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