Latest / Best of Business / Jarrod Kerr: Kiwibank Chief Economist on the Reserve Bank cutting the OCR by 50 basis points

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Jarrod Kerr: Kiwibank Chief Economist on the Reserve Bank cutting the OCR by 50 basis points · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk ZEDB. Follow
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• 0:16
  Speaker 2: The Reserve Bank has finally dropped a double cuts, taking
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  Speaker 2: the official cash rate to two point five percent. The
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  Speaker 2: bank says it's also open to further reductions. Jared Kerr
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  Speaker 2: is keyw WE Bank's chief economist.
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  Speaker 3: Hi, Jared, good evening.
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  Speaker 2: I mean some of us were expecting it, but it's
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  Speaker 2: still surprising.
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  Speaker 3: Were you surprised, No, we weren't. We thought it was needed,
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  Speaker 3: and the Reserve Bank has finally sort of realized that, Yeah, hey,
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  Speaker 3: look we need to take in straight into stimatory territory,
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  Speaker 3: and here we are.
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  Speaker 2: Will it give us the confidence to spend like they
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  Speaker 2: hope it will.
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  Speaker 3: It'll certainly help. Yeah, it'll certainly help, and we expect
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  Speaker 3: things to pick up over summer as a result of
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  Speaker 3: these rate cuts.
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  Speaker 2: Are you still expecting twenty five in November?
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  Speaker 3: Here we are. I don't think the job's done just
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  Speaker 3: quite just yet. It'd be great to get the cash
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  Speaker 3: right down to two and a quarter and then we'll
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  Speaker 3: think about whether we need it to go down to
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  Speaker 3: two in February. It'll all come down the house. Things
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  Speaker 3: play out over summer.
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  Speaker 2: Are you seeing this as an acknowledgment that they got
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  Speaker 2: it wrong.
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  Speaker 3: Yeah. Yeah. They told us they didn't need to cut
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  Speaker 3: further earlier in the year, and here they are cutting further.
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  Speaker 3: So it's disappointing that this two and a half percent
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  Speaker 3: cash rate wasn't delivered six months ago because it would
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  Speaker 3: have fed through by now. But we've got it today
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  Speaker 3: and it's going to feed through over the next six months.
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  Speaker 2: So would you because we had a double cut in
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  Speaker 2: what was it, February, So would you have actually double
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  Speaker 2: cut again in April?
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  Speaker 3: Yeah? Absolutely, That's what we were calling for. We've been
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  Speaker 3: calling for a two and a half percent cash rates
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  Speaker 3: two years. We knew it needed to go below neutral,
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  Speaker 3: which is three, and we needed to get some stimulus
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  Speaker 3: into the economy to really ignite the recovery. We haven't
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  Speaker 3: got it. The economy still spluttering, we're still in a recession,
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  Speaker 3: and that just shouldn't have been the case.
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  Speaker 2: Some say that this double cut may in fact spook
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  Speaker 2: people because people are already so nervous chances.
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  Speaker 3: No, I don't believe in that at all. I think
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  Speaker 3: people will take it for what it is. They'll see
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  Speaker 3: their mortgage rates falling, they'll see their business lending rates
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  Speaker 3: falling and there'll be a sigh of relief. You know,
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  Speaker 3: it'll free up cash for them to do what they
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  Speaker 3: haven't been able to do up until now.
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  Speaker 2: So, Jared, what are you picking for the economy next year?
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  Speaker 3: Look, we think we get the recovery which we should
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  Speaker 3: have got this year. We think we'll see growth of
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  Speaker 3: around one to two percent next year, so a significant
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  Speaker 3: improvement and what we've had, and then you know, things
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  Speaker 3: will continue into two thousand and seven as we sort
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  Speaker 3: of pick ourselves up off the ground.
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  Speaker 2: Good stuff, Jared, Thanks very much appreciated. Jared Kirky, we
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  Speaker 2: banks chief economists who has actually been right the whole
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  Speaker 2: way through here the wind does the new boss of
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  Speaker 2: the rbnz's dot Mark. I think she starts in December,
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  Speaker 2: but her first call will be in I think the
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  Speaker 2: new year.
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