Latest / Best of Business / Paul Bloxham: HSBC chief economist on the Australian Reserve Bank keeping rates on hold

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Paul Bloxham: HSBC chief economist on the Australian Reserve Bank keeping rates on hold · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks be follow
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  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: Now. The Australian Reserve Bank has held the official cash
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  Speaker 2: rate at three point six percent. As we told you earlier,
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  Speaker 2: the move was expected after the bank dropped the rate
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  Speaker 2: by twenty five basis points in August. Paul Bloxham is
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  Speaker 2: HSPECIES Chief Economist and with us HI Paul good eight.
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  Speaker 2: I see it's taken to some people by surprise who
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  Speaker 2: were expecting a cat.
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  Speaker 3: Now. I think this is pretty fairly expected that the
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  Speaker 3: RBA was going to be on hold today. The market
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  Speaker 3: was fully comfortable around that that. The real discussion today
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  Speaker 3: is not really about what was going to happen today,
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  Speaker 3: but rather what sort of guidance the RBA is giving
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  Speaker 3: about what they might do next and whether there are
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  Speaker 3: further interest rate cuts yet to come. And I think
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  Speaker 3: on that front, the RBA was a little bit more
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  Speaker 3: hawkish or indicating that the RBA is just a little
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  Speaker 3: bit more concerned that inflation might not continue to fall
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  Speaker 3: towards the midpoint of its target fan than they were,
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  Speaker 3: perhaps obviously so so that that's the main thing that
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  Speaker 3: I think the market's taken from today that you know,
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  Speaker 3: they're on hole today and whether there's more cuts to
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  Speaker 3: come is sort of where the debate is or how
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  Speaker 3: many of those rate cuts are yet to come? Will
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  Speaker 3: they cut in November, I guess is the big question.
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  Speaker 2: Okay, what are they seeing in inflation?
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  Speaker 3: Well, we got this reading last week of this sort
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  Speaker 3: of indicator, this partial indicator, the monthly CPI indicator, that
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  Speaker 3: was a little bit higher than the market had expected
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  Speaker 3: for August, and that's been where a lot of the
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  Speaker 3: focus of the discussion has been. Is that giving you
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  Speaker 3: a clear signal that actually inflation might now be starting
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  Speaker 3: to look a bit more persistent, or is that indicator
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  Speaker 3: which is actually really quite noisy and quite volatile, you know,
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  Speaker 3: just a partial indicator. And so so you know, the
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  Speaker 3: thing for the RBA is the last reading of the
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  Speaker 3: main measure they watch around at two point seven percent,
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  Speaker 3: which is very much in there two to three percent
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  Speaker 3: target band, of course, but they need it to really
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  Speaker 3: keep heading towards the midpoint, towards two and a half.
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  Speaker 3: And if it doesn't keep heading towards, then maybe they
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  Speaker 3: won't be able to deliver much more easing. And if
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  Speaker 3: it does you know, head towards it. Then then we
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  Speaker 3: might get a couple more we might get a little
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  Speaker 3: bit more easy from the RBA. But we're getting close
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  Speaker 3: to the end. It does seem like the RBA has
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  Speaker 3: done enough to get the economy to be in an upswing.
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  Speaker 3: Growth has picked up pace, you know, the consumers starting
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  Speaker 3: to spend a bit more. Australia is in a modest
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  Speaker 3: growth up swing.
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  Speaker 2: Yeah, Paul, what are you expecting from the rbn Z
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  Speaker 2: in next week?
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  Speaker 3: Well, that is going to be very interesting. I mean,
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  Speaker 3: I think they're going to cut and I think that's
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  Speaker 3: fairly uncontroversial that the question is going to be how
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  Speaker 3: much do they, you know, take from that really weak
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  Speaker 3: judy p print we got for the the last second
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  Speaker 3: quarter one and do they feel the need to move
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  Speaker 3: even more? And so, you know, we think that that
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  Speaker 3: was quite a hefty surprise to the downside, and you know,
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  Speaker 3: the RBNS that had already been talking about the idea
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  Speaker 3: of maybe cutting a couple more times before the end
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  Speaker 3: of the year. So our leaning is that it's most likely,
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  Speaker 3: we think the albiens that will probably deliver fifty basis
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  Speaker 3: points next week, that they'll cut more because that print
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  Speaker 3: was very weak. It surprised them to the downside. They'd
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  Speaker 3: already be indicating that they were going to be cuts
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  Speaker 3: coming anyway, so we think that's likely. We think we're
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  Speaker 3: going to get the Abienz cutting delivering a bigger cut
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  Speaker 3: next week.
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  Speaker 2: Look, I stand to be corrected, but I think I
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  Speaker 2: sall be in Z saying today that they are expecting
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  Speaker 2: to hit two point two five in the OCR by
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  Speaker 2: Christmas time. Do you think they're on the money there?
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  Speaker 3: That's our view too, So we think they go fifty
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  Speaker 3: basis points next week, and then they go another twenty
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  Speaker 3: five basis points in November, and the cash rate would
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  Speaker 3: be yes down at two twenty five by the end
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  Speaker 3: of the year. Keeping in mind, you know, they've had
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  Speaker 3: this big downside surprise to GDP, so growth is weak
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  Speaker 3: and it's clear the economy is not quite on the
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  Speaker 3: right pathway. And I think the other thing, in terms
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  Speaker 3: of that November meeting, that's the second one. There's a
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  Speaker 3: big gap between the November meeting and a February meeting,
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  Speaker 3: So if they still feel like they need to do
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  Speaker 3: a bit more even after cutting next week, that's how
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  Speaker 3: we get there. So yeah, we do think there's going
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  Speaker 3: to be quite a bit more easy coming through from
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  Speaker 3: the abn Z pretty soon.
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  Speaker 1: Yeah.
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  Speaker 2: Listen on that gap, it seems to be firming up
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  Speaker 2: as a bit of a discussion of topic discussion here,
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  Speaker 2: a topic of discussion as to whether that there should
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  Speaker 2: be that bigger gap between the end of the year
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  Speaker 2: and the start of the year for them.
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  Speaker 3: What do you think, Oh, I think it is quite
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  Speaker 3: a large gap between the last meeting for the year
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  Speaker 3: and the one that comes along long in February, and
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  Speaker 3: so you know there's a question there about whether the
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  Speaker 3: timing is right, whether whether something should happen a bit
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  Speaker 3: more so a bit a bit sooner in between. That'll be,
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  Speaker 3: of course for the rbn Z to work out, especially
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  Speaker 3: with the new governor governor arriving in December.
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  Speaker 2: Yeah, you like the cut of her jib.
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  Speaker 3: I think that, you know, it's a very highly qualified
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  Speaker 3: person to come and to come and run and run
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  Speaker 3: the Central Bank.
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  Speaker 2: Absolutely, Yeah, Paul, thank you very much, as always appreciated.
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  Speaker 2: Paul Blocksham hspecies Chief Economist.
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