Latest / Early Edition with Ryan Bridge / Kelly Eckhold: Westpac Chief Economist on the OCR figures set to be released today

Transcript

Kelly Eckhold: Westpac Chief Economist on the OCR figures set to be released today · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: We're going out to Kelly Echold, who is with us
• 0:02
  Speaker 1: from Westpac, the chief economist there. Kelly, good morning. It
• 0:05
  Speaker 1: is OCR day today. We're expecting it to be held
• 0:07
  Speaker 1: at five and a half percent. But what are we
• 0:10
  Speaker 1: looking for in terms of language from the Reserve Bank today?
• 0:14
  Speaker 2: Well, today we think the Reserve Bank's going to keep
• 0:17
  Speaker 2: it pretty tight here. They advocated back in May that
• 0:20
  Speaker 2: they thought interestrates you have to remain restrictive for a
• 0:23
  Speaker 2: protracted period to get inflation down. So not very much
• 0:28
  Speaker 2: has changed them, I suspect, So I think it's going
• 0:31
  Speaker 2: to be pretty short and sweet. Perhaps some hint that
• 0:34
  Speaker 2: the economy has turned down a little bit based off
• 0:37
  Speaker 2: some of the indicators have seen since May.
• 0:41
  Speaker 1: And banks like ASB are predicting that there'll be a
• 0:43
  Speaker 1: cut in November. West Pac saying, now you still think
• 0:46
  Speaker 1: early next year? Is that still your view? Could that
• 0:49
  Speaker 1: change today?
• 0:51
  Speaker 2: I don't think it all changed today and it is
• 0:53
  Speaker 2: still view. The challenge thing for the Reserve Bank is
• 0:57
  Speaker 2: that they really need to see some runs on board
• 0:59
  Speaker 2: here with respect to getting that inflation rate down within
• 1:03
  Speaker 2: their target range. Clation's running at four percent, it's twice
• 1:07
  Speaker 2: the target and whilst we're all hoping that there'll be
• 1:11
  Speaker 2: some interest rate relief sometime soon. The reality is that
• 1:15
  Speaker 2: inflation way girl by itself. It's it's going to require
• 1:20
  Speaker 2: that period of tight conditions, flat economic activity so that
• 1:24
  Speaker 2: we can actually get to where things have been forecasted.
• 1:27
  Speaker 1: What about this issue of non tradable inflation that keeps
• 1:30
  Speaker 1: wearing its head that actually the reserve banks blunt tool
• 1:33
  Speaker 1: isn't working for for things like you know, council rate increases,
• 1:38
  Speaker 1: et cetera.
• 1:40
  Speaker 2: Yeah, well, it takes a bit of time I think
• 1:42
  Speaker 2: for some of these things to happen. I mean the
• 1:44
  Speaker 2: particular issues. I guess that the council rates and also
• 1:47
  Speaker 2: the insurance charges as well. You know, the typical lags
• 1:52
  Speaker 2: on those things are a little bit longer, and that's
• 1:54
  Speaker 2: why we've been sitting here with these interest rates for
• 1:57
  Speaker 2: a relatively long period of time compared to previous cycles.
• 2:01
  Speaker 2: But the fact that the economy has responded to interest
• 2:05
  Speaker 2: rates gives you confidence that is going to have an impact.
• 2:08
  Speaker 2: But it's just going to take time. And it's that
• 2:11
  Speaker 2: message of the time required to have to keep interest
• 2:15
  Speaker 2: rates at this level is the key message that the
• 2:17
  Speaker 2: Reserve Bank has really been telling.
• 2:19
  Speaker 1: Us all right, so we've looked for the language today,
• 2:22
  Speaker 1: but it will be around the edge. Is Kelly e
• 2:24
  Speaker 1: called the Westpac chief economists with us this morning. That
• 2:27
  Speaker 1: decision by the way drought at two pm. For more
• 2:29
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• 2:33
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• 2:35
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