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Kelly Eckhold: Westpac chief economist giving a preview on the OCR · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Now it's our day today. That's why I'm all excited
• 0:02
  Speaker 1: and all over the place. Where are those numbers going
• 0:04
  Speaker 1: to go? Twenty five basis point cut is on the cards.
• 0:06
  Speaker 1: That would take us to three point twenty five percent?
• 0:08
  Speaker 1: Westpac chef economist, Kelly, you're cold with me, Kelly?
• 0:10
  Speaker 2: Good morning, Good morning.
• 0:12
  Speaker 1: Hey. They're going to go down, aren't they? How low
• 0:15
  Speaker 1: will they go?
• 0:15
  Speaker 2: Though?
• 0:16
  Speaker 1: That's the question, isn't it?
• 0:18
  Speaker 2: Well? Today I think we get the twenty five point
• 0:20
  Speaker 2: cut from universally expected and had been pretty well signaled previously.
• 0:27
  Speaker 2: After that, though, I think there's quite a bit more debate.
• 0:30
  Speaker 2: Quite a lot of the data that's come out last
• 0:33
  Speaker 2: few months hasn't really surprised negatively the reserve bag very much.
• 0:37
  Speaker 2: It really depends a lot on how much weight they
• 0:39
  Speaker 2: put on that international outlook.
• 0:42
  Speaker 1: That's the big question here, isn't it? Because your non
• 0:44
  Speaker 1: tradable inflation is coming down, You've got CPI within band,
• 0:49
  Speaker 1: so you know, and to what extent? Because below three
• 0:53
  Speaker 1: percent you're starting to get expansionary? Right, to what extent
• 0:56
  Speaker 1: is the reserve that meant to just keep cranking growth?
• 1:01
  Speaker 2: Well, it's not on the mandate at all, right, it's
• 1:04
  Speaker 2: all been changed to be solely focused on inflation. And
• 1:08
  Speaker 2: I think the problem they've got here is in the
• 1:10
  Speaker 2: short term, Like if you look at inflation forecast for
• 1:13
  Speaker 2: the next year, inflation's actually nudging three percent again, So
• 1:17
  Speaker 2: when you're seeing that sort of profile, you wouldn't normally
• 1:19
  Speaker 2: expect them to cut rates very far. So hence, you know,
• 1:23
  Speaker 2: we've got a forecast that suggest that they'll get down
• 1:25
  Speaker 2: to about three percent and finish the year. But after that,
• 1:29
  Speaker 2: if you look through its next year, if this global
• 1:32
  Speaker 2: environment looks really weak, then inflation could fall back quite rapidly.
• 1:36
  Speaker 2: So hence you've got some commentators talking about maybe rates
• 1:39
  Speaker 2: getting to two and a half percent.
• 1:41
  Speaker 1: Then you're into real guessing work, though.
• 1:43
  Speaker 2: Aren't you. Well, we're always in the guessing stage. Now,
• 1:47
  Speaker 2: we've got to remember that this easing cycle was very
• 1:49
  Speaker 2: well advanced. You know, we've had two hundred points of easing.
• 1:53
  Speaker 2: We'll be getting up towards two hundred and twenty five,
• 1:55
  Speaker 2: maybe even a bit more as you go through the
• 1:57
  Speaker 2: next few months. I think it's fair. It's not just
• 2:00
  Speaker 2: simply a case of closing your eyes and picking a
• 2:03
  Speaker 2: rate cat. You're going to have to start thinking about pauses.
• 2:06
  Speaker 2: In some stage it will stop.
• 2:09
  Speaker 1: So what do we do right now if we're waiting
• 2:12
  Speaker 1: for the bottom?
• 2:14
  Speaker 2: Well for borrowers, I mean basically, what usually happens is
• 2:18
  Speaker 2: people go back to picking the lowest rate on the curve,
• 2:21
  Speaker 2: don't they, So all the mortgage rates have adjusted down
• 2:23
  Speaker 2: quite considerably. You know, usually at this stage that's when
• 2:27
  Speaker 2: people start moving sort of out of the very short
• 2:29
  Speaker 2: rates into something a bit longer so that they can
• 2:31
  Speaker 2: lock in current rates for a while. And I don't
• 2:34
  Speaker 2: think there's any prospect of rate hikes coming into the
• 2:38
  Speaker 2: calculations for quite some time. But you know, the idea,
• 2:42
  Speaker 2: for example, that the mortgage rates go down into the
• 2:45
  Speaker 2: very low fours or into the three starts to look
• 2:48
  Speaker 2: a little bit speculative a thing, and there's something really
• 2:51
  Speaker 2: bad happens.
• 2:52
  Speaker 1: Which, as we have learned from history and even recent history,
• 2:56
  Speaker 1: can happen. Kelly, appreciate your time this morning, Kelly Cold
• 3:00
  Speaker 1: Spective Economists with us.
• 3:02
  Speaker 2: For more from Early edition with Ryan Bridge.
• 3:04
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• 3:08
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