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Cameron Bagrie: Independent Economist on the OCR being held at 2.25% · Early Edition with Ryan Bridge

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  Speaker 1: So Anna Bremen Reserve Bank governor yesterday held the ocr
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  Speaker 1: reckons will be back in target range for inflation by
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  Speaker 1: the end of the year. Cameron Baggery Independent economists with
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  Speaker 1: me this morning, Cameron, good morning, good morning. Did they
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  Speaker 1: get the tone right?
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  Speaker 2: Well? At your markets have been thinking that the reserve
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  Speaker 2: banks can be highly possibly two twice before the end
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  Speaker 2: of the year. The Reserve Bank pushed back a little
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  Speaker 2: bit against that. They said more likely than not, probably one.
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  Speaker 2: But the general s what that's what the Reserve Bank
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  Speaker 2: is saying is the next move in interest rates is up,
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  Speaker 2: but it looks like will be at the back after
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  Speaker 2: this year as opposed to first off.
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  Speaker 1: And is she right? Are they right, I should say,
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  Speaker 1: on the inflation track. Do you think that they're getting
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  Speaker 1: that right because that basically predicts what they do with
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  Speaker 1: the rates?
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  Speaker 2: Right. Yeah, I've got what you call a set of
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  Speaker 2: holy guilty of the economic forecast. Growth has up to
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  Speaker 2: three percent in place, magically goes back to two percent,
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  Speaker 2: the unemployment rate sort of drops, productivities up, their house
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  Speaker 2: prices move back up to around four to five percent.
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  Speaker 2: There's a little bit of magic and achieving dose of outcomes.
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  Speaker 2: If I think there's a problem within their forecast. The
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  Speaker 2: problem with theirs is they assume uptick in productivity growth.
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  Speaker 2: Now we need that uptick in productivity growth, which is
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  Speaker 2: that drives a supply side capacity in your comment, your
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  Speaker 2: ability to meet demand. Now we know that demand line
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  Speaker 2: is packing up. What the Reserve Bank is assuming is
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  Speaker 2: that the supply side capacity via productivity growth is going
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  Speaker 2: to improve. And if demand and supply both improved, then
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  Speaker 2: we're not going to have an inflation problem over twenty
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  Speaker 2: twenty six. If we do not get that supply so
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  Speaker 2: or capacity up, then in place is going to prove
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  Speaker 2: to be a lot more sticky and it's not going
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  Speaker 2: to come down to two percent. As the Reserve Bank are.
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  Speaker 1: Saying, productivity very hard thing to fix, isn't it.
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  Speaker 2: Yeah, it is, and a lot of the leavers to
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  Speaker 2: ten productivity around lots of infrastructure education their long term
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  Speaker 2: In nature, what we tend to see though, is that
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  Speaker 2: productivity tends to wax and wane with the economic cycle.
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  Speaker 2: At the top of the cycle, productivity tends to sort
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  Speaker 2: of back off. What you tend to see early in
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  Speaker 2: the cycle traditionally is a productivity growth starts to pick up.
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  Speaker 2: What We're seen early in this cycle. There's employment growth
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  Speaker 2: and ours works have started to pack up pretty early
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  Speaker 2: in the economic cycle, so that suggests a face edue.
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  Speaker 2: We actually not seen much of what's called a cyclical
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  Speaker 2: pickup and productivity growth.
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  Speaker 1: Yet interesting stuff. Cameron Cameron Bagri Independent Economists with us
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  Speaker 1: this morning. For more from Early Edition with Ryan Bridge,
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  Speaker 1: listen live to News Talks it'd be from five am weekdays,
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