Latest / Best of Business / Brad Olsen: Infometrics principal economist on the Reserve Bank cutting the OCR to 3 percent

Transcript

Brad Olsen: Infometrics principal economist on the Reserve Bank cutting the OCR to 3 percent · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks'd be follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: The Reserve Bank has cut the official cash rate by
• 0:20
  Speaker 2: twenty five basis points to a three year low of
• 0:23
  Speaker 2: three percent. To discuss this further, we're joined by Brad Olsen.
• 0:26
  Speaker 2: He's a friend of the show, and he's also the
• 0:28
  Speaker 2: CEO of Infometrics. Brad, get a tou.
• 0:31
  Speaker 3: Good afternoon, Brad.
• 0:33
  Speaker 4: Did they go hard enough? Wouldn't have you know? Fifty
• 0:36
  Speaker 4: points would have put some much needed juice into the economy,
• 0:38
  Speaker 4: wouldn't it have?
• 0:40
  Speaker 3: It would have to be fair. They actually did consider
• 0:42
  Speaker 3: going by fifty. They took a vote by four to two.
• 0:46
  Speaker 3: They decided to cut by twenty five rather than fifty.
• 0:49
  Speaker 3: Let's be clear, though, that was very well anticipated. We
• 0:51
  Speaker 3: all thought we were getting the twenty five, so tick
• 0:54
  Speaker 3: on that box. But by making that expectation that you
• 0:57
  Speaker 3: could see or that there were votes on the committee
• 1:00
  Speaker 3: to go even harder, that does send a strong enough
• 1:02
  Speaker 3: signal that hey, they've probably got a bit further to go.
• 1:05
  Speaker 3: Most expectations now seem to be shifting. People were thinking
• 1:09
  Speaker 3: maybe two point seventy five was now the bottom. We
• 1:12
  Speaker 3: had metrics this afternoon. We've changed our pick to now
• 1:15
  Speaker 3: expecting a further cut in both October and November, taking
• 1:18
  Speaker 3: their official cash rate down to two point five percent.
• 1:21
  Speaker 3: So we've done a lot of the heavy lifting, but
• 1:23
  Speaker 3: there still might be a little bit more relief on
• 1:25
  Speaker 3: the way.
• 1:26
  Speaker 2: You mentioned that vote four to two. Do we get
• 1:28
  Speaker 2: to know which way and who votes for which option brand?
• 1:32
  Speaker 2: That would be nice to know information or is it
• 1:34
  Speaker 2: all anonymous?
• 1:36
  Speaker 3: It is all anonymous as much as I would also
• 1:38
  Speaker 3: like the gossip to sort of understand it because as
• 1:41
  Speaker 3: well one member of the committee, they didn't vote this way,
• 1:44
  Speaker 3: but they did am and r about it. Of actually
• 1:46
  Speaker 3: doing nothing this time, it's sort of, you know, holding
• 1:48
  Speaker 3: things steady. So there's clearly a bit of diversity of
• 1:51
  Speaker 3: view out there. What's interesting is it's not just our
• 1:53
  Speaker 3: central bank doing this either. You look at a number
• 1:56
  Speaker 3: of central banks around the world, the Australian one in
• 1:58
  Speaker 3: the last couple of months at one point they had
• 2:00
  Speaker 3: a divided vote. I think the UK also had a
• 2:04
  Speaker 3: divided vote recently. So there's a lot of uncertainty out
• 2:07
  Speaker 3: there over how much more do you need to do?
• 2:09
  Speaker 3: And I think the big one for decision makers at
• 2:12
  Speaker 3: the moment is the timing delays because by the time
• 2:15
  Speaker 3: this official cash rate cut that we got today actually
• 2:17
  Speaker 3: hits the numbers in about a year's time. Because it
• 2:20
  Speaker 3: takes that long for everyone to refix. You could see
• 2:23
  Speaker 3: a lot of the interest rate cuts that have already
• 2:25
  Speaker 3: happened be hitting people's back pockets. They'll have lower mortgages
• 2:28
  Speaker 3: and they might be spending more. So there is a
• 2:30
  Speaker 3: lot of sort of timing questions going on, and I
• 2:34
  Speaker 3: think unfortunately a little bit of patience for those lower
• 2:38
  Speaker 3: interest rates to actually be affecting people's back pockets and
• 2:40
  Speaker 3: what they spend on. So it's all about timing, and
• 2:43
  Speaker 3: so far it's difficult to pin that down.
• 2:45
  Speaker 4: But patience is the problem because we need an economic
• 2:49
  Speaker 4: turnaround right now. You know, we need things to happen today.
• 2:54
  Speaker 4: And look, you know that twenty five basis points, as
• 2:57
  Speaker 4: you said, was well, we knew that well in advance,
• 3:00
  Speaker 4: so you know everyone's already the banks have already factored
• 3:03
  Speaker 4: that in. So does it actually give any juice into
• 3:05
  Speaker 4: the economy just twenty five basis points?
• 3:08
  Speaker 3: Oh yes, and no. The thing is is that economic
• 3:10
  Speaker 3: conditions today, economic conditions next month. They were sort of set.
• 3:14
  Speaker 3: The conditions for that were set a year ago. Like
• 3:16
  Speaker 3: even if the Reserve Bank cut one hundred basis points today,
• 3:19
  Speaker 3: you wouldn't see that filter through immediately because every you know,
• 3:22
  Speaker 3: you've got a large number of households out there that
• 3:25
  Speaker 3: are either hevery fixed in the last couple of months
• 3:27
  Speaker 3: or might still be refixing in the next couple But
• 3:30
  Speaker 3: it doesn't sort of hit as immediately as everyone sort
• 3:32
  Speaker 3: of wants or expects, So there is always this sort
• 3:35
  Speaker 3: of persistent timing piece. What I think we're seeing a
• 3:38
  Speaker 3: bit more of is that the second quarter of the
• 3:40
  Speaker 3: year April through June that was a bit more lackluster.
• 3:43
  Speaker 3: You saw the tariffs sort of make everyone freeze in place.
• 3:46
  Speaker 3: No one was confident, everyone was uncertain. But some of
• 3:49
  Speaker 3: the partial data for July shows a little bit more.
• 3:53
  Speaker 3: You've seen manufacturing that's ticked up, spending that's ticked up,
• 3:56
  Speaker 3: So we're hoping to see a little bit more of
• 3:58
  Speaker 3: that momentum coming through. It is a slow recovery, but
• 4:01
  Speaker 3: it is a recovery nonetheless. But you're right, everyone wants
• 4:04
  Speaker 3: a whole lot more. I'm not sure we can get
• 4:06
  Speaker 3: there a whole lot quicker without destabilizing something out the
• 4:09
  Speaker 3: other end. Because equally, if you had, you know, some
• 4:12
  Speaker 3: bigger cuts, that send a pretty strong signal that we
• 4:15
  Speaker 3: haven't got control of the economy at the moment, and
• 4:17
  Speaker 3: I'd worry it could reverse out the other way. So
• 4:19
  Speaker 3: we've got to be a bit careful with how quick
• 4:21
  Speaker 3: we move.
• 4:22
  Speaker 4: Yeah, my go hard or go home attitude is why
• 4:24
  Speaker 4: I'm not the Reserve Bank governor. Hey, now, Brad Olson,
• 4:28
  Speaker 4: CEO of Infometrics, as part of the problem that we
• 4:32
  Speaker 4: seem to have this much talked about two speed economy
• 4:35
  Speaker 4: with the regions doing well from the experts, but the
• 4:37
  Speaker 4: city's being sort of hit by property downturn and various
• 4:43
  Speaker 4: problems with hospo, is that part of the problem for them,
• 4:46
  Speaker 4: that they're trying to balance those two economies.
• 4:49
  Speaker 3: Yeah, that's absolutely true, And look at it the metrics.
• 4:51
  Speaker 3: We've got some numbers actually coming up tomorrow that sort
• 4:54
  Speaker 3: of puts that in stark relief. The challenge as well,
• 4:56
  Speaker 3: though it's not even a two speed economy, it's just
• 4:58
  Speaker 3: that everything's very bitsy. You know, different parts of rural
• 5:02
  Speaker 3: and provincial centers seem to be going better, but not everywhere.
• 5:06
  Speaker 3: You've got some parts of tourism that are fire, others aren't.
• 5:09
  Speaker 3: Some parts of construction that are going all right, but
• 5:12
  Speaker 3: a lot of others that are really struggling to find activity.
• 5:15
  Speaker 3: So I think it's just that the economy sort of
• 5:17
  Speaker 3: moving in fits and starts at the moment, and for
• 5:20
  Speaker 3: a lot of businesses, what do you plan around with that?
• 5:22
  Speaker 3: You know, it's very very difficult to know exactly what
• 5:24
  Speaker 3: you're going to see what the pipeline of activity and
• 5:26
  Speaker 3: sales is. So yeah, everyone at the moment trying to
• 5:29
  Speaker 3: figure out effectively still what the new Goldilock zone is
• 5:32
  Speaker 3: going to be for the economy, and we're clearly not
• 5:34
  Speaker 3: there yet.
• 5:35
  Speaker 4: Well, inflation is what two point seven percent right now?
• 5:38
  Speaker 3: Is that correct? That's right?
• 5:41
  Speaker 4: So surely we can run the crank up to two
• 5:45
  Speaker 4: point nine and see what we can keep going with
• 5:48
  Speaker 4: the juice in the economy. But thank you so much
• 5:52
  Speaker 4: for talking to us today, Brad.
• 5:54
  Speaker 2: Brilliant, Thanks Tom great insights. That is Brad Olson, the
• 5:56
  Speaker 2: CEO of Inframetrics.
• 5:59
  Speaker 1: For more from News Talks b listen live on air
• 6:02
  Speaker 1: or online and keep our shows with you wherever you
• 6:05
  Speaker 1: go with our podcasts on iHeartRadio,