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Paul Bloxham: HSBC chief economist ahead of latest Reserve Bank OCR decision · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks B Follow
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  Speaker 2: All eyes are on the Reserve Bank tomorrow afternoon, when
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  Speaker 2: the Acting Reserve Bank Governor, Christian Hawksby will announce any
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  Speaker 2: changes to the OCR and in talk to media for
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  Speaker 2: the first time as the governor. Paul Bloxham is HSPECIES
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  Speaker 2: Chief economist Hey Paul Good aim twenty five basis point cut.
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  Speaker 3: I think that's likely. That's certainly what we think's going
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  Speaker 3: to arrive, and that's the consensus obviously in the market
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  Speaker 3: as well. I mean, there's always a possibility it doesn't,
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  Speaker 3: but I think that the way the economy is still
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  Speaker 3: quite sluggish and growth is still weak enough that the
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  Speaker 3: RBNZ is likely to be focused on that weaker growth story,
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  Speaker 3: and inflation is low enough at least on the last
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  Speaker 3: print to allow them to be able to ease a
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  Speaker 3: bit further. But the key question is going to be
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  Speaker 3: what they have to say about what's coming after that.
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  Speaker 3: I think that's where you can have a much sort
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  Speaker 3: of more vivid debate about what's next.
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  Speaker 2: Why not cut fifty basis points.
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  Speaker 3: Well. I think the RBNS has done a lot of
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  Speaker 3: easing already, is the answer. They've already cut their cash
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  Speaker 3: road by two hundred basis points over a pretty small
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  Speaker 3: amount of time if you think about it. I mean,
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  Speaker 3: the first cut came in August of last year. We're
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  Speaker 3: sitting here in May of this year. I mean, I
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  Speaker 3: think so that's one reason there's a lot of easing
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  Speaker 3: that's already been put in place. I think the second
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  Speaker 3: one is that you are seeing some signs that it's
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  Speaker 3: starting to get a bit of traction. You know, the
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  Speaker 3: retail numbers last week, we're a bit on the stronger
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  Speaker 3: side for the first quarter. You're seeing some signs of
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  Speaker 3: stability in the housing market, a turnaround in some of
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  Speaker 3: the sentiment indicators in the business sector. And we know
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  Speaker 3: monetary policy operates with lags. You cut interest rates, it
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  Speaker 3: takes time for it to feed through. So you've put
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  Speaker 3: a lot of stimulus into the economy. You're seeing some
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  Speaker 3: signs it's getting some traction. I think there's probably enough
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  Speaker 3: evidence that you might want to ease just a bit further.
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  Speaker 3: But that's where it's going to start to become a
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  Speaker 3: question as to how much more beyond that needs to
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  Speaker 3: be done to get the economy to turn around and
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  Speaker 3: to still keep inflation assistant with target.
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  Speaker 2: So the thing is, Paul, I mean everybody agrees that
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  Speaker 2: we're sitting above neutral at the moment, right that is,
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  Speaker 2: still that OCR at that level is still strangling to
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  Speaker 2: some extent. Given how bad the economy is, surely you
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  Speaker 2: should actually be at neutral, if not below, and providing
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  Speaker 2: some stimulus. So why not?
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  Speaker 3: Well, I think two things. One, neutral is an estimate.
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  Speaker 3: We don't actually know where neutral lives. We don't know,
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  Speaker 3: you know, it's always an estimated concept. And there are
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  Speaker 3: large era bands around where that neutral estimate lies as well.
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  Speaker 3: And you know, so I think for the moment, it
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  Speaker 3: pays the RBNZ to be a little bit more cautious
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  Speaker 3: in terms of the pace at which they deliver rate cuts.
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  Speaker 3: We've already seen them pivot out of the fifty basis
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  Speaker 3: point moves they were doing to the last time, they
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  Speaker 3: moved to a twenty five basis point move, and I
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  Speaker 3: think you're seeing signs that the domestic economy stabilizing. One
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  Speaker 3: other remark would be you have seen in their most
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  Speaker 3: recent reading of inflation expectations. So they do their own
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  Speaker 3: They've got a survey that looks at what consumers think
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  Speaker 3: inflation will do going forward, a bit of a lift.
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  Speaker 3: It's picked up a little bit, so that might be
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  Speaker 3: something that the arbians that we'll just want to keep
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  Speaker 3: a bit of an eye on that inflation does remain
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  Speaker 3: on target and well embedded and anchored at the middle
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  Speaker 3: point of their target band.
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  Speaker 2: Paul, it's good to talk to you. I appreciate your
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  Speaker 2: time and enjoy it. Tomorrow it's Paul bloxhom Hspecies Chief Economists.
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