Latest / Early Edition with Ryan Bridge / Kelly Eckhold: Westpac Chief Economist on ahead of today's OCR announcement

Transcript

Kelly Eckhold: Westpac Chief Economist on ahead of today's OCR announcement · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: The cutting cycle continues. This morning, economists expecting the Reserve
• 0:03
  Speaker 1: Bank to cut the OCR twenty five basis points. That'll
• 0:05
  Speaker 1: get us down to three percent. We'll also get a
• 0:07
  Speaker 1: deeper look into inflation unemployment. There we get a monetary
• 0:11
  Speaker 1: policy statement, which basically means you get a bit more
• 0:14
  Speaker 1: meat on the bones. Kelly Ekol, there's Westpac chief economs
• 0:17
  Speaker 1: with me this morning. Good morning, good morning. So yes,
• 0:20
  Speaker 1: we will get a twenty five basis point cut today,
• 0:23
  Speaker 1: say most economists, how far? How many more you reckon?
• 0:28
  Speaker 2: Well after that, I think they're going to be a
• 0:29
  Speaker 2: bit more cagey. I think they'll have a bias towards
• 0:34
  Speaker 2: looking at another ingistrate cut. But I think that's probably
• 0:38
  Speaker 2: about it for now. There might be another one in
• 0:42
  Speaker 2: them depending on how the data rolls between now and Christmas,
• 0:46
  Speaker 2: but I think that's probably about all we should reasonably
• 0:50
  Speaker 2: expect for now.
• 0:52
  Speaker 1: They don't want to go too low and then and
• 0:53
  Speaker 1: risk over cooking later.
• 0:55
  Speaker 2: Well, that's right. I mean, if you've looked at the
• 0:57
  Speaker 2: commentary in the Reserve Bank couple of meetings, you've said
• 1:01
  Speaker 2: there's been arguments on both sides of this. Now, there
• 1:04
  Speaker 2: was somebody who didn't even want to do the last cut,
• 1:07
  Speaker 2: and then there's a couple of others talking about, well
• 1:09
  Speaker 2: if we do a little bit more cutting, then we
• 1:11
  Speaker 2: put a bit more guard rails against weaker growth. We know,
• 1:15
  Speaker 2: when you've got those sort of debates going on, it
• 1:17
  Speaker 2: isn't a slam duck that you just keep on getting
• 1:20
  Speaker 2: our rates.
• 1:21
  Speaker 1: That's the fact that we've got a temporary you know,
• 1:23
  Speaker 1: the Reserve Bank, and we've got Christian hawksby and there
• 1:26
  Speaker 1: the fact we haven't got a permanent replacement. Does that
• 1:28
  Speaker 1: mean that they'll be more cautious or is that just talk?
• 1:31
  Speaker 2: Well, I think you should probably reasonably assume that they
• 1:35
  Speaker 2: can't tie themselves into a future strategy too much because
• 1:40
  Speaker 2: you know, if there's a new boss coming in a
• 1:41
  Speaker 2: couple of months, well they need to tell our a
• 1:43
  Speaker 2: little bit of room for them to work out what
• 1:45
  Speaker 2: they want to do. But you know, the data itself
• 1:48
  Speaker 2: also doesn't lendure just being too committed about what happens next,
• 1:53
  Speaker 2: because you don't know how things are going to evolve.
• 1:55
  Speaker 2: So hence that's why I think they should be just
• 1:57
  Speaker 2: a bit cagy.
• 1:58
  Speaker 1: We've had positive signs from manufacturing and services just in
• 2:02
  Speaker 1: the last week, and they are you know, the high
• 2:05
  Speaker 1: frequency data that you talk about. Do you think these
• 2:08
  Speaker 1: are positive enough? Are we finally cracking the back of
• 2:12
  Speaker 1: this blip in our recovery?
• 2:15
  Speaker 2: Oh? I think it's encouraging. I mean what we sort
• 2:18
  Speaker 2: of saw was some actually pretty decent growth right at
• 2:20
  Speaker 2: the start of the year. If you sort of were
• 2:23
  Speaker 2: talking to me about six weeks ago, would have looked
• 2:25
  Speaker 2: a lot more negative than that. Probably looks like it's
• 2:28
  Speaker 2: somewhere in the middle now, So we're expecting to be
• 2:32
  Speaker 2: back onto that kind of path of trend growth quite soon.
• 2:36
  Speaker 2: This sort of indicators have seen the last month or
• 2:38
  Speaker 2: so encouraging science that that's still a good view to have.
• 2:43
  Speaker 1: Was reading yesterday that in order to hit the Reserve
• 2:47
  Speaker 1: Bank estimates for growth this year, the manufacturing and the
• 2:51
  Speaker 1: services indicators need to be fifty three. I mean, obviously
• 2:54
  Speaker 1: fifty and above is growing, and we had services still
• 2:58
  Speaker 1: below fifty but improving manufacturing and finally cracked it. To
• 3:01
  Speaker 1: hit those we need to hit fifty three. Is that true?
• 3:04
  Speaker 2: Oh? I think that's a pretty rough estimate, to be honest, right,
• 3:08
  Speaker 2: I don't really abide by those sorts of numbers. A
• 3:11
  Speaker 2: few draw graphs of these sorts of things against growth,
• 3:14
  Speaker 2: you'll see that it's a rougher relationship than that. I mean,
• 3:17
  Speaker 2: if I look at where those purchasing manager indices are there,
• 3:22
  Speaker 2: if you average them out, then they're probably not too
• 3:25
  Speaker 2: far short of where they were in the first quarter,
• 3:27
  Speaker 2: and we got zero point eight percent growth in that quarter,
• 3:30
  Speaker 2: which is enough basically right now.
• 3:33
  Speaker 1: Good stuff, Kelly, appreciate your time this morning. Kelly echoled
• 3:36
  Speaker 1: westpacchief economists.
• 3:38
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• 3:41
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• 3:42
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• 3:45
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