Latest / Best of Business / Paul Bloxham: HSBC Chief Economist on Australian business confidence rising but staying low

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Paul Bloxham: HSBC Chief Economist on Australian business confidence rising but staying low · Best of Business

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  Speaker 1: Hither Duplessy Andrew.
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  Speaker 2: Dickens, even the Big Voice guys confused twenty three minutes
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  Speaker 2: to seeven. Welcome to the program. Paul Boxer, HSBC Chief Economists, Hello,
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  Speaker 2: good day. All right, we got week sentiment readings for Australia.
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  Speaker 3: That's right. So today we got a couple of readings.
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  Speaker 4: We got the consumer sentiment reading, so asking households how
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  Speaker 4: they feel about things, and it weakened further and it's
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  Speaker 4: already at quite a low level. And we also got
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  Speaker 4: the NAB Business Survey, which is our main one of
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  Speaker 4: the main surveys Australia has about business conditions, and business
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  Speaker 4: confidence improved a little, but it's still well below average
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  Speaker 4: and it had actually plummeted back in March and April
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  Speaker 4: to very low levels. And within that survey you also
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  Speaker 4: get a reading of how businesses feel about current conditions
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  Speaker 4: and those current conditions are positive, but very very week
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  Speaker 4: So the Australian economy has tipped into a downturn. We
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  Speaker 4: saw that last week in GDP figures for the first
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  Speaker 4: quarter which had already slowed down, and now we're seeing
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  Speaker 4: it in these more timely readings that both the consumer
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  Speaker 4: and the business sector are feeling pretty down about things,
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  Speaker 4: and we think this is going to slow growth down
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  Speaker 4: even more into the second quarter. We may even see
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  Speaker 4: a contraction in GDP in the second quarter in Australia.
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  Speaker 2: All Right, you are a man who is both blessed
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  Speaker 2: and cursed with actually coming up with the phrase rockstar
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  Speaker 2: economy when we were talking about New Zealand. So who's
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  Speaker 2: got the rock star economy now, Australia or New Zealand.
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  Speaker 3: That's a nice nice way of framing it.
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  Speaker 4: Yeah, Look, I think that New Zealand's got in a
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  Speaker 4: little bit better shape right now. I think New Zealand's
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  Speaker 4: economy is in a modest upswing. It was in a
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  Speaker 4: stronger upswing, but the Middle East conflict shock has lifted
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  Speaker 4: the cost of fuel and that's starting to take a
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  Speaker 4: little bit of the steam out of the economy. But
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  Speaker 4: I think it's still in a modest upswing, whereas I
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  Speaker 4: think Australia is in a downturn. You know, I think
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  Speaker 4: I think, you know, and a part of this is
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  Speaker 4: that inflation has been too high in Australia and the
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  Speaker 4: RBA has had to lift interest rates quite quickly, because
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  Speaker 4: though if you keep in mind, they've lifted interest rates
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  Speaker 4: three times this year already, and that seems to have flattened,
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  Speaker 4: as I say, the confidence dedicators we're in it. We're
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  Speaker 4: in a down swing in Australia, whereas New Zealand seems
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  Speaker 4: to be in a modest upswing. I wouldn't go quite
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  Speaker 4: as far as saying New Zealand is a back to
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  Speaker 4: rock star status, but I.
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  Speaker 3: Do think, I do think that you know.
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  Speaker 4: Things are looking a bit better and that should certainly
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  Speaker 4: be something that New Zealand is aspiring to once more.
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  Speaker 2: Okay, we know a Rocksdale we might have had a
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  Speaker 2: top forty hit in a small country. So there we go. Okay,
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  Speaker 2: So while we're comparing Australia and New Zealand, we've got
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  Speaker 2: the Reserve Bank of Australia ABBA and the Reserve Bank
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  Speaker 2: of New Zealand AB and Z and of course they're
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  Speaker 2: all looking at rates and how the economy is going.
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  Speaker 2: So can you do a little piece where you compare
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  Speaker 2: the outlook for both?
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  Speaker 4: Okay, So the first thing to start with is to
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  Speaker 4: say that the RBA has already lifted its cash rate three.
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  Speaker 3: Times this year. They lifted in February, in March, and
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  Speaker 3: in May.
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  Speaker 4: And we have a cash rate right now at four
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  Speaker 4: point three five percent, so it's a back above what
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  Speaker 4: US economists would describe as neutral. So it's sitting at
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  Speaker 4: a level that's actually weakening the economy purposely to get
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  Speaker 4: inflation down. So and at four thirty five it's not
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  Speaker 4: that low, whereas in New Zealand, of course, the cashret
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  Speaker 4: has been slashed over the past couple of years to
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  Speaker 4: very low levels. You're at two twenty five, two point
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  Speaker 4: twenty five on the cash rate, and that's.
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  Speaker 3: Priming the economy. That's part of the reason the economy
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  Speaker 3: is in an upswing. So the RBA, we think is done.
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  Speaker 4: We don't think the RBA is going to be lifting
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  Speaker 4: interest rates any further because they've already moved, they've already
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  Speaker 4: taken action. The economy is in a downturn, and we
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  Speaker 4: think that that's they're not going to be They're not
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  Speaker 4: going to be doing anything for a while actually, Whereas
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  Speaker 4: for the RB and Z we actually think the next
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  Speaker 4: move is likely to be to lift interest rates. We
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  Speaker 4: do think that it's next meeting, you're likely to see
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  Speaker 4: the RB and Z starting to lift its cash rate
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  Speaker 4: because inflation's picked up, the economy's in a modest upswing,
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  Speaker 4: and I think the RB and Z will be a
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  Speaker 4: little nervous that the cash rate is so low and
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  Speaker 4: below neutral and stimulating an economy that's already got you know,
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  Speaker 4: that's got inflation that's starting to rise a bit, particularly
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  Speaker 4: given the Middle East conflict shop that's come through.
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  Speaker 2: Well, we're certainly not in sync, are we now, Because
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  Speaker 2: you're quite right, everybody here believes that we're going to
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  Speaker 2: have our rates go up and up for a bit.
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  Speaker 2: That's going to suppress some activity we make slow economic activity,
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  Speaker 2: we start to fall after as you maybe recover after
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  Speaker 2: heading the peak with your rates as well. So the
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  Speaker 2: two economies are certainly not in sync.
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  Speaker 3: No, they're not. Well.
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  Speaker 4: The rate cycles have been similar but not identical for
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  Speaker 4: quite for quite some time now. If you sort of
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  Speaker 4: go back post pandemic, we both got this big surgeon
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  Speaker 4: inflation in twenty twenty two. The RB and Z lifted
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  Speaker 4: interest rates more quickly and buy more and pushed the
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  Speaker 4: economy into a bigger downturn.
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  Speaker 3: The RBA chose not to lift interest rates as much, and.
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  Speaker 4: The economy slowed, but inflation stuck around for longer, and
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  Speaker 4: then the RB and ZED had to come along after
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  Speaker 4: having lifted rates and pushed the economy and slash interest
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  Speaker 4: rates a long way. The RBA did did a bit
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  Speaker 4: of that and actually had to reverse all of it
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  Speaker 4: because they basically, you know, had an inflation challenge that
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  Speaker 4: was still there. So the cycles have been sort of
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  Speaker 4: got parallels, but they're not They haven't tracked each other,
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  Speaker 4: you know, certainly not been in sync, as you say,
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  Speaker 4: over the last of the.
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  Speaker 2: While, Paul, it's always a pleasure to told you Paul
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  Speaker 2: Bloxham from HSBC.
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