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Brad Olsen Infometrics Principal Economist on the increase in banks dropping the · The SME Stream

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  Speaker 1: Heather duple class six.
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  Speaker 2: Now several New Zealand banks have been dropping interest rates
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  Speaker 2: again today, mainly the eighteen month and the two year rates,
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  Speaker 2: So ki We Bank and be in z also are
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  Speaker 2: now both calling for a cut to the OCR next week.
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  Speaker 2: Brad OLSENI ism Fort's principle economists and with us now
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  Speaker 2: a Brad.
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  Speaker 1: Good evening, are they dreaming? Oh?
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  Speaker 3: I think they have a pretty convincing argument for why
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  Speaker 3: it should happen. The question now is was the Reserve
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  Speaker 3: Bank dreaming and May or July? And how do they
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  Speaker 3: make all of it? I mean, the economic numbers haven't
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  Speaker 3: changed as markedly as I think. You know this big
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  Speaker 3: shift would be because it would be effectively the Reserve
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  Speaker 3: Bank moving forward their expectations and moving on the official
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  Speaker 3: cash rate a.
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  Speaker 1: Year earlier than they were originally thinking. So there will
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  Speaker 1: be a pretty heroic shift.
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  Speaker 3: But maybe it could happen because we know the economy
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  Speaker 3: is going through a lot of ups and downs at
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  Speaker 3: the moment.
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  Speaker 1: You can see that with the stock markets.
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  Speaker 3: We're expecting unemployment rate data out tomorrow to show some
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  Speaker 3: darker things as well. So all of that together you
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  Speaker 3: can start to build an argument for the Reserve Bank
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  Speaker 3: moving maybe sooner other mater I still feel like it's
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  Speaker 3: probably more in that November sort of area where the
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  Speaker 3: Reserve Bank might land. But I think there is an
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  Speaker 3: increasing argument for why it might be time to move.
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  Speaker 3: To be fair headed, that argument's probably been growing for
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  Speaker 3: a while, but we're still not sure where the Reserve.
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  Speaker 1: Bank will actually land on any of this.
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  Speaker 2: Yeah, I mean, the argument that key we Bank make
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  Speaker 2: is that interest rates take about eighteen months to filter
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  Speaker 2: through anyway, So even if they start cutting now, we're
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  Speaker 2: really eighteen months away from feeling the relief fully. So
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  Speaker 2: isn't that a fair argument?
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  Speaker 1: It is a fair argument.
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  Speaker 3: But the Reserve Bank also knows that like that won't
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  Speaker 3: be news to them. So again, if they were thinking
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  Speaker 3: it was, you know, towards the second half of next
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  Speaker 3: year on their official forecast, that they were going to
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  Speaker 3: move back when they last put out those forecasts, and
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  Speaker 3: they knew at that point that it was still going
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  Speaker 3: to take eighteen months, and they still thought that was
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  Speaker 3: the right move. So, like I said, what has changed
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  Speaker 3: markedly since then? I look at the numbers, and yet
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  Speaker 3: they've gotten sort of better on inflation, worse on other
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  Speaker 3: parts of the economy, but broadly in line what the
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  Speaker 3: bank was thinking anyway. So that's what I'm trying to
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  Speaker 3: figure out, is if the bank still thought that back
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  Speaker 3: in May, how has their shifting, How has their view
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  Speaker 3: shifted that much? Again, though, I think we'd actually probably
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  Speaker 3: see a slightly sharper amount of that monetary policy change
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  Speaker 3: pass through quicker.
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  Speaker 1: We know, for example, that about twenty percent of new.
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  Speaker 3: Loans over the last couple of months have been people
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  Speaker 3: fixing for only six month periods, sort of betting on
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  Speaker 3: a cut sooner other than later. So you might see
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  Speaker 3: a slightly quicker pass through the normal, but look, it
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  Speaker 3: will take a while to come through.
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  Speaker 1: The economy is obviously in a difficult place.
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  Speaker 3: I think there is a real question amongst economists at
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  Speaker 3: the moment over how quickly the Reserve Bank does it,
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  Speaker 3: and probably more importantly, how quickly the Reserve Bank should
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  Speaker 3: do it, And they are still quite a way.
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  Speaker 1: Apart at the moment.
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  Speaker 2: What do you make of the market turmoil in the
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  Speaker 2: last few days around the world.
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  Speaker 1: Well, I think, to be honest, probably a lot of
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  Speaker 1: sort of overreaction.
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  Speaker 3: Everyone losing their minds in the markets, and then maybe
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  Speaker 3: coming back a bit to their senses.
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  Speaker 1: I mean, you look at the likes of the Japanese market.
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  Speaker 3: Yesterday dropped the largest it's ever dropped, worse than the
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  Speaker 3: eighty seven stop crash. Yet today it's up another sort
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  Speaker 3: of ten percent, you know, so it's called back a
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  Speaker 3: lot of those losses. So I think probably what's happened.
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  Speaker 3: You've got three broad threat things. The Japanese have raised
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  Speaker 3: interest rates, that's pretty unusual. The US economy is looking
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  Speaker 3: a little bit worse for wear, and that sort of
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  Speaker 3: ringing those recession alarm bells. But I think there's also
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  Speaker 3: a part where the market's the last couple of months,
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  Speaker 3: particular on tech, particular on AI, got way over zealous.
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  Speaker 3: You know, everyone was thinking that these things were just
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  Speaker 3: going to make them, you know, quadrillions more than they
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  Speaker 3: could ever imagine.
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  Speaker 1: Now I think we've come crashing back to earth.
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  Speaker 3: We're probably a bit more realistic about things, and the
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  Speaker 3: outlook just in the general economy and in tech is
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  Speaker 3: not as upbeat, so a bit more realism. It's going
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  Speaker 3: to sort of be a bit ugly. There's a lot
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  Speaker 3: of red ink and I think, you know, people probably
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  Speaker 3: don't want to check their key. We save as tonight
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  Speaker 3: for the next couple of days. But actually I think
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  Speaker 3: sort of keep calm and carry on is maybe not
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  Speaker 3: the worst idea in the world at the moment.
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  Speaker 1: I'm very good advice.
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  Speaker 2: Hey, Brad, thank you as always appreciated. Brad Awlson informetrics
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  Speaker 2: principle economists. Brad is the expert and I'm not. But
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  Speaker 2: I'm going to say October when he says November for
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  Speaker 2: the first cut. So we'll just put that out there
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  Speaker 2: because if I beat Brad on this, it's going to
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  Speaker 2: be bragging right for the rest of my life. Let's
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  Speaker 2: be honest.