Latest / Best of Business / Christian Hawkesby: Reserve Bank Governor on whether Kiwis can expect more rate cuts next year

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Christian Hawkesby: Reserve Bank Governor on whether Kiwis can expect more rate cuts next year · Best of Business

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  Speaker 2: Good afternoon. The Reserve Bank has cut the official cash
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  Speaker 2: rate today by a quarter of a percent. It is
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  Speaker 2: now sitting at two point twenty five percent, the lowest
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  Speaker 2: in three years. It reckons this is the Reserve Bank.
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  Speaker 2: It reckons inflation is not a problem. The economy is
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  Speaker 2: already growing in the labor market is stabilizing. Christian Hawksby
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  Speaker 2: is the outgoing governor high Christian Gooday? Is that a
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  Speaker 2: one and done, no more cuts.
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  Speaker 3: We've put out an ocr projection which would have the
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  Speaker 3: os will be consistent with the OCEA being unchanged over
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  Speaker 3: two thousand in twenty six and we think that's a
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  Speaker 3: good position to be in, having done a lot of
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  Speaker 3: work over the course of this year to loosen policy
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  Speaker 3: and starting to see it having in its effect.
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  Speaker 2: And one of the things that you're taking into account possible.
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  Speaker 2: Possibly is the fact that Kiwi's like, even this cut
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  Speaker 2: may not be enough to get Kiwis going in.
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  Speaker 3: That's the doubt, you know. The downside risk is that
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  Speaker 3: households and businesses feel but battered and bruised still from
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  Speaker 3: this year and are a bit cautious. Our fifty point
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  Speaker 3: cut in October was you know, sort of designed to
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  Speaker 3: a bit of a shot in the arm to address that.
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  Speaker 3: So there is that risk still there. On the other side,
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  Speaker 3: the recovery could be faster and stronger than we expect
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  Speaker 3: because we have cut interest rates a long way and
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  Speaker 3: it could really start coming through quite quickly.
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  Speaker 2: I can't call it. What's your gut telling you.
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  Speaker 3: I think we've we have done a lot of work.
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  Speaker 3: I'm a true believer that monetary policy works. People have
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  Speaker 3: their doubts, but it just does work its way through
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  Speaker 3: all the different channels.
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  Speaker 2: Can I put something to you. It's historically right. But
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  Speaker 2: the problem that's happened now is that you might have
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  Speaker 2: cut the ocr and I've come off my rate and
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  Speaker 2: I've refixed at a lower rate, but by the same
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  Speaker 2: at exactly the same time, my counsel is chucking up
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  Speaker 2: my rates. So any free cash has been sucked up
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  Speaker 2: in that again, isn't it.
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  Speaker 3: There's lots of different channels through rich monetary policy works,
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  Speaker 3: wealth channel, cash flow channel, the exchange rate channel. You know,
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  Speaker 3: we're seeing we're so we're seeing it working. The exchange
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  Speaker 3: rate one is one that people don't talk so much
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  Speaker 3: about at the moment that the key we has weakened.
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  Speaker 3: That's lifting you know, explort Earn.
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  Speaker 2: Want to put it to you, Is it possible that
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  Speaker 2: we are actually poorer than you guys might anticipate, and
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  Speaker 2: that even the money that you free up as being
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  Speaker 2: sucked up by bills, Like we just don't have as
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  Speaker 2: much disposable cash as you might think we do.
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  Speaker 3: We we do have a lower potential growth rate of
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  Speaker 3: the economy. Is what we've noticed that the productivity growth
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  Speaker 3: is weak, the population growth is pretty weak, so we
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  Speaker 3: kind of need to be realistic about how fast the
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  Speaker 3: economy can grow in the future. But what we're seeing
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  Speaker 3: is a lot of spare capacity, and that's what's motivating
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  Speaker 3: us to go, Okay, we can have low interest rates
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  Speaker 3: because we can have an economy that's running hotter for
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  Speaker 3: a while to close that gap.
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  Speaker 2: Okay, So I mean you talk to the business leaders.
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  Speaker 2: They say they're seeing green shoots. When do you think
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  Speaker 2: we start really feeling it properly?
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  Speaker 3: Well, we've got a positive Q three and Q four,
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  Speaker 3: and you know, once you get into you know, further
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  Speaker 3: on beyond that, you're looking at about kind of a
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  Speaker 3: three percent per annum type run rate as the effect
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  Speaker 3: of lower interest rates kick in. So the answer is,
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  Speaker 3: the recovery is happening right now. It's just that we
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  Speaker 3: won't see the official.
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  Speaker 2: Do you think they're feeling it yet, thou Christian.
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  Speaker 3: It's early days in terms of it. You know, it's
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  Speaker 3: a positive quarter Q three. We look at high frequency data.
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  Speaker 3: We've got a kiw GDP indicator that we update all
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  Speaker 3: the time each time a new bit of data comes out.
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  Speaker 3: You know, that's starting to show it. So it's it's
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  Speaker 3: not about waiting for something to happen. It's happening at
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  Speaker 3: the moment. It'll pick up through the next while, hope.
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  Speaker 2: So, okay, listen, have you met the new governor?
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  Speaker 3: Yes?
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  Speaker 2: What do you reckon? What's your take on her?
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  Speaker 3: I think she will do a wonderful job. We've met
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  Speaker 3: six times now. A big focus for me has been
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  Speaker 3: supporting her. You know induction and getting ready for the role.
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  Speaker 3: So we've had a lot of discussions and you know
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  Speaker 3: everything and anything a new governor might want to ask.
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  Speaker 2: She asked you about Adrian.
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  Speaker 3: Before bucking. You know what's gone a matter when you're
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  Speaker 3: sitting the seat.
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  Speaker 2: First, I would like if you and I ever see
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  Speaker 2: each other for a beer, I'm going to be like, right,
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  Speaker 2: tell me everything. This is the most fascinating thing. What
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  Speaker 2: are you off to do?
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  Speaker 3: By the way, I'm going to have a long break
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  Speaker 3: over the summer. I've had a big job of being
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  Speaker 3: focused on the finish line. Next next job is to
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  Speaker 3: have a really good break and not turn my mind
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  Speaker 3: to the future for as long as I can.
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  Speaker 2: All right, Well, good luck with that. Christian hawksby outgoing
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  Speaker 2: Reserve Bank Governor.
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