Latest / Early Edition with Ryan Bridge / Nick Tuffley: ASB Chief Economist says that the OCR will likely continue to be cut in the wake of the GDP slump

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Nick Tuffley: ASB Chief Economist says that the OCR will likely continue to be cut in the wake of the GDP slump · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Better than expected, but still bad. That seems to be
• 0:02
  Speaker 1: the vert on our GDP data out yesterday, one point
• 0:05
  Speaker 1: two percent for the June quarter. Will that hinder our
• 0:07
  Speaker 1: chances of more and maybe bigger rate cuts this year
• 0:11
  Speaker 1: before Christmas? Nick Touughley is asb's chief economist. Nick, good morning,
• 0:15
  Speaker 1: Good morning, what do you reckon? Well, what does it
• 0:17
  Speaker 1: affect what you've seen yesterday our chances of cuts this year?
• 0:23
  Speaker 2: No, it doesn't. The Reserve Bank will be cutting anyway.
• 0:27
  Speaker 2: The Reserve Bank was expecting the slightly weakened number, but
• 0:30
  Speaker 2: it's not going to go fuel. Let's keep rates where
• 0:32
  Speaker 2: they are now. It's of the view that it's got
• 0:34
  Speaker 2: inflation under control, and the thing is that we need
• 0:37
  Speaker 2: to see the cash rate get from over five percent
• 0:40
  Speaker 2: down to something but over three percent, which is a
• 0:43
  Speaker 2: more neutral level, reasonably quickly. So they'll keep cutting rates.
• 0:47
  Speaker 1: How soon do you reckon? We'll get to that three.
• 0:49
  Speaker 2: Percent if they cut at a quarter percent every single meeting.
• 0:54
  Speaker 2: They've only got seven meetings a year, then we're talking
• 0:56
  Speaker 2: about say about this time next year, around around October
• 1:01
  Speaker 2: next year now, because that's a long time to have
• 1:04
  Speaker 2: rates essentially still with the foot on the break, there
• 1:07
  Speaker 2: is that possibility that we do get a larger cut,
• 1:11
  Speaker 2: say later this year or early next year. But it's
• 1:14
  Speaker 2: really going to depend on whether inflation starts to look
• 1:18
  Speaker 2: like it's falling a lotier than what the Rezero Bank's
• 1:21
  Speaker 2: been anticipating.
• 1:22
  Speaker 1: That potential for a fifty basis point cut. How does
• 1:26
  Speaker 1: the summer break, because obviously they go away for some
• 1:28
  Speaker 1: of them went back to February. How does that affect
• 1:30
  Speaker 1: the potential for it to be either this side or
• 1:32
  Speaker 1: the other side of Christmas.
• 1:34
  Speaker 2: Well, it does mean that you have this chance that
• 1:37
  Speaker 2: you do get a bigger cut, and that's what financial
• 1:39
  Speaker 2: markets have been building it, and financial markets have been
• 1:43
  Speaker 2: building in a very strong chance that you get large cuts.
• 1:47
  Speaker 2: It's either or both of those meetings. It's got a
• 1:50
  Speaker 2: huge amount built in over that period, so look at
• 1:54
  Speaker 2: it's certainly a risk. It's going to depend on what
• 1:56
  Speaker 2: the data is looking like, particularly some of the labor
• 1:59
  Speaker 2: market data that we get early November ahead of the
• 2:01
  Speaker 2: Reserve banks last decision of the year, and also the
• 2:05
  Speaker 2: inflation figures that it seems before that last decision of
• 2:08
  Speaker 2: the year.
• 2:08
  Speaker 1: Immigration. How worried are you about because obviously it props
• 2:12
  Speaker 1: up our GDP. How worried are you about potential for
• 2:15
  Speaker 1: net zero migration to New Zealand next year?
• 2:19
  Speaker 2: Well, from an inflation point of view, it's probably potentially
• 2:23
  Speaker 2: a bit helpful, and we don't need the people in
• 2:27
  Speaker 2: the workforce like we did a couple of years where
• 2:29
  Speaker 2: we sort of went from sort of like fam to
• 2:31
  Speaker 2: feast and now we do face some pretty weak need
• 2:34
  Speaker 2: immigration next year. But look, the thing about net immigration
• 2:38
  Speaker 2: is it's about the pace and the type of people
• 2:41
  Speaker 2: that we are getting as well and looking over longer term,
• 2:46
  Speaker 2: having migration that's not going in such big swims so
• 2:49
  Speaker 2: you can cope better from the infrastructure is really important,
• 2:52
  Speaker 2: and also who's coming and who's going out. It's really
• 2:54
  Speaker 2: important as well from the sorts of skills that we need.
• 2:56
  Speaker 1: All right, Nick, thank you very much for that update.
• 2:58
  Speaker 1: Great to have you on. The show is always Toughly
• 3:00
  Speaker 1: Cheap Economist at ASP. For more from Newstalk st B,
• 3:04
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• 3:07
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