Latest / The SME Stream / Paul Bloxham: HSBC chief economist outlines predictions for final OCR decision of the year

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Paul Bloxham: HSBC chief economist outlines predictions for final OCR decision of the year · The SME Stream

• 0:01
  Speaker 1: Ever do for c ellens.
• 0:02
  Speaker 2: All right, So the Reserve Bank is going to make
• 0:04
  Speaker 2: the final decision on the OCR tomorrow, and the consensus
• 0:07
  Speaker 2: is that it's going to be a cut of fifty
• 0:08
  Speaker 2: basis points or half a percent. Paul Bloxham as ahgbc's
• 0:11
  Speaker 2: chief economist, Ay, Paul god A, right, do you reckon
• 0:14
  Speaker 2: fifty basis points as well?
• 0:16
  Speaker 1: Yeah, we do. We think that that's the right balance.
• 0:19
  Speaker 1: We think the RBNZ will consider possibly even three options.
• 0:22
  Speaker 1: They could look at the economy and say, look, actually,
• 0:25
  Speaker 1: conditions are starting to look a little tiny bit better
• 0:28
  Speaker 1: just in the recent indicators, and maybe judge that they
• 0:31
  Speaker 1: only need to do twenty five. But on the other hand,
• 0:33
  Speaker 1: inflations come down a long way, the economy is being
• 0:36
  Speaker 1: quite weak for quite some time, and so they could
• 0:39
  Speaker 1: even go as far as saying, well, actually, maybe we
• 0:41
  Speaker 1: should deliver seventy five. But we think on balance they'll
• 0:44
  Speaker 1: net the two out and go, look, fifty basis points
• 0:46
  Speaker 1: is the right about the right move for them. It's
• 0:49
  Speaker 1: obviously another bigger than usual move and that would reflect
• 0:53
  Speaker 1: the fact that inflations come down, growth has been very weak.
• 0:56
  Speaker 1: They need to focus on lifting growth from here and
• 1:00
  Speaker 1: The other factor, of course, is that they don't have
• 1:02
  Speaker 1: another meeting now for three months, so it's more than
• 1:05
  Speaker 1: it's double the normal amount of time, So they'd be
• 1:07
  Speaker 1: effectively delivering what would be twenty five at each of
• 1:10
  Speaker 1: two meetings all together in a fifty basis point move.
• 1:12
  Speaker 1: I don't think we can rule out the possibility that
• 1:15
  Speaker 1: tomorrow they could do seventy five, but I think fifty
• 1:17
  Speaker 1: is more likely, And so yes, that's the camp we're
• 1:19
  Speaker 1: in as well.
• 1:20
  Speaker 3: How is it even possible to be considering twenty five
• 1:23
  Speaker 3: basis point cut when you consider the fact that Treasury
• 1:25
  Speaker 3: has just come out and see the economy is worse
• 1:27
  Speaker 3: than even they thought.
• 1:29
  Speaker 1: Well, we think that they're going to weigh up all
• 1:31
  Speaker 1: of these different options in terms of the way they
• 1:33
  Speaker 1: look they look at things, and as I say, look,
• 1:36
  Speaker 1: our central case is that they are they'll say to themselves, no,
• 1:39
  Speaker 1: we need to do a bit more than that. It
• 1:41
  Speaker 1: needs to be an outsized move. We haven't got another
• 1:43
  Speaker 1: meeting happening for another three months, and so it is
• 1:46
  Speaker 1: likely that they'll do one that's a bit bigger than normal,
• 1:48
  Speaker 1: So they'll do fifty. But to get yourself into the
• 1:51
  Speaker 1: camp of saying they're going to go seventy five. I
• 1:53
  Speaker 1: think it's a bit harder because that's a really, really
• 1:56
  Speaker 1: large move. And yes, we've got some indications the card
• 2:00
  Speaker 1: spending numbers have started to look a little bit better
• 2:02
  Speaker 1: in the last couple of months. The housing market, some
• 2:05
  Speaker 1: early sales tell source signs that things are starting to stabilize,
• 2:07
  Speaker 1: not pick up, just starting to stabilize. The business surveys
• 2:11
  Speaker 1: are telling us that businesses are seeing on the horizon
• 2:14
  Speaker 1: they can see that. Well, with rate cuts coming, the
• 2:17
  Speaker 1: economy looks as though it'll start to turn around. And
• 2:19
  Speaker 1: let's keep in mind the main thing that's been suppressing
• 2:22
  Speaker 1: the economy has been those interest rate rises that were
• 2:25
  Speaker 1: delivered earlier. The elevated level of interest rates has been
• 2:28
  Speaker 1: the main thing suppressing things and with purpose to get
• 2:30
  Speaker 1: inflation to come down. But as that gets taken away,
• 2:34
  Speaker 1: the economy should start to revive.
• 2:36
  Speaker 3: Yeah, now, tell me what you read on inflation in
• 2:38
  Speaker 3: New Zealand, because I see around the world there are
• 2:40
  Speaker 3: still little uptechs that should be causing some concern.
• 2:43
  Speaker 1: Well, this is something else to keep in mind, which
• 2:45
  Speaker 1: is that primarily so far the disinflation, so inflation coming
• 2:49
  Speaker 1: down the extent to which inflation has come down has
• 2:52
  Speaker 1: been largely about goods prices coming down. It's been about that.
• 2:56
  Speaker 1: It hasn't been services inflation that slowed substantial. There's still
• 3:01
  Speaker 1: some domestic pockets of inflation that are still holding up,
• 3:04
  Speaker 1: and so this might be just another thing that would
• 3:07
  Speaker 1: temper the Arbianz's willingness to deliver an exceptionally large move,
• 3:11
  Speaker 1: you know, to go seventy five. So that's another factor
• 3:14
  Speaker 1: that we've got in mind, is that, you know, globally,
• 3:16
  Speaker 1: look around the world, we're starting to get a few
• 3:18
  Speaker 1: little upside surprises for some inflation prints. And the primary
• 3:22
  Speaker 1: thing that's been driving things so far has been this
• 3:24
  Speaker 1: goods price coming down. Domestic inflation in New Zealand has
• 3:27
  Speaker 1: still not quite come down enough to be to be
• 3:30
  Speaker 1: completely comfortable.
• 3:31
  Speaker 3: Very interesting, Paul, thanks very much.
• 3:32
  Speaker 1: Man.
• 3:33
  Speaker 3: Appreciate a Paul block. Some AGSPC chief economists