Latest / Best of Business / Kelly Eckhold: Westpac Chief Economist chats US dollar, European interest rates, and global dairy trade

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Kelly Eckhold: Westpac Chief Economist chats US dollar, European interest rates, and global dairy trade · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
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  Speaker 2: It's the Wait Time You Day Breakfast. I'm Andrew Dickens.
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  Speaker 2: At six point fifteen. Let's talk money. Westpactief economist is
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  Speaker 2: Kelly Echo. Good morning to her.
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  Speaker 3: Kelly, Good morning.
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  Speaker 2: So we've got the European Central Bank and the Bank
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  Speaker 2: of England meeting over night to discuss the interest rates.
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  Speaker 3: Yeah, yeah, they did, and they delivered as expected. The ECB,
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  Speaker 3: for example, left their rates unchanged. The governor there, Christine Leguard,
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  Speaker 3: actually sounded pretty chilled and happy about the outlook. Interest
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  Speaker 3: rates there at two percent, looking like they're probably going
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  Speaker 3: to stay there for a while unless the euro really
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  Speaker 3: does race up. They're commenting that easier German fiscal policy basically,
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  Speaker 3: the money they spended to try to keep the Russians
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  Speaker 3: out of the door is really helping to support growth
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  Speaker 3: here and probably issue one of the interesting things I
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  Speaker 3: know noticed as they're extending what they call this repo
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  Speaker 3: line framework where they basically commit to the end other
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  Speaker 3: central bank's money and euros in times of trouble, and
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  Speaker 3: then this could be quite interesting could be quite interesting
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  Speaker 3: for the Reserve Bank actually, because you know, we're in
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  Speaker 3: a world now where the Federal Reserve is perhaps less
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  Speaker 3: likely to be dishing out money in a crisis because
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  Speaker 3: they're more interested in themselves. So you know, perhaps there's
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  Speaker 3: going to be a role there for the European Central
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  Speaker 3: Bank to pick up the slack there if there's trouble.
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  Speaker 3: I will also say the Bank of England, they'd also
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  Speaker 3: didn't change rates. They're a bit more dubbish than expected,
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  Speaker 3: and it's looking like there's going to be a rape
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  Speaker 3: cut there. In the next couple of whiles, it was
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  Speaker 3: a nine edge voat in that Bank of England governor.
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  Speaker 3: He basically sounded like he could easily be talked into
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  Speaker 3: a rep cut.
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  Speaker 2: Yeah, I understand England the very close decision five to
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  Speaker 2: four to hold, so that's pretty close. They're at three
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  Speaker 2: point seventy five percent, which is high when you compared
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  Speaker 2: to Europe, which is at two. But you're right, the
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  Speaker 2: Bank is saying there could be great cuts for England
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  Speaker 2: in twenty twenty six, and that would be very gratefully received.
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  Speaker 3: Indeed, Yeah, I mean that they've had a bit of
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  Speaker 3: a trouble because inflation has just been a bit sticky
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  Speaker 3: and their economy hasn't been too good. So that's a
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  Speaker 3: bit of a side of optimism in PC.
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  Speaker 2: I mean, while, by the way, can I just say
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  Speaker 2: about the European Central Bank? Their rates have now held
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  Speaker 2: steady for a fifth consecutive meeting, So Europe is very
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  Speaker 2: stable right now and easy at two percent. Now to America,
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  Speaker 2: we've got jobs. What's happening with the jobs and the
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  Speaker 2: indicators there?
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  Speaker 3: Well, I think the jobs thing has really what's driven
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  Speaker 3: markets over night. We've got lower long term magistrates and
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  Speaker 3: weaker equities, and it's been a few indicators suggesting that
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  Speaker 3: jobs are a bit harder to come by here. Jobless
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  Speaker 3: claims went up unexpectedly to two hundred and thirty one
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  Speaker 3: thousand for the last week. There were fewer new jobs
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  Speaker 3: coming out of the Jolt survey, and these layoffs from
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  Speaker 3: large brooms, the Challenger Layoffs survey survey had a big
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  Speaker 3: like to the weakest that it's seen since two thousand
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  Speaker 3: and nine. So that's just made people think, oh, actually,
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  Speaker 3: maybe the serious jobs market is going to weaken after all.
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  Speaker 2: Okay, let's get back home, because this is a big one.
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  Speaker 2: We had a global dairy trade auction and it was
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  Speaker 2: pretty good, and it's been not so good lately, and
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  Speaker 2: now people are started to talk about ten dollars at
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  Speaker 2: the farm gate again. So what is happening with dairy
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  Speaker 2: right now?
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  Speaker 3: Well, that's a bloody good question. Before Christmas, we were
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  Speaker 3: all thinking there were tons of supply and there wasn't
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  Speaker 3: going to be enough by it. So these prices were
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  Speaker 3: falling and everybody was furiously cutting their payout forecast. We
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  Speaker 3: cut outs to nine forty from ten bucks. A few
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  Speaker 3: of the others on the street got a bit more excited,
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  Speaker 3: and I think at least one bankhaded under nine bucks.
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  Speaker 3: But what we've seen this year is a really big
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  Speaker 3: rise in dairy prices, basically up over twenty percent now
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  Speaker 3: since the start of the year. Big auction last week,
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  Speaker 3: big rises in the futures after the auction this week
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  Speaker 3: as well. There was a ten percent rise in skim
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  Speaker 3: milk prices in the last ouction, five percent on everything else.
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  Speaker 3: Actually just looks like there's some pretty resilient demands, so
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  Speaker 3: there's buyers out there for all this milk. So I'm
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  Speaker 3: thinking that we'll all probably have to put our payout
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  Speaker 3: four casts upper. This is going to continue because we'll
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  Speaker 3: get closer to ten bucks again.
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  Speaker 2: I was going to say, are you going to go
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  Speaker 2: ten bucks and above?
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  Speaker 3: Well, the exchange rate's a bit higher, so you sort
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  Speaker 3: of have to kind of like offset that off of birds.
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  Speaker 3: But I actually think the really interesting question is not
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  Speaker 3: so much this season, but if this is going to
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  Speaker 3: continue on past the middle of the year, then it'll
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  Speaker 3: be the season after that where the forecast is down
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  Speaker 3: at nine bucks, but perhaps it's going to be closer
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  Speaker 3: to teen.
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  Speaker 2: You talk about our exchange rate, and I've got a
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  Speaker 2: little bit of time, so I'd just like to talk
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  Speaker 2: to you briefly about that. The greenback is falling and
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  Speaker 2: it's not been used as the currency, and therefore people
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  Speaker 2: are doing trades. I know that Canada and China they're
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  Speaker 2: doing trades based on their currency rather than using the
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  Speaker 2: US dollar. Is our dollar going up because we're getting
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  Speaker 2: better or is our dollar going up because the US
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  Speaker 2: dollar is going down?
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  Speaker 3: You know, there's a bit of both here. The US
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  Speaker 3: dollar has generally been weaker in the last couple of weeks,
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  Speaker 3: particularly as things like that US equity market has looked
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  Speaker 3: a little bit wobblier, there's also been some kind of
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  Speaker 3: weakness and a whole lot of risk currencies like you
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  Speaker 3: bet coin is under seventy thousand now. But underneath this,
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  Speaker 3: you know, you have to remember that all the economic
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  Speaker 3: data and New Zealand has looked quite a bit better
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  Speaker 3: in the last few weeks and the market has got
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  Speaker 3: to rate best part of two rate hikes priced him
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  Speaker 3: for twenty twenty six. So that is a bit of
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  Speaker 3: a turnaround and sentiment which has really helped a KIV
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  Speaker 3: as well.
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  Speaker 2: Good stuff, and I thank you so much as Kelly
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  Speaker 2: Echold who's from Westbak he is the chief economist there.
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  Speaker 2: The phenomenon's known as the de dollarification. Very hard thing
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  Speaker 2: to say at the start of the morning. As the
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  Speaker 2: trade wars and the tariff wars continue and America continues
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  Speaker 2: to be more isolationists, people are starting to move away
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  Speaker 2: from the dollar, the US dollar being the global currency
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  Speaker 2: that trades are done on, and that's making for some
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  Speaker 2: very interesting ramifications. We'll keep an eye on that for you.
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