Latest / Best of Business / Paul Bloxham: HSBC chief economist on Australia's Reserve Bank holding the Official Cash Rate for seventh time in a row

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Paul Bloxham: HSBC chief economist on Australia's Reserve Bank holding the Official Cash Rate for seventh time in a row · Best of Business

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  Speaker 2: So the Reserve Bank in Australia held its official cash
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  Speaker 2: rate at four point three five percent for the seventh
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  Speaker 2: time today in a row of course if the Fed sorry,
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  Speaker 2: and the Reserve Bank here in New Zealand have both
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  Speaker 2: dropped their rates in recent times, but the RBA said
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  Speaker 2: it will be sometime yet before inflation is sustainably in
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  Speaker 2: the target range. Paul Bloxham is agspc's chief economist.
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  Speaker 1: Hey, Paul good eight, Paul, listen, tell me if I'm.
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  Speaker 2: Wrong, But I thought that you guys with headline and
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  Speaker 2: inflation are expected to very shortly actually be within the margin,
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  Speaker 2: aren't you.
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  Speaker 3: Headline inflation is going to fall, and probably tomorrow when
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  Speaker 3: we get the CPI indicator. This is not the CPI
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  Speaker 3: but it's our new timely monthly version, it's going to
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  Speaker 3: show headline inflation falling quite strongly. Actually, But this is
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  Speaker 3: not the key. The key is that headline inflation is
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  Speaker 3: likely to come down simply because the government has given
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  Speaker 3: energy subsidies. They've lowered people's electricity bills and so that
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  Speaker 3: doesn't really constitute a sustainable fall and inflation. That's a
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  Speaker 3: policy measure, and so the RBA has made it absolutely clear,
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  Speaker 3: and today they were very very clear in their statement
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  Speaker 3: that they are going to focus on the underlying measures
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  Speaker 3: of inflation, not the headline rate of inflation, because that's
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  Speaker 3: being affected by these temporary policy changes, and so it'll
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  Speaker 3: be key to watch out for what the underlying measures do.
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  Speaker 3: But our take is the underlying measures that the trimmed mean,
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  Speaker 3: for example, is still are still going to be well
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  Speaker 3: above where the RBA is comfortable, well above the RBA's
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  Speaker 3: target band. And we saw that today in the tone
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  Speaker 3: of what they delivered, they remained on hold. They talked
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  Speaker 3: about the idea that they've not ruled anything in or
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  Speaker 3: anything out, and they noted that near term rate cuts
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  Speaker 3: are really not on the cards at the moment.
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  Speaker 2: Does it get awkward for Michelle Bollock to have the
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  Speaker 2: feed cutting by fifty, the Reserve Bank cutting maybe even
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  Speaker 2: by fifty at some stage a herders sitting.
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  Speaker 3: There, It certainly raises the bar. It raises the bar
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  Speaker 3: for them to think about where they're at and say
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  Speaker 3: to themselves, why are we different? You know why is
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  Speaker 3: Australia in a different spot. And the argument we've been
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  Speaker 3: put forward for a while is Australia is in a
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  Speaker 3: different spot. We're in a different spot for a number
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  Speaker 3: of reasons. One of them is that the RBA didn't
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  Speaker 3: lift interest rates as much as everyone else. I've talked
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  Speaker 3: about this all year along with you. I know, you know.
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  Speaker 3: They did four hundred and twenty five basis points of hiking,
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  Speaker 3: whereas the FED did five twenty five, the RBNSZ they
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  Speaker 3: did five twenty FO just did less, They did less tightening,
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  Speaker 3: and so one of the consequences is they haven't had
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  Speaker 3: quite as much disinflation. And then the other really big
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  Speaker 3: factor is that the supply side productivity has been really
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  Speaker 3: quite quite quite weak, quite weak in Australia, and so
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  Speaker 3: we're not getting as much disinflation. We do look different
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  Speaker 3: to everyone else, but they're going to with other central
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  Speaker 3: banks now cutting rates across the world, it's going to
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  Speaker 3: be that bar is higher for them to convince themselves
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  Speaker 3: continually that we are different. We don't think rate cuts
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  Speaker 3: are coming through for a while though. We think rate
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  Speaker 3: cuts aren't coming into a well into twenty twenty five.
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  Speaker 3: In Australia.
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  Speaker 2: What do you think about the feed having cut by
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  Speaker 2: fifty basis points and the impact it's going to have
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  Speaker 2: on the Reserve Bank in New Zealand at the next decision.
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  Speaker 3: Well, I think the first thing to take from it
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  Speaker 3: is that, actually, this is what a soft landing look like.
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  Speaker 3: You know, the reason why the Fed's been able to
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  Speaker 3: cut this because inflation's coming down quite quickly and they
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  Speaker 3: feel that they can deliver more support, and they've done
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  Speaker 3: that while the economy is actually the US economy is
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  Speaker 3: still got positive momentum, growth is still holding up pretty well.
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  Speaker 3: You want to be able to cut interest rates before
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  Speaker 3: growth slows down to prevent it from slowing down by
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  Speaker 3: very much. This is, again, what a soft landing looks like.
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  Speaker 3: I don't think it's a bad story. I think it's
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  Speaker 3: a good story. I don't think it has that much
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  Speaker 3: bearing on the RBNZA. I think the RBNZ, like the RBA,
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  Speaker 3: gets to run its own race and said it's policy
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  Speaker 3: based on domestic conditions. And I think the RBNZED will
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  Speaker 3: cut rates further twenty five in the next meeting, twenty
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  Speaker 3: five at the one after. We think that the RBNZ
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  Speaker 3: has broad inflation down enough to be able to continue
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  Speaker 3: to ease its policy setting a lot like the FED,
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  Speaker 3: but not necessarily because of the Fed.
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  Speaker 2: Yeah, Paul, Hey, thank you as always, really appreciate your take.
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  Speaker 2: That's Paul Bloxham.
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