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Brad Olsen: Infometrics Principal Economist on unemployment figures being expected to grow · The SME Stream

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  Speaker 1: Brad Olsen infor Metrics, Principal economist, Hey Brad Good Evening,
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  Speaker 1: Brad Listen. So we've seen the Reserve Bank's Financial Stability
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  Speaker 1: Report out today. They are still holding out. I think
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  Speaker 1: this is interesting. Haven't changed their prediction on what the
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  Speaker 1: unemployment rate's going to do, held it since about August.
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  Speaker 1: Haven't that five point four percent?
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  Speaker 2: Yes, that's right, and in a sense, I mean it's
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  Speaker 2: also important that it still is going to take a
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  Speaker 2: while to get to that point. That five point four
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  Speaker 2: percent peak is what they think will get to sort
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  Speaker 2: of over the first six months of twenty twenty five.
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  Speaker 2: So again it doesn't come through immediately. What was interesting
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  Speaker 2: looking through the Financial Stability Report was just how much
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  Speaker 2: they highlighted that. Look, the domestic economy obviously in a
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  Speaker 2: challenging position, and even with interest rates coming down and
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  Speaker 2: starting to fall, the fact that you'll still have further
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  Speaker 2: increases in unemployment. Obviously it's pretty difficult for households to
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  Speaker 2: afford their mortgage at that point. So the Reserve banks
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  Speaker 2: still actually thinking that the proportion of loans that are
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  Speaker 2: non performing and people that can't pay their loans is
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  Speaker 2: expected to increase. It's currently at point five percent of
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  Speaker 2: total loan values. That's the highest it's been since around
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  Speaker 2: sort of twenty fourteen or so. So you are really
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  Speaker 2: getting this message from the Reserve Bank, and I think
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  Speaker 2: it is important that although interest rates are starting to
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  Speaker 2: come down and there are better times on the horizon,
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  Speaker 2: the economy is still in a pretty difficult place for
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  Speaker 2: the next six to nine months until those lower interest
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  Speaker 2: rates come through.
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  Speaker 1: Now, we were chatting yesterday to Steve Yukovich, the CEO
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  Speaker 1: of ki We Bank. He says he's picking link to
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  Speaker 1: this month a fifty basis point cut, no more, because
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  Speaker 1: it's just too much at seventy five.
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  Speaker 2: What do you think? Look, I think a lot might
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  Speaker 2: depend on actually on tomorrow, not the US election outcome,
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  Speaker 2: but the latest labor market data out from stats n Z.
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  Speaker 2: We're expecting a five percent unemployment rate to come through.
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  Speaker 2: But I think in a sense, if there is a
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  Speaker 2: lot of the numbers are pretty consistent at the moment
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  Speaker 2: that the economy continues to get weaker. If you saw
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  Speaker 2: the unemployment rate though that sort of was quite a
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  Speaker 2: bit above where the market and the Reserve Bank we're thinking,
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  Speaker 2: if you saw wage pressures starting to drop a lot
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  Speaker 2: quicker than might have been expected. If you see that
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  Speaker 2: job hiring figure really come back, and it has started
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  Speaker 2: two in recent times. We were talking just last week
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  Speaker 2: about how there are twenty thousand fewer jobs in the economy.
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  Speaker 2: So if all of that data was particularly weaker, I
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  Speaker 2: think it could force the bank to still look at
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  Speaker 2: seventy five, and I sort of hope that they do
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  Speaker 2: at least toss it up in their meeting coming up
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  Speaker 2: later this month. But I mean the central view and
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  Speaker 2: my central view as well, is still around that fifty
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  Speaker 2: basis points. That would be sort of the current normal expectation.
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  Speaker 2: But again, I think all eyes are on the data,
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  Speaker 2: all eyes also on the rest of the world. Not
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  Speaker 2: only is there an election in the US this week,
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  Speaker 2: there's also a new announcement from the US Federal Reserve
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  Speaker 2: over what they want to do with interest rates, So
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  Speaker 2: all of that, I think we'll go into the reserve
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  Speaker 2: banks thinking. But yep, at the moment, fifty is still
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  Speaker 2: I think where the smart money is. Although my Melbourne
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  Speaker 2: cup pick didn't go well today, so it's always a
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  Speaker 2: challenging decision, Right.
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  Speaker 1: Do you want to have a pick at the US election?
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  Speaker 2: Then? Ah, jeez, I really don't know what way it's
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  Speaker 2: going to go. I feel like either way, you've got
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  Speaker 2: some pretty different outcomes that are coming through. I think
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  Speaker 2: by a slim, slim margin, I think it'll go to Harris.
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  Speaker 1: What that is wishful thinking, Brad, isn't it?
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  Speaker 2: Oh? Well? I mean I think put it this way.
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  Speaker 2: If it goes to Trump, I think there's a huge
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  Speaker 2: question that can't really be answered tomorrow or even in
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  Speaker 2: the next couple of weeks as to what that means
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  Speaker 2: for the New Zealand economy at the very least, let
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  Speaker 2: alone the global economy. Of course, inauguration doesn't happen till
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  Speaker 2: twenty twentieth of January twenty twenty five, so a lot
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  Speaker 2: of water to go under the bridge no matter what
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  Speaker 2: happens in the next twenty four hours.
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  Speaker 1: So you make a very good point, Hey, Brad, Thank
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  Speaker 1: you very much. Brad Olson infa Metric's principal economist. Poor Brad,
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  Speaker 1: I'm just like stabbing at him with that wishful thinking