Latest / Best of Business / Sharon Zollner: ANZ Chief Economist on the bank forecasting rate cuts for November 2024

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Sharon Zollner: ANZ Chief Economist on the bank forecasting rate cuts for November 2024 · Best of Business

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  Speaker 1: Jack Team and A.
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  Speaker 2: And Z is forecasting a twenty five basis point rate
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  Speaker 2: cut from the Reserve Bank in November of this year.
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  Speaker 2: So they've brought ford their previously forecasted cut. They thought
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  Speaker 2: the first cut was going to be coming from the
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  Speaker 2: RB and Z to the OCR in February of twenty
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  Speaker 2: twenty five. It comes off the back of today's inflation data,
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  Speaker 2: the CPI dipping to a three year low three point
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  Speaker 2: three percent for the June quarter. It still remains outside
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  Speaker 2: of the reserves Reserve banks target band, of course one
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  Speaker 2: to three percent, but you would have to say it's
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  Speaker 2: getting very close. Indeed, A and Z chief economist Sharon
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  Speaker 2: z Oolner is with us Kelder. Good evening. Oh you're
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  Speaker 2: going to sleep easy tonight. Good news, eh, yeah, over
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  Speaker 2: a lost good news.
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  Speaker 3: I mean, while it's true that domestic complation was a
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  Speaker 3: mitch high in the Reserve Bank expected, it looked like
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  Speaker 3: it was actually just technical factors and the other part
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  Speaker 3: of inflation, the important bit was lower. So yeah, overall,
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  Speaker 3: I think it confirmed the vibes that things are more
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  Speaker 3: under control than the Reserve Bank feared back in May.
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  Speaker 2: And it was low enough for you to upgrade your forecast.
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  Speaker 3: Well, yeah, it was brought forward our forecast for when
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  Speaker 3: the Reserve bankill cut.
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  Speaker 2: Upgrade from our perspective shower.
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  Speaker 3: Yes, certainly. I think businesses are looking for some light
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  Speaker 3: at the end of the tunnel, and if that could
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  Speaker 3: be this year, then I think that would be good.
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  Speaker 3: The market is convinced that they'll be coming earlier than that.
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  Speaker 3: They're putting fifty pen odds on a cut as soon
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  Speaker 3: as next month, maybe getting ahead of themselves there, but
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  Speaker 3: we'll see what the unemployment rate does and the data
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  Speaker 3: that's out a week before that.
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  Speaker 2: So what do you think we would need to see
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  Speaker 2: to see either a twenty five basis point cut next
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  Speaker 2: month or fifty basis points across this year.
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  Speaker 3: So the Reserve Bank will cut when they're convinced cert
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  Speaker 3: information is going to return to two percent and then
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  Speaker 3: stay within the band. So they've got a bit of
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  Speaker 3: a buffer to absorb the inevitable surprises that will come along.
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  Speaker 3: So for them to cut sooner than November, I think
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  Speaker 3: we would need them to basically acknowledge a mistake that
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  Speaker 3: they already should have been cutting by now. Possibly they
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  Speaker 3: could always cut fifty points later, but if say the
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  Speaker 3: unemployment rates shot much higher than expectations, that could do it.
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  Speaker 3: That's the only data they'll have really before August, apart
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  Speaker 3: from the usual monthly reads like the business surveys and
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  Speaker 3: the like. But before October there'll be a bit more
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  Speaker 3: data in the bag. Before November they'll have the whole
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  Speaker 3: suite of everything. So it's just how they weigh up
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  Speaker 3: that desire for certainty with the risk of holding rates
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  Speaker 3: too high for too long and causing unnecessary pain.
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  Speaker 2: You mentioned the non tradeable still at five point four
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  Speaker 2: percent for you know what we often deem as being
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  Speaker 2: domestic inflation. Why is that still so high.
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  Speaker 3: Yeah, the resurd Bank thought it would be four point
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  Speaker 3: one percent by now when they stopped hiking, so that's
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  Speaker 3: still a big gap. But yeah, there's some key things
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  Speaker 3: like rents rates and insurance for example, as the general
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  Speaker 3: price increase across the economy falls and those things will
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  Speaker 3: to get stranded on the top side and if their
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  Speaker 3: outliers and the Reserve Bank will be able to look
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  Speaker 3: through them. So essentially we expect the Reserve Bank to
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  Speaker 3: stop talking more about the headline level of inflation and
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  Speaker 3: start to talk more about the core inflation measures, because
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  Speaker 3: they should have a bit more space to look through
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  Speaker 3: stuff now that it looks like they're winning the war.
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  Speaker 2: Yeah, does anything in today's numbers give you cause for anxiety?
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  Speaker 3: No, not really. I mean there was some solid progress,
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  Speaker 3: I would say, I mean, yes, it is disappointing that
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  Speaker 3: non tradable inflation hasn't fallen more over the last year,
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  Speaker 3: but there's good signs going forward if you look at
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  Speaker 3: what firms are saying about their costs and their prices,
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  Speaker 3: that sort of thing. It's all taking a while, but
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  Speaker 3: there was nothing in today's data that suggested that the
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  Speaker 3: economy needs to go through more pain than we thought
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  Speaker 3: to beat inflation, which was definitely the tone of the
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  Speaker 3: Reserve Bank's montrospolicy statement in May.
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  Speaker 2: Do you feel confident that in three months time, when
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  Speaker 2: we're looking back at the September quarterly data, we will
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  Speaker 2: be comfortably within the Reserve banks target band?
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  Speaker 3: It's looking like it at the moment, But of course
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  Speaker 3: you never say that one hundred percent certainty, because if
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  Speaker 3: there was a suden million oil shocks, for example, that
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  Speaker 3: the headline numbers could move around quite quickly.
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  Speaker 2: Damn it, Sharon. I shouldn't have put that as my
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  Speaker 2: last question this ening, but thank you very much for
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  Speaker 2: your time. We appreciate it. Sharon Zolder, who is of
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  Speaker 2: course ain Z's chief economists, and she had nic Sharon
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  Speaker 2: about this. But ain Z has dropped some of its
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  Speaker 2: home loan and term deposit rates, and this comes after
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  Speaker 2: Westpac I think lowered some of their rates last week.
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  Speaker 2: So ain Z's decreased its home loans with a thirty
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  Speaker 2: basis point drop on their two year special rate. That's
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  Speaker 2: down to six point four to nine per random of
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  Speaker 2: twenty nine point basis drop on their one year special
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  Speaker 2: rate to six point eight five. I've got a reset
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  Speaker 2: in October, So what do we think end of October?
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  Speaker 2: Throw this over to the wisdom of the crowds. The
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  Speaker 2: thing is that once they start cutting, the real question
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  Speaker 2: is how quickly are they going to cut and how
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  Speaker 2: far are they going to go? Right, Because even if
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  Speaker 2: the Reserve Bank does start cutting in November of this year,
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  Speaker 2: if it's only twenty five basis points, and we've got
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  Speaker 2: to wait, you know, a full year until we see
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  Speaker 2: or maybe longer until we see one hundred basis points
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  Speaker 2: off that ocis that stands right now, then that's still
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  Speaker 2: a lot more pain in the economy. It's a delicate
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  Speaker 2: balance for the Reserve Bank as they try and make
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  Speaker 2: sure they don't breathe too much life back into economic activity.
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