Latest / Early Edition with Ryan Bridge / Cameron Bagrie: Independent Economist on the division between economists over whether the Reserve Bank should raise the OCR

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Cameron Bagrie: Independent Economist on the division between economists over whether the Reserve Bank should raise the OCR · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: But if a cat fight. Speaking of between the banks
• 0:02
  Speaker 1: on what's next for the OCR A and Z picking
• 0:04
  Speaker 1: three hikes starting July. Westpac thinks one could come as
• 0:07
  Speaker 1: soon as May. Kiwibank's warning, push too hard, you risk
• 0:09
  Speaker 1: tipping the economy into recession. Cameron Baggery Independent Economists with
• 0:12
  Speaker 1: us this morning. Hey Cameron, good to have you on
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  Speaker 1: the show. So peck aside Cameron, whose position is more realistic.
• 0:22
  Speaker 2: So I I put an article up on Business test site.
• 0:25
  Speaker 2: It was a case for a May hike. You know,
• 0:26
  Speaker 2: the Reserve Bank said, you're watching core inflation, they're watching
• 0:30
  Speaker 2: inflation expectations. If you look at the December quarter, core
• 0:33
  Speaker 2: inflation already ticked up. If you look at inflation expectations,
• 0:37
  Speaker 2: they've started to move up slightly, and we seem more
• 0:41
  Speaker 2: out of that data in the comings to a month.
• 0:43
  Speaker 2: Then you have the case for a mayhip. Now that's
• 0:45
  Speaker 2: what's called a bit of a preempt to stripe. We're
• 0:47
  Speaker 2: not going to like it, but we don't like inflation
• 0:49
  Speaker 2: rating as well. So it's a bit of a double
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  Speaker 2: ed sword for the Reserve Bank to.
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  Speaker 1: Be fair too. A and Z they also said that yeah,
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  Speaker 1: it might go up sooner, but it wouldn't go as
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  Speaker 1: high as they'd previously said either.
• 1:00
  Speaker 2: Well, there's the old adage one you're a stitch in
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  Speaker 2: time by save nine, and I think that comes to
• 1:04
  Speaker 2: the play here. If you feel that you need to go,
• 1:07
  Speaker 2: you're better off to go early. Is if you go early,
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  Speaker 2: you're not this thing on the head. If you go
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  Speaker 2: late and you're let inflation get a little bit and better,
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  Speaker 2: then you're going to have to take the official care
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  Speaker 2: straight an awful lot of hiasis. Strategically, you're what aims
• 1:18
  Speaker 2: you're to saying. Here, you go early and you're going
• 1:20
  Speaker 2: to have to go less hard. I think makes a
• 1:22
  Speaker 2: lot of sense.
• 1:23
  Speaker 1: Arbian did said that they would look through short term
• 1:25
  Speaker 1: inflation then didn't matter. I spoke to Paul Conway. He said,
• 1:28
  Speaker 1: doesn't matter if it's four, five, six, whatever percent, we'll
• 1:30
  Speaker 1: look through it short term. Are you saying that the
• 1:34
  Speaker 1: medium to long term inflation number is now looking like
• 1:38
  Speaker 1: it warrants change.
• 1:40
  Speaker 2: Well, if you go back and have a look at
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  Speaker 2: the December quarter inflation numbers, which is called dated, but
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  Speaker 2: it gives us a bit of a benchmark. Poorer inflation,
• 1:48
  Speaker 2: which strips out food and energy already started to tick
• 1:51
  Speaker 2: up very early in this economic recovery. And this is
• 1:56
  Speaker 2: kindly supposed to the still got an awful lot of
• 1:58
  Speaker 2: XTS capacity. You wouldn't expect to see core inflation tick
• 2:02
  Speaker 2: up this early in the economic recovery. So if we
• 2:05
  Speaker 2: see another pickup in core inflation once again strips out fuel,
• 2:09
  Speaker 2: strips out energy, electros, strips out food as well, then
• 2:14
  Speaker 2: you've got the case that's sitting there on the table
• 2:17
  Speaker 2: for the special cash right to move. It's not going
• 2:20
  Speaker 2: to move high. It's going to move to what's called
• 2:22
  Speaker 2: a less rescriptive setting. You know, people need to remember
• 2:25
  Speaker 2: that the official casht rate of the mine there's two
• 2:27
  Speaker 2: point two five percent. The Reserve Bank caused the neutral
• 2:30
  Speaker 2: official cash rate. That's where they've got neither the foot
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  Speaker 2: on the accelerate or the break around three. So if
• 2:34
  Speaker 2: you take it from two point twenty five to two
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  Speaker 2: point five or as angel to say, in back to three,
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  Speaker 2: you're merely taking the foot off the accelerator. It's not
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  Speaker 2: as though you're jumping on the brake.
• 2:44
  Speaker 1: Yeah, it's going bloody low to low. This is not
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  Speaker 1: the Quevy Bank makes the point, this is not demand inflation.
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  Speaker 1: This is supply inflation via oil. Does it matter where
• 2:52
  Speaker 1: it comes from?
• 2:54
  Speaker 2: Well, yes, But the problem is is that the Reserve Bank,
• 3:00
  Speaker 2: the governor has made it pretty clear and she delivered
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  Speaker 2: an excellent speech a couple of weeks ago where they said, look,
• 3:05
  Speaker 2: they are going to look through the immediate impact of
• 3:08
  Speaker 2: a rise in fuel prices. They're going to look through
• 3:10
  Speaker 2: the immediate impact of what's called the indirect consequences of inflation,
• 3:14
  Speaker 2: the likes of increases and transport costs on food inflation,
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  Speaker 2: but they're going to jump on what's called secondary inflation.
• 3:21
  Speaker 2: Now do we see secondary inflation? You look at what's
• 3:23
  Speaker 2: called core inflation that strips out fuel with strips out food.
• 3:26
  Speaker 2: And as I said, what we've already seen is that
• 3:29
  Speaker 2: core inflation has already started to pick up. So if
• 3:31
  Speaker 2: we see the March inflation figures and we see a
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  Speaker 2: further tick up in that core inflation measure, I think
• 3:37
  Speaker 2: there is a case for going and may Now. I
• 3:39
  Speaker 2: think one of the reasons that Ang has gone with
• 3:42
  Speaker 2: Lie is that they think one month March is not
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  Speaker 2: going to be enough. They think, I suspect, are you
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  Speaker 2: more likely see within the June figures? And the Bserve
• 3:51
  Speaker 2: Bank would like a little bit of two quarter qualification
• 3:54
  Speaker 2: in regard to what's going on here, but your key
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  Speaker 2: eventks sort of view that you jump on this early,
• 4:00
  Speaker 2: there's not the watch to the call. Well, there's a costy'
• 4:02
  Speaker 2: not jumping on the saying word up front as well.
• 4:04
  Speaker 1: Cameron Begory Beggary Economics.
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  Speaker 2: For more from Early Edition with Ryan Bridge.
• 4:09
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• 4:13
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