Latest / Best of Business / Paul Bloxham: HSBC chief economist on the RBA hinting it's open to cutting rates

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Paul Bloxham: HSBC chief economist on the RBA hinting it's open to cutting rates · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks B Follow
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  Speaker 2: The Reserve Bank in Australia says that it's May meeting
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  Speaker 2: would be a quote opportune time to reconsider the official
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  Speaker 2: cash rate. Hgspc's chief economist, Paul Bloxham's with us.
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  Speaker 3: Paul, Hello, good a.
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  Speaker 2: So it's a cutomer, Thanks very much.
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  Speaker 1: Made appreciate it.
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  Speaker 2: Cut on the cards, isn't it.
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  Speaker 3: I think so? Yes, I think that's right. You know,
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  Speaker 3: quite a lot has changed. I mean part of it is,
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  Speaker 3: of course that Australia's inflation has been gradually coming down
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  Speaker 3: and this has left the RBA with an opportunity to
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  Speaker 3: consider to potentially consider cutting. But I think the major
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  Speaker 3: force at work now is what's happening globally, and that's
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  Speaker 3: going to be the force that overwhelms all of these
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  Speaker 3: local stories. I guess the way I'm framing this is,
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  Speaker 3: this is what's been happening is global is downside risk
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  Speaker 3: for global growth, and typically that is disinflationary for most
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  Speaker 3: of the world, and I think it's going to be
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  Speaker 3: disinflationary for Australia and New Zealand as well. You can
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  Speaker 3: certainly make the case that in the short run there
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  Speaker 3: might be supply disruption that plays a role and holds
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  Speaker 3: up that disinflationary force. But I think the major one
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  Speaker 3: is going to be that there's going to be a
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  Speaker 3: lot of manufactured goods in Asia that can't ness is
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  Speaker 3: to be sold into the US market, and they'll show
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  Speaker 3: up in our markets instead. So I think there's going
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  Speaker 3: to be a lot of trade diversion and that's going
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  Speaker 3: to be one of the factors that puts downward pressure
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  Speaker 3: on inflation allows the RBA to move a bit faster.
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  Speaker 2: Do you think that the RBA is going to actually
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  Speaker 2: look at what's happening globally right now and take that
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  Speaker 2: into consideration or look through it.
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  Speaker 3: I think the first. In the first instance, by May
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  Speaker 3: we'll know that domestic inflation in Australia is low enough
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  Speaker 3: for them to be able to consider cutting anyway. But
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  Speaker 3: I think when you're thinking about the pathway going forward there,
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  Speaker 3: they'll be considering in their own set of forecasts that
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  Speaker 3: the likely risk to their forecast for inflation is more
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  Speaker 3: to the downside than to the upside. Given what we're
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  Speaker 3: seeing globally and so I think you're going to get
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  Speaker 3: a cut in on the back of the domestic story followed,
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  Speaker 3: and also some sense that they're they're you know, they're
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  Speaker 3: happy that they're considering that they're likely to be lowering
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  Speaker 3: rates further because of what's happening globally.
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  Speaker 2: Yeah, how wise is it to start acting in anticipation
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  Speaker 2: of what Donald Trump is going to do or how
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  Speaker 2: long he may do it for because he's so unbelievably unpredictable.
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  Speaker 3: Well, this is a lot of what came out of
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  Speaker 3: the minutes today. I mean, you know, when the last
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  Speaker 3: meeting that the RBA had was in early April, obviously,
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  Speaker 3: and just before the second of April, when we had
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  Speaker 3: all these big announcements from the US administration, and the
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  Speaker 3: RBA wasn't prepared to do anything because of course they
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  Speaker 3: didn't really know what it was going to look like.
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  Speaker 3: And so I think that's exactly why the RBA. Part
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  Speaker 3: of the reason the RBA was on hold in April
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  Speaker 3: was because they don't want to jump at shadows. They
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  Speaker 3: want to know what's going on. But the time we
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  Speaker 3: get to the main meeting, and then the ones that
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  Speaker 3: are subsequent to that will have a bit more economic
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  Speaker 3: data that actually shows the effect of all of these
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  Speaker 3: policy changes on the global economy and then potentially the
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  Speaker 3: local economy as well.
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  Speaker 2: Yeah, obviously my first opportunity to talk to you about
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  Speaker 2: what's going on with Donald Trump and the tariffs. Is
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  Speaker 2: this blowing your mind with how stupid it is.
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  Speaker 3: There's a lot of change really really fast, and it's
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  Speaker 3: having pretty big implications for the overall global the overall
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  Speaker 3: global story, and I think we all have to sort
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  Speaker 3: of reframe how we think about things. But I think,
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  Speaker 3: you know, when I think about it in the context
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  Speaker 3: as I say for Australia and New Zealand, I think
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  Speaker 3: that the main forces are that it's downside risk to
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  Speaker 3: global growth, but it's also likely downside risk for inflation,
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  Speaker 3: and that means that the central banks should have scope
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  Speaker 3: to be able to support the local economies by lowering
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  Speaker 3: rates further.
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  Speaker 2: It's all right, hey, Paul, good to talk to you
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  Speaker 2: as always, Thank you so much. We'll talk to you
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  Speaker 2: again soon. That's Paul Bloxham, HSBC's chief economist.
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