Latest / Early Edition with Ryan Bridge / Mark Smith: ASB Senior Economist ahead of today's employment data release

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Mark Smith: ASB Senior Economist ahead of today's employment data release · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: It's a big day today for mortgage holders. Basically, are
• 0:03
  Speaker 1: enough people out of work to force the ocr down,
• 0:06
  Speaker 1: thereby taking the pressure off our mortgages. Unemployment data for
• 0:10
  Speaker 1: the June quarter is out today. The Reserve Bank is
• 0:12
  Speaker 1: expecting unemployment rate to rise to four point six percent.
• 0:16
  Speaker 1: It's currently at four point three percent for quarter one.
• 0:19
  Speaker 1: A n Z, ASB Kiwibank Westpact, they all predict an
• 0:23
  Speaker 1: increase to four point seven percent, b n Z saying
• 0:26
  Speaker 1: four point six Joining me now as ASB Senior economist
• 0:29
  Speaker 1: Mark Smith, Mark, good morning, Good morning. What's the magic number?
• 0:33
  Speaker 1: Do you think what is the magic number we would
• 0:35
  Speaker 1: need to see today in order for their to be
• 0:38
  Speaker 1: a cut, say next week?
• 0:41
  Speaker 2: Well probably that's the higher the numbers, the more likely
• 0:45
  Speaker 2: you'd like to see a cat. It's not just the
• 0:47
  Speaker 2: unemployment rate, but also things like labor costs and wages
• 0:51
  Speaker 2: that the Reserve Bank are looking at very closely.
• 0:54
  Speaker 1: Will they how how well? To what extent is it
• 0:58
  Speaker 1: the job's data versus that sticky domestic inflation that we've
• 1:02
  Speaker 1: been watching.
• 1:04
  Speaker 2: Yeah, I think what we've seen is we're gone from
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  Speaker 2: a period a few years ago where firms have been
• 1:08
  Speaker 2: hoarding labor. It's now a where firms are actually shedding
• 1:11
  Speaker 2: labor because the demind of environment is so weak and
• 1:15
  Speaker 2: they're having to do that. Also, firms profitability now is
• 1:19
  Speaker 2: very dire, you know, the weakest in about thirty years
• 1:21
  Speaker 2: as the share of income. So they're really in position
• 1:24
  Speaker 2: now where they can't really afford to hold on to
• 1:27
  Speaker 2: staff and had to let them guards. Now, when that happens,
• 1:30
  Speaker 2: what we'd like to see is this labors share of
• 1:32
  Speaker 2: income is likely to fall and inflation will fall as well.
• 1:37
  Speaker 2: So all of these things are interlinked. But really when
• 1:40
  Speaker 2: we see more spare capacity growing in the labor market
• 1:43
  Speaker 2: with the undepoman rate going up, that meets that inflation
• 1:46
  Speaker 2: will eventually go down, and that meant that means their
• 1:49
  Speaker 2: official cash rate needs to come down as well.
• 1:51
  Speaker 1: The Aussies are playing hardballed yesterday the Reserve Bank there,
• 1:56
  Speaker 1: you know, no cuts till twenty twenty five, that sort
• 1:58
  Speaker 1: of thing. Do you do you believe them?
• 2:02
  Speaker 2: Well, it's hard to say at the moment. Bear in
• 2:06
  Speaker 2: mind the Australian official their cash rate is four point
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  Speaker 2: three five said ours is five and a half, so
• 2:11
  Speaker 2: that they're completely different. Also, the Australian economy is doing
• 2:15
  Speaker 2: better than the New Zealand economy. For example, the Australian
• 2:18
  Speaker 2: housing market is still doing very well. We're here, it's
• 2:21
  Speaker 2: down the dumps. New Zealand is flit think in and
• 2:24
  Speaker 2: out of recession. I would like to see a size
• 2:27
  Speaker 2: or contraction the economic activity in the middle of the
• 2:30
  Speaker 2: share So things in New Zealand are by and we
• 2:33
  Speaker 2: really deceive the OCI come down how.
• 2:35
  Speaker 1: Much because they're obviously the committee that decides. They're all
• 2:39
  Speaker 1: humans and they can see themselves, presumably how much hurt
• 2:43
  Speaker 1: there is out there on main street? How much do
• 2:46
  Speaker 1: they do you reckon? They actually listen to that noise,
• 2:49
  Speaker 1: you know, to that political pressure as well well.
• 2:53
  Speaker 2: They're obviously continent of what's happening around them. You know,
• 2:56
  Speaker 2: it's it's pretty clear how weak things are. But really
• 3:00
  Speaker 2: they've got an inflation targe to meet first, and at
• 3:02
  Speaker 2: the moment, inflation is at three point three percent. Now,
• 3:06
  Speaker 2: if you take out costs, for example, it's already below
• 3:08
  Speaker 2: three percent. So from that point of view, yes, they
• 3:11
  Speaker 2: should be in the ocr but they want to make
• 3:14
  Speaker 2: sure that inflation will settle below three percent before cutting that.
• 3:18
  Speaker 2: You're right, you look around you the unumplement rate is
• 3:21
  Speaker 2: going up. We expect to hit around five and a
• 3:23
  Speaker 2: half percent by the end of the year and it's
• 3:25
  Speaker 2: contrack to move around six percent by five both oft
• 3:28
  Speaker 2: of next year as well. So things that are certainly
• 3:31
  Speaker 2: calling and there are certainly needs for the SCO to
• 3:34
  Speaker 2: come down.
• 3:34
  Speaker 1: Mark. Thank you. That's Mark Smith, the ASP Senior Economist.
• 3:38
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• 3:41
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• 3:42
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• 3:44
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