Brad Olsen: Infometrics Principle Economist on banks cutting their home loan rates

The banks are at it again. 

ASB is slashing its rates this morning following a move by Westpac yesterday afternoon. 

Many borrowers have been moving to floating or short-term fixed rates, anticipating further OCR cuts. 

But latest forecasts show bank economists now expect the Reserve Bank to start hiking the OCR again next year. 

Infometrics Principal Economist Brad Olsen told Tim Beveridge the latest changes to advertised rates are driven more by bank competition, than by the Reserve Bank. 

He's expecting a lot of competitive pressure between the banks this year as they jockey for market position. 

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Episode Transcript

Speaker 1 (00:09):
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Speaker 2 (00:16):
Time to say a very good morning to Brad Olsen.
How are you doing. I'm well, thank you, excellent, excellent.

Speaker 1 (00:23):
Hey.

Speaker 2 (00:24):
I was about to ask you about what you had
for breakfast, but that ties into our higher food prices
but cheaper flights and accommodation. In twenty twenty four, what
have we got with the stats?

Speaker 1 (00:34):
Yeah, we did see that food prices had ticked up
a little bit more. If I was planning to have
cereal for breakfast, it would cost me a bit more
to put the milk. And I'm not sure. I mean,
obviously you're having breakfast fairly early for the show, Tim,
but I certainly you haven't quite got there yet. But
you're right, some of those pricing pressures are still showing through.
The higher international dairy prices have pushed through into what

(00:56):
we're paying at the soupermarket. But we're also seeing that
there's some better news again when it comes to likes
of fruits and vegetables. But the other one that caught
our eye was the fact that restaurant meals were a
bit more more expensive as well, up three point three
percent over the last year. So all in all, not
the best feeling around inflation for food. At the end
of the year. We sort of knew some of that though,

(01:19):
more interesting that, like you say, some of those other
areas were a bit more consistent with inflation remaining or
getting down to that two point zero percent midpoint that
the Reserve Bank wants to see. So a few blips,
a few challenging areas every now and then, but on
the whole, that inflationary data is still in a much
better position and a much more consistent position as we

(01:39):
head into twenty twenty five.

Speaker 2 (01:41):
Now, I'm fascinated with what's going to happen with property
this year and money and mortgage rates, because we've talked
about this before earlier in the week. But we've got
the first interest rate cut of twenty twenty five. But
trade mes reported plunge, reports a plunge in buy demand.

Speaker 1 (01:54):
Yes, well, especially with that big fall in buy demand,
I mean we're talking a thirty percent fall in the
number of sort of you know what seems like clicks
and interest in people going through and looking at property
on the web, so you know, you do one that
is that just a bit of a seasonal thing that's
coming through, and it was exacerbated last year. Everyone was
sort of looking forward to a break and really was

(02:16):
taking it and going, look, I'll come back next year
and I'll sort of figure it out. But given that
you were seeing quite a lot of interest rate cuts
at the end of last year, we almost might have
expected a few more people to start buying or to
be looking at it because all of a sudden they
hadn't been able to do it a couple of months back.
Now they were able to get a loan. But then again,

(02:37):
yesterday we had Westpac that cut their six month homelan
rate down to five point nine to nine, which I
think is a joint market leader. But it is interesting
that this cut came to the six month rate, which
I don't think all that many people are looking at
at the moment, and it does suggest that rather than
Westpac definitely trying to get in ahead of, you know,

(02:58):
further interest rate cuts, I think you're going to see
quite a lot of competitive pressure from the banks this year,
a bit more of that jockeying for position because health
sales haven't been fantastic and the way that the banks
fund themselves. Is with mortgages, they need to make sure
that they've got the bulk of them, even if there's
not heaps of sales going on. So I think sort

(03:18):
of a first move, but maybe a few more to
come over the next couple of weeks, not big, but
just little shifts every now and then to try and
get a little bit more interested, maybe get a little
bit more market share.

Speaker 2 (03:29):
Yeah, I've seen some interesting I think Tony Alexander's predicted
a more conservative approach to interest rate drots based on
stuff that's happening overseas as well being interesting to watch expert.
He must have been listening to us, Brad. I think
I'm pretty sure exactly more jobs and more unemployment across
the ditch.

Speaker 1 (03:45):
Yeah, this was the other interesting one. Of course, we
are often talking about the New Zealand data, and in
the last week we've talked a lot about the US
as well. But the jobs report out from Australia I
think quite important for US because it sort of speaks
to one, how are kiwi's going across the ditch, but
too how many more might follow them? Because the labor
market is a big part of that Australia's un rate

(04:08):
increase to four point zero percent now, that's compared to
our current four point eight percent last year. But they
also added about fifty six thousand jobs, and this is
important because we've been trying to sort of pick through
the starter and go how good or bad was it. Yes,
the unemployment rate went up, but there were far far

(04:29):
more jobs added than expected because a lot more people
are now looking for work and some of them got it.
A lot of those new jobs coming through did look
like they were a bit more part time than full time,
which again suggests that there's yep, there's hiring going on,
but it's not sort of as full blown as we
might have first expected. But given you had such a

(04:50):
bulk of jobs added, there's questions now being asked of
the Reserve Bank of Australia. A lot of economists, a
lot in the market had been picking the first interest
rate cut for Australia to come in February. You remember,
they haven't actually cut their interest rates anytime recently, whereas
we've been going for a little bit now. But a
question now is the labor market effectively looking too solid

(05:11):
and the Reserve Bank of Australia has to push that
out so for Kiwi's thinking of going across the ditch.
For Kwi's already there quite a lot of water still
to go under their bridge as well when it comes
to interest rates, employment, jobs and everything else.

Speaker 2 (05:25):
Excellent. Hey, thanks so much, Brad. We'll look forward to
catching up on the Weekend Collective some time too.

Speaker 1 (05:31):
Brilliant, looking forward to it.

Speaker 2 (05:32):
There we go. That's that's Brad Olson.

Speaker 1 (05:34):
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