The Country 10/07/25: Ben Picton talks to Hamish McKay

Senior Macro Strategist for the RaboResearch Global Economics and Markets team in Sydney, on what the OCR means on both sides of the ditch, and what it may mean for the future.

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Episode Transcript

Speaker 1 (00:00):
On the country. We'll being picked in as senior macro
strategist for the Rubber Research Global Economics and Markets team
over there in Sydney. Of course, keep an eye both
sides of the Tasman can I Ben?

Speaker 2 (00:11):
How are you today, Haymis? I very well, thank you
for having me on.

Speaker 1 (00:15):
Excellent to have you here.

Speaker 2 (00:17):
Right.

Speaker 1 (00:17):
Okay, So the week of the OCR results both sides
of the ditch. What do you make of it?

Speaker 2 (00:22):
Yeah? Really interesting one. I think for New Zealand it
was sort of steady as she goes and very much
as expected. The rbn Z decided to keep the OCR
unchanged at three point twenty five percent. Most economists were
expecting that if we looked at the futures market the
day before, an unchanged result was very much priced into
the market, so no surprises there. Different story in Australia.

(00:46):
The futures market was fully priced for a cut and
almost every economist, including yours truly was expecting a cut
from the RBA, but they didn't deliver it. They decided
to hold rates unchanged at three point eighty five In Australia.

Speaker 1 (01:01):
Yeah, look, it's interesting. I mean, I think, as you say,
in New Zealand. It was reasonably well projected what would happen.
But I suppose still still a bit of a shock
for some though, because it's been moving south steadily.

Speaker 2 (01:15):
Yeah, that's fair to say, I think. So this is
the first time in the cycle that they've paused. They
did indicate that they still think that they're going to
cut interest rates in the future, So an economist would
say that they've got an easing bias there. They're expecting
to ease monetary policy further in the future, so they
were pretty explicit about that in the press release. But yep,

(01:40):
it maybe does come as a little bit of a
jolt to households who have become a customer. Seemed the
rate to go down with every meeting.

Speaker 1 (01:47):
So what are we going to be looking at. What
are they going to look at in terms of if
we're thinking that it's still got a downward movement, what
is the data that's going to make it's going to
be influential for that next announcement come all.

Speaker 2 (02:01):
Yeah, So the major data releases are going to be
the quarterly CPI figures, that's the inflation numbers, so they
come out towards the end of the month and also
the labor market figures telling us what's going on with
the unemployment rate and hiring in New Zealand. So those
are kind of the two main things that get looked at.
Of course, there's also a lot going on in the

(02:23):
international context, and we're seeing tariff letters going out to
various countries from the United States at the moment. That's
a bit of a moveable feast. There's a lot of
uncertainty there. So the RBNZ will certainly be watching what's
going on there because that will have an impact on
the domestic economy as well.

Speaker 1 (02:39):
Yeah. Absolutely, well I'm in that tariff situation. Trump of
course all sorts of new announcements. As you say, letters
in the box, you better open it up. The Aussies
look like they might be winners in this at the moment,
don't they.

Speaker 2 (02:51):
Yeah. I won't be counting my chickens before they hatch
on this one. Because we did have Brazil overnight got
center letter saying that they're facing a fifty percent tariff
and back on April second, they were told ten percent,
which is the same as what Australia and New Zealand
were offered or told. And I think it's fair to

(03:15):
say that Australia has maybe annoyed the United States a
little bit recently. We've sort of politely declined to increase
our defense spending to the degree that they would like
to see. We've placed sanctions on some Israeli politicians in
defiance of US wishes. And we've also got some non
tariff barriers on US tech companies that has upset the

(03:39):
United States in other countries when they've done similar things.
So there's a couple of little things there that make
me a little bit nervous for Australia. But as far
as we know, ten percent is probably going to be
the number.

Speaker 1 (03:52):
Talking with being picked them from RABO research. Is this
the I mean, how often is it a moving feast
like we're seeing at the moment in terms of everything
that will affect the ocr etc.

Speaker 2 (04:05):
Yeah, so I guess the path of the ocr the
Arbenz has provided a projection where they're expecting it to
land somewhere in the high twos, between between three percent
and two and three quarters percent, sort of in the
first and second quarter of next year. Is the projection
that they've offered. Our expectation is that they actually stopped

(04:29):
cutting at three percent, so we think one more rate cut,
We think that arrives in August, and then we think
they're probably on hold after that. But because there is
a huge, huge amount of uncertainty internationally, if international growth
slows down a lot, and it may do because of
these tariff impacts, then that would be an argument for

(04:53):
further rate cuts.

Speaker 1 (04:54):
Rights up being much appreciate it as always, thank you.

Speaker 2 (04:57):
Thanks Amus,