August 26, 2025 • 6 mins
The RaboResearch general manager for Australia and New Zealand shares his thoughts on where interest and exchange rates are going.
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Episode Transcript
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Speaker 1 (00:00):
I always enjoy catching up with this man on the
(00:02):
country because he's a smart man. You don't get to
be the RABO Research GM for Australia and New Zealand
no less, unless you are quite a smart plug. Stefan
Vogel joins us out of oz Stephan, I want to
start with the exchange rate and interest rates. Of course
here in New Zealand last week we had the Reserve
(00:22):
Bank dropping the OCR to three percent. Interestingly, they signaled
another two drops to get it down to two and
a half percent. What are you guys at Rabobanks saying.
Speaker 2 (00:34):
Look, you already summarized it nicely and if you look
at the wording that we have seen in coming out
of the meetings there, it actually signaled to the market
that it wasn't a matter of Shelby cut or Shelby
not cut, but it was a matter of Shelby cut
twenty five or fifty and when do we do the
next one. So the market obviously is already pricing in
(00:55):
another twenty five basis points towards the end of this
year that will be cut and another twenty five or
so to be cut in the first half of next year.
And that's all good news for the consumers over in
New Zealand, I think. So as a German, I'm trying
to be positive, and today I think will be a
call of a lot of good news for those who
(01:15):
look at the input cost site.
Speaker 1 (01:17):
Are you telling me that Germans aren't positive? I know
you're not generally humorous, Stefann, but you ah tough on you.
Speaker 2 (01:24):
I don't want to be general, but I can only
talk about myself. So I'm trying to be positive these days.
So obviously in a world where we have to find
through tougher trading times, I think for our businesses there
is a lot good news also still on the horizon.
So I said, the interest rate is one and if
you look at the impact this has because obviously not
(01:46):
only here in New Zealand, a lot has happened in
the meetings there of the Central Bank, but if you
look into the US, obviously mister Trump is trying to
fire the governor Cook and she's refusing to leave office,
and so we have a battle there ongoing, and that's
obviously something that impacts the exchange rate quite a bit,
(02:08):
because for US in Australia and New Zealand, the US
dollar is just a very important currency. So if we're
looking at where we've been, we've been actually rather weak
following the cuts we had in New Zealand here with
a currency and now with a turmoil in the US.
It's balancing slightly higher, but overall we're still well below
sixty cents to the US dollar, and that's I think
(02:30):
good for the export market because it just brings a
little bit more extra New Zealand dollars into our pockets
when we sell our products in the global market. In
the US dollars.
Speaker 1 (02:39):
Absolutely fifty eight and a half when I had a
look this morning at might have updated since then, but
that's a very export friendly exchange right for US.
Speaker 2 (02:49):
Absolutely, it helps us there. It may make our imports
a little bit more expensive, but that level, I think
is a good and healthy one. But we can't just
think that, oh, it's going to stay there. We have
seen that the exchange rate is what we call a
shock absorber in these times. Whenever there is a hit
to the economy, whenever there's a big Trump blow against China,
(03:10):
against any other country, we see the exchange rate taking
the shock a little bit and absorbing it and moving
quite a bit so We're still expecting that there could
be a turnaround of that interest rates, sorry that FX,
and we may move towards the sixty level brother soon again,
but there is quite a bit of a volatility in
(03:31):
the market going forward and for now, as you said,
good for the exporters, well, I'm.
Speaker 1 (03:35):
Sure we could live with the sixty USC in exchange right.
Sort of pick you up on a comment you made
awey bit earlier about the perhaps two more drops in
the OCA. Commentators are here are saying those two right
drops would or could happen before Christmas. You're calling one
between now and the end of the year and one
on the new year.
Speaker 2 (03:55):
Yeah, so I'm referring to what I see in the
market and the forward curve, the swaps basically, so that's
where we are. But you're right, there could be even
at of either fifty basis points this year or two
cuts of twenty five. So with the latest comments, I
think everybody guts alert gets a little bit more excited
(04:16):
about a further drop in the interest rate in New Zealand.
Speaker 1 (04:20):
Stephan Vogel with us RABO Research GM for Australia and
New Zealand. If you're sitting out there on your farm
and you've got a big mortgage to Rabobank of course Stefan,
and it's about to come off a fixed rate. What
do you do at the moment? Do you just roll
on floating, do you ride the floating train down? Or
do you take some short action I don't know six
(04:40):
or twelve months.
Speaker 2 (04:42):
Look, I don't want to give anybody an advice without
knowing their circumstances. But overall, I think for many of
us who have a mortgage, it is a good thing
if the interest rates comes down. And the question is
what does it do to your business if we would
soar in these interest rates? So right now the market
doesn't call it, but the market has been wrong in
(05:04):
the past, and that's kind of where I think the
risk assessment of everybody needs to kick in and we
need to think, well, are we happy if we lock
in something at this rate or do we want to
think it may drop further. But we've seen it also
on the way up, a lot of people were called
are caught a little bit off guard by the point
in time that the writing was on the wall that
(05:26):
we see interest rates increasing. When we went into that upcycle,
it was already too late. To log in rates, so
that I think everybody needs to take their own decisions
about what is good for their farm and what is
not good for their farm, to make sure that we
cover some other risks, because at the end of the day,
it's not only that part. It's also the cost on
farm that we need to monitor. Obviously, fertilizers are still expensive.
(05:50):
Fuel is volatile in these days as well. When we
look at the geopolitics and feed grain is maybe one
of those that brings us a little bit of good
news that it's going to be price wise, probably a
struggle for those who grow it, but it will be
good times for those who need to buy some feed
train and for New Zealand. Obviously you're importing quite a
(06:10):
bit of grain also from Australia. We had some very
good rains in the southern parts of the country. Here.
South Australia, which was dry, had some good rains. We
had some rains in Victoria, Western Australia. Many parts had
good rains you so as well. So with that we're
actually setting us up for a pretty good crop. Not
a record crop for sure, not but it looks much
(06:32):
better as we speak now than if we would have
had the same call four weeks ago before those rains.
Speaker 1 (06:39):
Stefan Vogel, Rabbi Bank out of Australia. Thanks for you, Tom,
always good to catch up. Appreciate it. And you know
I was only joking about Germans not having a sense
of humor, so I.
Speaker 2 (06:49):
Know that we can always joke about it. Thank you.
I always enjoy catching up with this man on the
(00:02):
country because he's a smart man. You don't get to
be the RABO Research GM for Australia and New Zealand
no less, unless you are quite a smart plug. Stefan
Vogel joins us out of oz Stephan, I want to
start with the exchange rate and interest rates. Of course
here in New Zealand last week we had the Reserve
(00:22):
Bank dropping the OCR to three percent. Interestingly, they signaled
another two drops to get it down to two and
a half percent. What are you guys at Rabobanks saying.
Speaker 2 (00:34):
Look, you already summarized it nicely and if you look
at the wording that we have seen in coming out
of the meetings there, it actually signaled to the market
that it wasn't a matter of Shelby cut or Shelby
not cut, but it was a matter of Shelby cut
twenty five or fifty and when do we do the
next one. So the market obviously is already pricing in
(00:55):
another twenty five basis points towards the end of this
year that will be cut and another twenty five or
so to be cut in the first half of next year.
And that's all good news for the consumers over in
New Zealand, I think. So as a German, I'm trying
to be positive, and today I think will be a
call of a lot of good news for those who
(01:15):
look at the input cost site.
Speaker 1 (01:17):
Are you telling me that Germans aren't positive? I know
you're not generally humorous, Stefann, but you ah tough on you.
Speaker 2 (01:24):
I don't want to be general, but I can only
talk about myself. So I'm trying to be positive these days.
So obviously in a world where we have to find
through tougher trading times, I think for our businesses there
is a lot good news also still on the horizon.
So I said, the interest rate is one and if
you look at the impact this has because obviously not
(01:46):
only here in New Zealand, a lot has happened in
the meetings there of the Central Bank, but if you
look into the US, obviously mister Trump is trying to
fire the governor Cook and she's refusing to leave office,
and so we have a battle there ongoing, and that's
obviously something that impacts the exchange rate quite a bit,
(02:08):
because for US in Australia and New Zealand, the US
dollar is just a very important currency. So if we're
looking at where we've been, we've been actually rather weak
following the cuts we had in New Zealand here with
a currency and now with a turmoil in the US.
It's balancing slightly higher, but overall we're still well below
sixty cents to the US dollar, and that's I think
(02:30):
good for the export market because it just brings a
little bit more extra New Zealand dollars into our pockets
when we sell our products in the global market. In
the US dollars.
Speaker 1 (02:39):
Absolutely fifty eight and a half when I had a
look this morning at might have updated since then, but
that's a very export friendly exchange right for US.
Speaker 2 (02:49):
Absolutely, it helps us there. It may make our imports
a little bit more expensive, but that level, I think
is a good and healthy one. But we can't just
think that, oh, it's going to stay there. We have
seen that the exchange rate is what we call a
shock absorber in these times. Whenever there is a hit
to the economy, whenever there's a big Trump blow against China,
(03:10):
against any other country, we see the exchange rate taking
the shock a little bit and absorbing it and moving
quite a bit so We're still expecting that there could
be a turnaround of that interest rates, sorry that FX,
and we may move towards the sixty level brother soon again,
but there is quite a bit of a volatility in
(03:31):
the market going forward and for now, as you said,
good for the exporters, well, I'm.
Speaker 1 (03:35):
Sure we could live with the sixty USC in exchange right.
Sort of pick you up on a comment you made
awey bit earlier about the perhaps two more drops in
the OCA. Commentators are here are saying those two right
drops would or could happen before Christmas. You're calling one
between now and the end of the year and one
on the new year.
Speaker 2 (03:55):
Yeah, so I'm referring to what I see in the
market and the forward curve, the swaps basically, so that's
where we are. But you're right, there could be even
at of either fifty basis points this year or two
cuts of twenty five. So with the latest comments, I
think everybody guts alert gets a little bit more excited
(04:16):
about a further drop in the interest rate in New Zealand.
Speaker 1 (04:20):
Stephan Vogel with us RABO Research GM for Australia and
New Zealand. If you're sitting out there on your farm
and you've got a big mortgage to Rabobank of course Stefan,
and it's about to come off a fixed rate. What
do you do at the moment? Do you just roll
on floating, do you ride the floating train down? Or
do you take some short action I don't know six
(04:40):
or twelve months.
Speaker 2 (04:42):
Look, I don't want to give anybody an advice without
knowing their circumstances. But overall, I think for many of
us who have a mortgage, it is a good thing
if the interest rates comes down. And the question is
what does it do to your business if we would
soar in these interest rates? So right now the market
doesn't call it, but the market has been wrong in
(05:04):
the past, and that's kind of where I think the
risk assessment of everybody needs to kick in and we
need to think, well, are we happy if we lock
in something at this rate or do we want to
think it may drop further. But we've seen it also
on the way up, a lot of people were called
are caught a little bit off guard by the point
in time that the writing was on the wall that
(05:26):
we see interest rates increasing. When we went into that upcycle,
it was already too late. To log in rates, so
that I think everybody needs to take their own decisions
about what is good for their farm and what is
not good for their farm, to make sure that we
cover some other risks, because at the end of the day,
it's not only that part. It's also the cost on
farm that we need to monitor. Obviously, fertilizers are still expensive.
(05:50):
Fuel is volatile in these days as well. When we
look at the geopolitics and feed grain is maybe one
of those that brings us a little bit of good
news that it's going to be price wise, probably a
struggle for those who grow it, but it will be
good times for those who need to buy some feed
train and for New Zealand. Obviously you're importing quite a
(06:10):
bit of grain also from Australia. We had some very
good rains in the southern parts of the country. Here.
South Australia, which was dry, had some good rains. We
had some rains in Victoria, Western Australia. Many parts had
good rains you so as well. So with that we're
actually setting us up for a pretty good crop. Not
a record crop for sure, not but it looks much
(06:32):
better as we speak now than if we would have
had the same call four weeks ago before those rains.
Speaker 1 (06:39):
Stefan Vogel, Rabbi Bank out of Australia. Thanks for you, Tom,
always good to catch up. Appreciate it. And you know
I was only joking about Germans not having a sense
of humor, so I.
Speaker 2 (06:49):
Know that we can always joke about it. Thank you.
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