Sharon Zollner: ANZ Chief Economist ahead of today's OCR announcement

The Reserve Bank's expected to press pause on the Official Cash Rate this afternoon, but that's not it's only option.   

The OCR's sitting at 3.2% after six consecutive rates reductions since last August.  

Mortgage rates have followed it down over that time, falling to about 5%.  

ANZ Chief economist Sharon Zollner told Andrew Dickens a 25-basis-point cut wouldn't be a bad idea, given GDP may have gone backwards.  

She says that more than offsets the fact that GDP in the first three months was stronger than expected.  

Zollner says it matters quite a bit that momentum's flagging at the moment.  

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Episode Transcript

Speaker 1 (00:00):
The official cast rate has had six cuts in a row.
Will this end today? It's widely expected to hit pause,
but a cut is not off the cards. A and
Z and chief economist Sharon's on has got up early
for us. Hello Sharon good Running. Two days ago I
suggested a cut of twenty five basis points to a
flat three might give the morrimond parts of our economy

(00:21):
a bit of a g up for summer. Was that
a silly idea?

Speaker 2 (00:25):
No, not at all. In fact, you know we're on
record of saying, actually, we think a cut is justified.
Wouldn't be a bad idea. What we've seen in a
wide range of data actually is that things have just
started to roll over a bit in the last few months.
And in fact, the reserve banks on shiny new toy,
the DVP now indicator, is producing a chance that GDP
actually have gone backwards in the last months of this year.

(00:49):
So in our mind that kind of more than offsets
the fact that GDP in the first three months was
stronger than they thought. That we actually think that matters
quite a bit. That momentum is play failing little bit
at the moment.

Speaker 1 (01:00):
Can we just talk about that. I've been actually watching
that Reserve back now Cast app which is on their website,
and it gives a real time indication of GDP and
it's saying the economy fell back into contraction in the
June quarter. Is that app accurate? Do you think it's
readings are real? Are we falling back into contraction?

Speaker 2 (01:20):
Well, it's not new and so far as it's just
rolling together all the indicators the Reserve bankbooks at anyway,
but it is kind of in your face, and so
you can't rule out that it might impact the committee
just by the fact that it's not their official GDP forecast.
They have their own forecasters who will take that into account,

(01:41):
but everything else as well. But our own forecast is
kind of zero point one positive.

Speaker 1 (01:47):
Sorry, So did you say zero point one?

Speaker 2 (01:50):
That's what we're our current forecast for the second quarter
as a positive.

Speaker 1 (01:55):
Let's just call the zero amongst friends, shall we?

Speaker 2 (01:57):
Yeah, exactly. I think that's some timely reasonable. Yeah, So
it does look like the economy more or less went
nowhere in the last three months that we've just finished.

Speaker 1 (02:04):
And yet do you think they will not do anything today?

Speaker 2 (02:08):
Well, they don't have a GDP target, but they don't
have an employment target. Either they've got an inflation target.
And in May there was one member of the committee
who felt pretty strongly they shouldn't have cuts back then,
and actually they couldn't reach consensus to cut. They had
to hold a vote, which is actually quite unusual. They
do prefer to all agree the very Zalan way, but
they couldn't. So it's particularly tricky one to call because

(02:32):
they're trying to guess not just what a committee will think,
but ultimately you know, this one holdout. How are they
feeling now? There was a mention in the summary record
of meeting last time that it was concerned about inflation
expectations and inflation generally, that the lingering inflation could come back,
that the members could catch fire again. We can see

(02:54):
why those concerns exist. There's certainly sticky parts of inflation,
but basically in the bigger picture, we think those concerns
will be alleviated rather than will intensify.

Speaker 1 (03:05):
Well, Charon, thank you so much for your advice today.
Certainly it feels like inflation is rusted in. I mean,
look at your rates bill.

Speaker 2 (03:10):
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