Sharon Zollner: ANZ Chief Economist on the OCR

Economists say a 25 basis point cut to the Official Cash Rate could be the Reserve Bank's most strategic option. 

The central bank will announce its latest review of monetary policy at two this afternoon. 

It's largely expected we'll see a cut from the current rate of 3% - but the size of the reduction isn't clear. 

ANZ Chief Economist Sharon Zollner told Ryan Bridge we're just getting into the spring period for the housing market - and the next six weeks will reveal a lot about the rebound.  

She says a 25-basis point cut would leave the most options open.

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Episode Transcript

Speaker 1 (00:00):
Well that ends AI report yesterday was more bad news.
Does it mean we get a fifty off today or
are we still going with twenty five points? It's ocyr day.
Sharon's on the A and Z Chief economist Sharon, good morning,
Good morning. What do you I know, what you think
they should do, but what do you reckon they'll do.

Speaker 2 (00:18):
Yeah, we're plumping for a twenty five point cut, but
it is looking like a close run thing. It wouldn't
be difficult to just fire a larger cut, But at
the end of the day, we think, when it's so uncertain,
probably go with strategy. And the fact is the rate
to come down a long way. We're just heading to
the spring period for the housing market. The next six
weeks of data are going to tell you a lot

(00:39):
about what the rebound looks like. And we think a
twenty five point cut while signaling that you're absolutely ready
to do what's needed. You've got another meeting in just
six weeks. That kind of leaves the most options open.
So that's really why we're plumping for twenty five rather
than having a strong view about the economics of it,
because yeah, the data has been a little bit rubbish.

(00:59):
We had obviously that week data for the GENP in
the second quarter of the year, that can be very volatile.
It can also be revised hugely. But then we had
the quarterly Survey Business Opinion yesterday, which is only one
indicator for how the economy has gone in the next
three months, but it wasn't a particularly good one.

Speaker 1 (01:16):
Sharing. Isn't this part of the problem that we keep saying, Oh,
there's another meeting in six weeks, we'll just wait for
more data, wait for more data, and you missed the boat.

Speaker 2 (01:24):
That's always the risk. You can never eliminate the trade
off between exactly that risk of being too slow and
then the risk of overshooting or flip flopping and causing
unnecessary volatility. Those two risks are ever present. But the
fact is, you know, the ocr is a lot closer
to its bottom than its top. It's come all the
way down from five and a half and an August

(01:47):
was that that was forecasting at two and a half
it would be the bottom. Maybe it'll be two and
a quarter, could even be two. But anyway, the point
is we're nearly there. So the driving instructors stay, you
should put your foot down, just as your approach for turn.
So I guess our assumption is that at risk of
other flip flop and overshooting will be higher in the

(02:08):
minds of the committee than the risk of being too
slow at this point of the cycle. But really, it
wouldn't be difficult for them to justify share remove Sharon,
they were forecasting it to get to two and a
half anyway.

Speaker 1 (02:18):
They were now very quickly because we've got to go.
But I just wanted for people listening to this, We've
got a mortgage. If we go fifty instead of twenty
five today, what does that actually change for me? Or
of these numbers already been priced in.

Speaker 2 (02:32):
A lot is priced in, but the fifty is not
fully priced. So the market's also a bit on the fence,
so you'd expect to see the oven. Well, the other
night rate will certainly drop more the one year rate.
That will depends very much on how the Reserve Bank.
It's see what the words they use them, how the
market interprets that. Really, I think the Reserve Bank's aim
will be to not cause too much of a splash,

(02:52):
but that'll be difficult when everyone's got next expectations.

Speaker 1 (02:56):
Sharon'solm A and Z appreciate your time, Thanks so much
for it.

Speaker 2 (03:00):
More from Early Edition with Ryan Bridge.

Speaker 1 (03:02):
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