Jarrod Kerr: Kiwibank Chief Economist on the Reserve Bank cutting the OCR by 50 basis points

Today's 50 basis point OCR cut could go some way to getting our economy growing again.

The Reserve Bank's slashed the cash rate to 2.5 percent.

ANZ has lowered its floating and flexible rates, on top of all major banks already lowering fixed term offerings.

Kiwibank chief economist, Jarrod Kerr, says he's been calling for a 2.5 percent cash rate for two years.

"We knew it needed to go below neutral, which is three, and we needed to get some stimulus into the economy to really ignite the recovery."

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
The Reserve Bank has finally dropped a double cuts, taking
the official cash rate to two point five percent. The
bank says it's also open to further reductions. Jared Kerr
is key we Bank's chief economist.

Speaker 2 (00:09):
Hi, Jared, good evening.

Speaker 1 (00:11):
I mean some of us were expecting it, but it's
still surprising.

Speaker 2 (00:13):
Were you surprised, No, we weren't. We thought it was
needed and the Reserve Bank has finally sort of realized that, Yeah, hey,
look we need to take in straight into stimatory territory
and here we are.

Speaker 1 (00:26):
Will it give us the confidence to spend like they
hope it will.

Speaker 2 (00:30):
It'll certainly help. Yeah, it'll certainly help, and we expect
things to pick up over summer as a result of
these rate cuts. Yeah.

Speaker 1 (00:37):
Are you still expecting twenty five in November?

Speaker 2 (00:39):
Heah, we are. I don't think the job's done just
quite just yet. It'd be great to get the cash
right down to two and a quarter and then we'll
think about whether we need it to go down to
two in February. It'll all come down the house. Things
play out over summer.

Speaker 1 (00:53):
Are you seeing this as an acknowledgment that they got
it wrong?

Speaker 2 (00:57):
Yeah? Yeah, they told us they didn't need to cut
further earlier in the year, and here they are cutting further.
So it's disappointing that this two and a half percent
cash rate wasn't delivered six months ago because it would
have fed through by now. But we've got it today
and it's going to feed through over the next six months.

Speaker 1 (01:17):
So would you because we had a double cut in
what was it, February? So would you have actually double
cut again in April?

Speaker 2 (01:24):
Yeah? Absolutely, that's what we were calling for. We've been
calling for two and a half percent cash rates two years.
We knew it needed to go below neutral, which is three,
and we needed to get some stimulus into the economy
to really ignite the recovery. We haven't got it. The
economy is still spluttering. We're still in a recession, and

(01:44):
that just shouldn't have been the case.

Speaker 1 (01:47):
Some say that this double cut may in fact spook
people because people are already so nervous. What are the chances?

Speaker 2 (01:53):
No, I don't believe in that at all. I think
people will take it for what it is. They'll see
their mortgage rates falling, they'll see their business lending rates falling,
and there'll be a sigh of relief. You know, it'll
free up cash for them to do what they haven't
been able to do up until now.

Speaker 1 (02:11):
So, Jared, what are you picking for the economy next year?

Speaker 2 (02:14):
Look, we think we get the recovery which we should
have got this year. We think we'll see growth of
around one to two percent next year, so a significant
improvement and what we've had, and then you know, things
will continue into two thousand and seven as we sort
of pick ourselves up off the ground.

Speaker 1 (02:31):
Good stuff, Jared, thanks very much appreciated. Jared Kirky, we
Bank's chief economist who has actually been right the whole
way through here the wind does the new boss of
the rbnz's dot Mark. I think she starts in December,
but her first call will be in I think the
new year. For more from Hither Duplessy Allen Drive, listen
live to news talks it'd be from four pm weekdays,

(02:51):
or follow the podcast on iHeartRadio