Paul Bloxham: HSBC chief economist ahead of Australia's GDP figures being released

Economists are outlining their predictions as Australia prepares to release a GDP update tomorrow.

The Australian economy is predicted to have grown faster over the December quarter, but the effect of inflation still linger.

HSBC chief economist Paul Bloxham explains further.

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Episode Transcript

Speaker 1 (00:00):
Bryan Bridge.

Speaker 2 (00:02):
Now, big debate. Obviously, it's been happening here, We've been
doing it on air. It's about which reserve bank New
Zealand or Australia fared better in trying to tackle inflation.
Paul Bloxham, the HSBC Economists, the rock Star Economists, has
been looking at this and he's done a paper on
it which I've been perusing this afternoon. Paul, good evening,

(00:25):
good ame, Hey, great to have you on the show.
Tell me about the report that you guys have done
from HSBC. Who did better? Who fared better?

Speaker 1 (00:34):
Yeah, So we've been comparing the Australian and the New
Zealand experience post pandemic. So as we know, both countries
had this surge in inflation and inflation picked up a
lot in twenty twenty two. It' got to somewhere between
seven and eight percent, depending on which economy you're talking about,
And of course both central banks took slightly different approaches
in terms of managing. The RBA lifted rates by four

(00:56):
hundred and twenty five basis points and really intentionally to
not slow the economy as much, take longer about getting
inflation down, but stay close to full employment and they
seem to have delivered that. And the RBNZ took the
approach of needing to get inflation down fast, they lifted
interest rates by more and in the end pushed the
economy into a bigger downturn to get to get inflation down.

(01:17):
And so they're both different choices and they both have
had different outcomes. You know, in New Zealand's case, inflation
has come down faster and it's back where the RBNZ
needs it to be. And after those rate rises, well,
of course you've had one hundred and seventy five basis
points of rate cuts so far. In Australia's case, having
not lifted rates as much, the economy is still pretty full,

(01:39):
close to full employment, and the RBA, of course has
only been able to cut interest rates twenty five basis points.
So it really depends on what weight you put on
the importance of getting inflation down fast, how important you
think it is for the unemployment rate to stay low
which and what weight you put on that, and how
much weight you put on the sort of the idea
that interest rates come down as well. You know, the

(02:00):
two are very very close. We found in the studies
it depends on which way you put on those things.
But on the margin, I think if you're prioritizing stabilizing
your economy as well and minimizing the volatility, then Australia
probably beares a little bit better.

Speaker 2 (02:15):
The answer surely is in the number of economic refugees
that fled this country to head to the other one.

Speaker 1 (02:22):
You know, well, it's part of the adjustment mechanism. Certainly
that the labor market's been stronger in Australia and it's
been weaker in New Zealand, and it's meant that people
have moved from New Zealand to Australia to get jobs.
And so if you're measuring it purely on the labor
market performance, you would definitely say Australia has been in
better shape. We've had an unemployment rate that's gone up
by only point six percentage points. It's picked up from

(02:45):
three and a half percent to four point one over
the last two and a half years. And in New
Zealand the unemployment rates picked up by almost two percentage points.
It's gone up from three point two to five point one. So,
you know, if it's just on the labor market, yes,
Australia is in better shape. If it's on the inflation performance, well,
New Zealand's got it to inflation down faster than Australia has.

Speaker 2 (03:02):
And you guys are still selling a bit closer to
the wind I suppose, and with Trump's terrorists et centa,
things could get a bit here. So we'll have to
wait and see how that plays out GDP figures. You've
got the figures out tomorrow. What are you expecting.

Speaker 1 (03:15):
Well, we think GDP growth will have picked up pace.
This is the fourth quarter print for last year and
we think that it'll run at half a percent in
the quarter, and that'll be up from running at point
twos and point threes over the previous quarter. So we're
in a modest consumer upswing. We've already seen it in
better retail numbers. We've seen it in improving consumer confidence
and that's because well, inflation is coming down, so cost

(03:37):
of living is improving a bit, and we've seen tax
cups in Australia in the second half of last year
cost of living measures as well. And we've got very
strong employment. You know, we're fully employed. The employment to
population ratio is at its highest level on record at
the moment, so people are spending a bit more because
they're quite confident. They're becoming more confident and that we
think is what's going to lift growth and show up

(03:59):
in tomorrow than Prince.

Speaker 2 (04:01):
How are just outside of the headline figures that we're expecting.
How are Australians feeling about the economy, the state of
how things are well?

Speaker 1 (04:10):
The consumer sentiment numbers have improved, so the pickup. The
low point was September last year, and then in October
and November they jumped quite a lot and then they
sort of held onto that level and they've approved a
little bit since the RBA delivered its first rate cut
as well. So I would say they're a lot better
than they were, but we're still not above average. You know,

(04:30):
the consumers are still pretty cautious, but certainly better than
it was, you know, late last year.

Speaker 2 (04:38):
Paul, thank you very much for that. Great to have
you on as always, Paul Blocks on the HSBC Chief Economists.
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