November 25, 2025 • 4 mins
The Reserve Bank is set to deliver their final Monetary Policy Statement for 2025 tomorrow, and reports indicate the OCR will be cut further.
Economists are widely expecting the OCR to drop 25 basis points to 2.25 percent - with room for further cuts down the line.
HSBC chief economist Paul Bloxham speculated further.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Paul Bloxham, AGSBC Chief Economists with US right now, Hey, Paul,
good aim, So tomorrow twenty five basis point cut. That's it,
isn't it?
Speaker 2 (00:10):
I think so.
Speaker 3 (00:10):
I think they're going to cut by twenty five basis
points tomorrow. I think the key thing to watch out
for is what they have to say about it and
where they're at. And I think they're going to still
they're going to cut by twenty five and I think
they're going to say that they will still leave the
door open to the possibility that they might have to
cut a little bit further yet. So I think it's
still the case that they're focused on the weak growth
(00:31):
story rather than worried about.
Speaker 2 (00:33):
Inflation pressures at this point.
Speaker 3 (00:35):
And so, you know, leaving the door open trying to
get the economy to get going, particularly ahead of you know,
they've got a three month gap now until the next
meeting until February, and of course the new governor that's
arriving at the RBNST as well, So trying to get
the economy to turn around ahead of that.
Speaker 2 (00:50):
I think that's what the aim will be.
Speaker 1 (00:53):
What are you expecting for the economy next year, Paul,
Because I know that we're I mean, I saw your
last prediction. Correct me if I'm wrong about two and
a half half percent till thereabouts, and the other banks
are calling around about that as well, up to three percent.
But the numbers that we're seeing in the data that
we're seeing just makes you feel a bit nervous, doesn't it.
Speaker 2 (01:10):
Yeah, it does make me nervous.
Speaker 3 (01:12):
We do have a number which is a bit over
two percent in terms of growth running into next twenty
twenty six, and I think you know that the challenge
has been that it has taken longer for growth to
pick up than we expected.
Speaker 2 (01:23):
We expected this year might be a bit better than
it was in the end, but it has been weaker.
Speaker 3 (01:27):
But I think the two key mechanisms are still there
that should get things going. The first one is interest
rates have come down a long way, and of course
they've come down even further and as I say, likely
to come down a bit further tomorrow again, and that
should start to feed through to a bit more consumer
spending and some support for the housing market as well.
And the other one is that dairy and meat prices
(01:48):
have been very high, so the agricultural sector has done
very well and those payouts are starting to arrive and
that income is starting to slosh into the economy. And
although it's mostly in the South Island, I think some
of it will start to feed through to the broader
economy as we run through next year as well.
Speaker 2 (02:01):
I don't think this is a strong growth profile.
Speaker 3 (02:04):
But this is a recovery after too what will turn
out to have been two quite.
Speaker 2 (02:08):
Weak years in terms of New Zealand's economic performance.
Speaker 3 (02:10):
So two years of economic weakness followed by a modest
recovery is what we've got factored in to the story.
Speaker 1 (02:18):
Have you factored in the possibility that everything that's freeing
up on account of the official cash rate coming down
is simply being hoovered up by increasing rates, so actually
you don't end up with that much disposable cash.
Speaker 2 (02:31):
I think this is still feeding through.
Speaker 3 (02:32):
I think the main thing that we've seen that's been
quite slow is people fixing shifting off their fixed rate
mortgages and rolling over those fixed rate mortgages to lower rates,
and that's been one of the things that has slowed
things down. I think, you know, if you sort of
look back and think about what else has held up
the recovery. I mean, I think it's taken you know,
the fact that you had such a big housing cycle,
(02:53):
house price cycle, you know, a forty five percent rise
in house prices through the pandemic and then sort of
an almost twenty percent to client in house prices, so
a lot more I think people you know had bought
in and are still facing house prices that are lower
than when they purchased them. And I think that's probably
been something that's that's been weighing on New Zealand more
than we anticipated earlier in the year.
Speaker 2 (03:14):
So that's that's one of the features.
Speaker 3 (03:18):
And then and then as a consequence of the weaker economy,
of course, you've seen this outward migration story, which is
weighed on population growth.
Speaker 2 (03:24):
So there's quite a bit that has to turn around.
Speaker 3 (03:26):
But I think the big mechanisms for getting it to
turn around are there. They're working, you know, with lower
interest rates and as I say, hi, high commodity price.
Speaker 1 (03:35):
Yeah, I mean, I feel like I should clarify what
I mean by rates was council rates, because obviously we
could talk about any kind of rates, but I feel
like that sucked up a heap of our disposable income.
But I mean, you'll bang on. You know, the wealth
effect will be part of it. So when you take
everything into account, are you still sticking with your projection
of two and a half.
Speaker 3 (03:53):
So I have a bit over two percent running into
next year. And as I say, I think the main
way characterized it is after having last year where growth
GDP went backwards, and this year where on average it's
not going to have grown very much at all. You know,
if two years of weakness are followed by growth of
a bit over two percent, that's you know, that's still
(04:13):
that's that's just a modest recovery.
Speaker 2 (04:15):
When you think about it, it's not it's not it's
not a strong picture. It's just a it's just a recovery.
Speaker 1 (04:20):
Yeah, brilliant. Hey listen, Paul, always brilliant to talk to you,
and we'll talk to you again very shortly. That's Paul Bloxham,
hspc's chief economist.
Speaker 3 (04:29):
For more from Hither Duplessy Allen Drive listen live to
news talks. It'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
Paul Bloxham, AGSBC Chief Economists with US right now, Hey, Paul,
good aim, So tomorrow twenty five basis point cut. That's it,
isn't it?
Speaker 2 (00:10):
I think so.
Speaker 3 (00:10):
I think they're going to cut by twenty five basis
points tomorrow. I think the key thing to watch out
for is what they have to say about it and
where they're at. And I think they're going to still
they're going to cut by twenty five and I think
they're going to say that they will still leave the
door open to the possibility that they might have to
cut a little bit further yet. So I think it's
still the case that they're focused on the weak growth
(00:31):
story rather than worried about.
Speaker 2 (00:33):
Inflation pressures at this point.
Speaker 3 (00:35):
And so, you know, leaving the door open trying to
get the economy to get going, particularly ahead of you know,
they've got a three month gap now until the next
meeting until February, and of course the new governor that's
arriving at the RBNST as well, So trying to get
the economy to turn around ahead of that.
Speaker 2 (00:50):
I think that's what the aim will be.
Speaker 1 (00:53):
What are you expecting for the economy next year, Paul,
Because I know that we're I mean, I saw your
last prediction. Correct me if I'm wrong about two and
a half half percent till thereabouts, and the other banks
are calling around about that as well, up to three percent.
But the numbers that we're seeing in the data that
we're seeing just makes you feel a bit nervous, doesn't it.
Speaker 2 (01:10):
Yeah, it does make me nervous.
Speaker 3 (01:12):
We do have a number which is a bit over
two percent in terms of growth running into next twenty
twenty six, and I think you know that the challenge
has been that it has taken longer for growth to
pick up than we expected.
Speaker 2 (01:23):
We expected this year might be a bit better than
it was in the end, but it has been weaker.
Speaker 3 (01:27):
But I think the two key mechanisms are still there
that should get things going. The first one is interest
rates have come down a long way, and of course
they've come down even further and as I say, likely
to come down a bit further tomorrow again, and that
should start to feed through to a bit more consumer
spending and some support for the housing market as well.
And the other one is that dairy and meat prices
(01:48):
have been very high, so the agricultural sector has done
very well and those payouts are starting to arrive and
that income is starting to slosh into the economy. And
although it's mostly in the South Island, I think some
of it will start to feed through to the broader
economy as we run through next year as well.
Speaker 2 (02:01):
I don't think this is a strong growth profile.
Speaker 3 (02:04):
But this is a recovery after too what will turn
out to have been two quite.
Speaker 2 (02:08):
Weak years in terms of New Zealand's economic performance.
Speaker 3 (02:10):
So two years of economic weakness followed by a modest
recovery is what we've got factored in to the story.
Speaker 1 (02:18):
Have you factored in the possibility that everything that's freeing
up on account of the official cash rate coming down
is simply being hoovered up by increasing rates, so actually
you don't end up with that much disposable cash.
Speaker 2 (02:31):
I think this is still feeding through.
Speaker 3 (02:32):
I think the main thing that we've seen that's been
quite slow is people fixing shifting off their fixed rate
mortgages and rolling over those fixed rate mortgages to lower rates,
and that's been one of the things that has slowed
things down. I think, you know, if you sort of
look back and think about what else has held up
the recovery. I mean, I think it's taken you know,
the fact that you had such a big housing cycle,
(02:53):
house price cycle, you know, a forty five percent rise
in house prices through the pandemic and then sort of
an almost twenty percent to client in house prices, so
a lot more I think people you know had bought
in and are still facing house prices that are lower
than when they purchased them. And I think that's probably
been something that's that's been weighing on New Zealand more
than we anticipated earlier in the year.
Speaker 2 (03:14):
So that's that's one of the features.
Speaker 3 (03:18):
And then and then as a consequence of the weaker economy,
of course, you've seen this outward migration story, which is
weighed on population growth.
Speaker 2 (03:24):
So there's quite a bit that has to turn around.
Speaker 3 (03:26):
But I think the big mechanisms for getting it to
turn around are there. They're working, you know, with lower
interest rates and as I say, hi, high commodity price.
Speaker 1 (03:35):
Yeah, I mean, I feel like I should clarify what
I mean by rates was council rates, because obviously we
could talk about any kind of rates, but I feel
like that sucked up a heap of our disposable income.
But I mean, you'll bang on. You know, the wealth
effect will be part of it. So when you take
everything into account, are you still sticking with your projection
of two and a half.
Speaker 3 (03:53):
So I have a bit over two percent running into
next year. And as I say, I think the main
way characterized it is after having last year where growth
GDP went backwards, and this year where on average it's
not going to have grown very much at all. You know,
if two years of weakness are followed by growth of
a bit over two percent, that's you know, that's still
(04:13):
that's that's just a modest recovery.
Speaker 2 (04:15):
When you think about it, it's not it's not it's
not a strong picture. It's just a it's just a recovery.
Speaker 1 (04:20):
Yeah, brilliant. Hey listen, Paul, always brilliant to talk to you,
and we'll talk to you again very shortly. That's Paul Bloxham,
hspc's chief economist.
Speaker 3 (04:29):
For more from Hither Duplessy Allen Drive listen live to
news talks. It'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
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