Paul Bloxham: HSBC chief economist on whether Australia's OCR will be adjusted in February

Australia has kept their official cash rate on hold for an entire year - but one expert believes that's likely to change.

The nation has been committed to bringing down inflation, but HSBC's Paul Bloxham predicts a rate cut will come this February.

He explained the factors contributing to this choice, and outlined his predictions for the rest of 2025.

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Episode Transcript

Speaker 1 (00:00):
Bryan Bridge time how to catch up with rockstar economist
HSBC's Paul Bloxham. The Australian Financial Review has just named
him the best economic forecaster in Australia for calling every
decision by the RBA correctly last year. They didn't charge
the change the ocr the entire year, so basically had
one answer the whole time, Paul Good, evening Good, I

(00:23):
how much did you pay the Australian Financial Review?

Speaker 2 (00:27):
No, it doesn't work that way that way, but it's
a very very nice bit of recognition that we're very
appreciative of. As you say, we had the view all
through last year that the RBA wasn't going to be
able to cut interest rates, and I think we got
there for the right reason. We talked a lot about
the fact that productivity was weak and that the supply
side of the economy was still constrained, and that that

(00:48):
was the primary reason they just won't good to get there.
So so it's nice for that for that to have
turned out to be right.

Speaker 1 (00:54):
Yet you are expecting a cut this month.

Speaker 2 (00:57):
That's right, we do. We think the RB is going
to be able to cut interest rates this year, and
that view again we've had that for a while. We
now think it's likely to be at their meeting that
comes up in a couple of weeks times, so the
February meeting. And you know, part of the story there
is that inflation has gradually headed towards the RBA's target.
It's moving a little bit faster towards their target than

(01:19):
they had anticipated late last year. And in addition to that,
we've got global risks as well that we you know,
we can see playing out every day at the moment
in terms of the global trade developments and US policy
developments and so on. So we think that's going to
factor in a little bit as well. And all in all,
we think the RBA is going to be able to
start to be able to lower its policy rate deliver

(01:40):
a bit of support for the economy.

Speaker 1 (01:42):
How is Australia going to be impacted by the Trump Well,
I mean, we say Trump's terrorists, but he's put them
on and then he's taken them off already within the
space of twenty four hours, and they're at the negotiating table.
So as best you can crystal ballgay is about what
impact it could have.

Speaker 2 (01:58):
Well, I think the first thing we know is that
it's creating uncertainty. I mean, that's quite clear from just
the way you described it, and that uncertainty makes it
you know, means that I think overall it is it
is a downside risk for global growth because uncertainty means
that it's more difficult to make investment decisions, it's more
difficult to make decisions in general. And I think this

(02:20):
story has got further to play out, So I think
that possible downside risk to global growth is something we
need to factor in terms of thinking about what's going on.
That said, you know, what happens in terms of US
policy is not the primary driver in terms of its
US effect on the effect on the US economy on
Australia or New Zealand. That the primary question is what

(02:41):
the policy changes that affect China and then how does
do Chinese policy makers respond? And that's something we're also
watching play out at the moment, and we'll just have
to see how that plays, because that's the most important
feature factor in terms of driving what happens in Australia
and New Zealand. They are you know, Asia is our
major instead of trading partners.

Speaker 1 (02:58):
They're true, and so father've just been making noises about
going to the wto that kind of thing. But yeah,
it has the potential to get quite gnarally.

Speaker 2 (03:09):
I think it's going to be very a very interesting
time to watch what's going on, and it's going to
be difficult to navigate how in terms of in terms
of how you think about these various developments. But you know, nonetheless,
I think I think, obviously it's what's happening, so we
need to keep that in mind. And I think, as
I say, we need to watch out for what happens
in terms of policy developments, not just in the US

(03:29):
of course, but what the retaliation is from other countries
and particularly in Asia.

Speaker 1 (03:35):
Nice one, Paul, thank you very much for that. Enjoy
the award. Did you get a trophy or something for
that or just a nod in the paper?

Speaker 2 (03:41):
Just a nod in the paper, that's enough, Thanks Paul.

Speaker 1 (03:44):
Thanks for that, Paul Blocks and with HSBC now the
reason we call them the rock star economists. You'll probably
know this, but back in the day when John Key
was in power, he declared that we had the rock
star economy of the world and has since done many
many interviews and every time you can speck for an
interview the poor guy. We used to do it on
Telly as well. So what is it? What's your new
label for our economy? And he'd have to come up

(04:06):
with some stupid name, just just to try and compete
with the first one he gave. By the way, they've
never been as good since, have they? For more from
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