Paul Bloxham: HSBC chief economist on reports claiming the RBA won't cut interest rates til 2026

New reports indicate the Reserve Bank of Australia won't be cutting interest rates until at least February 2026.

Employment remains high and inflation is still at target, and experts claim the central bank has no reason to do anything big.

HSBC chief economist Paul Bloxham explains further.

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Episode Transcript

Speaker 1 (00:00):
Paul Blocks, Heather duper c l pull onto much more
serious matters. Paul Block, somem HSBC chief Economists is with us. Hello,
Paul good A. Okay, so the minutes have come out
and it looks like you're getting no more rate cuts
until at least February.

Speaker 2 (00:14):
Oh. Look, I think there's still a chance the RBA
could get over the line for cutting. They haven't said no,
but they're saying that they're you know, just the economy
is in an upswing where at full employment inflation is
in the upper part of the target ban. There's no
great rush for them to do anything. I think the
critical feature of this will be a couple of things.
We get some labor force numbers later this week, so
employment numbers and what they do is going to be important.

(00:36):
But the really important one is going to be the
quarterly CPI print that we get on the twenty ninth
of October. So that last bit of information will either
make or break the idea that the RBA gets to
cut again this year or not. I think the RBA
is near the end. I don't think that they have
a lot of reason to be cutting a lot further,
but they may yet be able to cut a little
bit further. You know, I think the RBA is setting

(00:58):
us up for the idea that when viewing the end,
that there isn't necessarily a good reason to be cutting
a lot further from here. And that's what I think
we got out of the minute today.

Speaker 1 (01:05):
What are you expecting in the CPI print.

Speaker 2 (01:09):
We think that the trim mean measure will allow the
RBA just enough room the points that it'll be a
point seven on the quarter. That's what we're looking for,
and that's the key figure to be looking for, you know,
the we'll see. I don't know what the consensus is yet,
because of course it's a couple of weeks away still,
but the RBA was looking for it to potentially at
their last set of full cast to be a point
six or a point seven about that sort of mark.

(01:31):
And so they're talking about the risk of some upside
surprise to that measure, and a lot of it's based
on this monthly CPI indicator that we get in Australia,
a little bit like the selected price indicators that you
get over in New Zealand. And I think it's still
early days for reading too much into those indicators because
I think they're still not necessarily that good a guide
to the final quarterly print. So that quarterly print's going

(01:52):
to mean a lot for Australia. The market at the
moment's pricing about a forty percent chants that the RBA
will cut in November.

Speaker 1 (01:58):
What do you make about Mike ration stats which came
out yesterday.

Speaker 2 (02:03):
Well, they looked very weak. I mean I think that
you know, it's pretty clear still that the labor market
is quite soggy, quite soft in New Zealand. And with that,
you're still seeing Kiwis wanting to move to Australia where
the labor market is actually still holding up pretty well.
And you know, we're basically at full employment and there's
still jobs available here for Kewis to move into. So,

(02:25):
you know, the thing we haven't seen happened as fast
as we might have thought was that the Kiwi economy,
the New Zealand economy, hasn't really turned around as quickly.
That GDP print in the second quarter was of course
very weak, and the RBNZ responded with their fifty basis
point cut. You know, the economy hasn't turned around quite
as quickly as we thought it might. We thought the
high dairy prices and the really sharp declient and interest

(02:47):
rates that we'd already seen would get things going. It's
taking a bit longer, I think than we'd anticipated. So
that's seeing the labor market were loose, and because the
labor markets wheat, people are choosing to still continue to
flow across the taskment.

Speaker 1 (03:00):
Paul, correct me if I'm wrong, But I recall that
we had a discussion about the different approaches that the
rbs in and the RBA was taking, and that the
RB and Z it was going hard on just trying
to control inflation, whereas the RBA was considering inflation and
unemployment at the same time. Have we reached a point
at which we can say one approach is correct in
the other knot, or one is better.

Speaker 2 (03:21):
I think we can. I think we did have that conversation.
We've had a number of times on this on this program,
and I think we were waiting to make a judgment
as to how whether it was better to lean in
really hard with interest rate rises like that the RB
and Z did and get inflation down fast, of course,
at the cost of slowing the economy down more, or
take a more gradualist approach which is what the RBA did.

(03:41):
They lifted rates by less slow the economy by less
and got inflation down more slowly. It took longer, but
they did get there in the end. I think, you know,
you can sit back and say that it looks as
though the RBA took a better approach. The RBA's approach
is delivered outcomes that have been a bit easier to absorb.
The economy didn't tip into a recession last year. It's
back into an economic upswing. The unemployment rate is steady

(04:04):
at full employment, and inflation's on target. And I guess
in New Zealand, you know, hitting the economy hard did
get inflation down, but it's brought along some costs with it,
and it's still those costs are still there. It's not
clear that the New Zealand economy is quite out of
this yet, but that upswing has gotten going solidly.

Speaker 1 (04:22):
Yeah, Yeah, fascinating stuff.

Speaker 2 (04:23):
Paul.

Speaker 1 (04:23):
It's good to talk to you as always. Thank you
so much, mate. We'll talk to you soon. Paul Bloxham,
HSBC Chief Economist.

Speaker 2 (04:32):
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