Kelly Eckhold: Westpac Chief Economist ahead of the Consumer Price Index release

There's anticipation inflation will fall once again.  

Economists are expecting another drop in the Consumer Price Index for the June quarter.  

The annual rate dipped to four percent in the year to March, a vast improvement on the precarious peak of 7.3% seen in the year to June 2022. 

Westpac's Kelly Eckhold told Mike Hosking he's picking a headline inflation rate of 3.5%. 

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Episode Transcript

Speaker 1 (00:00):
CPI Wednesday. Welcome to it where a lot of people
hope and hold their breath that inflation are showing genuine
signs are falling, thus leading soon or rather than later,
to the Reserve Bank entering the elusive world of the
rate cut. West PAXTEF economist Kelly E. Colder is with us. Kelly,
very good morning to you morning zero point six. You're
a little higher than the others, you little dower than
the others. What's driving that?

Speaker 2 (00:20):
Well, we think that the services sector inflation is still
going to remain reasonably chunky, so we're in line with
where the Reserve Bank was forecasting things would be when
they told us back in May, although probably since then
it sounds like they're maybe expecting something a little lighter.

Speaker 1 (00:37):
The non tradeable worry you.

Speaker 2 (00:39):
Still, that is basically what the services sector stuff is about.
I mean, obviously there's a few high profiles stickier things
like rates and insurance, which are going to take a
while to adjust, But it's all the other things in
the services sector that I'm watching particularly closely because those
have been robust now for a couple of years.

Speaker 1 (00:57):
Do we see ford beyond today? In other words, the
retrospective obviously at three point six and trending down still
here now today, or three point six and sticky.

Speaker 2 (01:09):
It's three point six, says, probably three point five today
and heating lower. The question is not really about whether
we're going to go down, it's about how are we
going to go down? And for the Reserve Bank, there's
a big difference between inflation being around two percent and
say two point Take the seat and say six and
nine months time.

Speaker 1 (01:29):
Right, let me read you this text. See if he's right, Mike.
Since the RB dubbish pervot last week, the market's now
pricing effectively eight twenty five point rate cuts over the
next eight meetings, taking the cash rate to three point
five percent in August next year. Would you agree with
that or not?

Speaker 2 (01:43):
I don't agree with that. I think that the Reserve
Bank won't be moving that fast. Even if we get
a good number today, it's still going to take a
while for that service expected to flea adjust.

Speaker 1 (01:55):
So the problem being, do you see anything remarkable so
say they can't? Do you say for first we'll end
of the year, they'll cut the first cut coming at
the end of the year, or not?

Speaker 2 (02:04):
Well, right now, I'm still on the early next year
in February today data though it is going to be important.
The Reserve bank tune did shift last week, and you
have to listen to that.

Speaker 1 (02:15):
Okay, So the second part of that question, when they go,
they go more than once. So once twice does anything
materially change in the economy. Do we get out of
our funk or not?

Speaker 2 (02:24):
Well? I think things will improve relative to the very
negative situation right now. You've got to remember that through
this year the economy has been hit with three pretty
negative factors. First, one of the banks suggested there'd be
great heights this year, which initially put things into a fund.
And then we've got a big CPI in the first quarter,
which solidified in people's minds that it was going to

(02:45):
take a while for interest rates to go down. Then
the Reserve Bank hitters in May with the idea that
interest rates might have to go up and certainly wouldn't
be going down until later next year. I think those
views have all shifted away now, right, so we just
about the timing things that are going to start will
be drads to be falling. That will be something that

(03:05):
will make households feel a bit chippier.

Speaker 1 (03:08):
Okay, well, let's hope you're right. In today, we hope
you're wrong. Kelly E Cold, Westpac chief Euctonomous with us
this morning. For more from the mic Asking Breakfast listen
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