Mike's Minute: The Reserve Bank didn't inspire me

Call me superficial, but to watch the Reserve Bank heavyweights lined up, as I did Wednesday post their cash rate decision, I did not see dynamism. 

These people outwardly do not fill you with any sense of excitement. 

The Reserve Bank is in a spot and, as a result, so are we as a country. 

A couple of semi-interesting things happened and also one very interesting thing. 

They voted 5 to 1 to cut. They don’t vote that often. 

They also offered alternative scenarios, which they haven't done for five years. Alternative scenarios are not a good sign. If you have enough of them, you are literally making stuff up. 

Anyone can drum up alternative scenarios. What I want to hear more of from experts is what is actually going on. 

The important stuff is they have no bias on further cuts. 

A lot of people thought we would get a cut yesterday, followed by one, possibly two, more. 

The so-called "neutral rate", that's the cash rate settling at 2.75% or 2.5% – that now seems to be off the table. 

Why? 

They argue inflation, which is what drives them. That's their mandate. 

The trouble with that is inflation is only just in the band. It's heading more towards the top of the band and here is the really big part – growth, or large dollops of growth, are not driving this inflation. 

We are barely growing, if growing at all. Yet inflation is still a thing. That's not good for an economy and it's not good for the Government. 

The Government, namely Willis and Luxon, leap, and have leapt, on each announcement talking about the money coming back into the economy as the interest rates drop. If the bank isn't cutting, then rates aren't dropping, and we aren't spending or feeling remotely bullish. 

The Reserve Bank doesn’t care that much because they are fixated on inflation, whether it's driven by factors beyond our control —like insurance, shipping or councils— or growth. 

Yes, we had growth in Q1. It was quite good growth too. The live GDP tracker has Q2 up a bit, but not much. 

But it has annual numbers negative and inflation trending up. 

What we need is help. We are in a quagmire we need to extricate ourselves from. 

The Reserve Bank doesn’t look like they are that interested. 

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Episode Transcript

Speaker 1 (00:00):
Now call me superficial, but to watch the Reserve Bank
heavyweights lined up as I did yesterday afternoon post their
cash rate decision, you are not seeing dynamism there. Believe me,
these people outwardly do not fill you with any sense
of excitement. The Reserve Bank, I think, is in a spot,
and as a result, so are we as a country.
The couple of semi interesting things happened yesterday, and in fact,
one very interesting thing. They voted five to one to cut.

(00:22):
They don't vote often. They also offered alternative scenarios. They
haven't done that for five years. Alternative scenarios are not
a good sign in my mind. Have enough of them.
You're literally making stuff up. I mean, anyone can drum
up alternative scenarios. What I want to hear from and
more from the experts, is what's actually going on. The
important stuff is that they've got no bias now on
further cuts. A lot of people thought, including me, we

(00:45):
would get a cut yesterday, followed by one more, possibly
two more, the so called neutral rate, that cash rate
would settle at two seven five or two point five.
That now seems to be off the table. Why they
argue inflation, which is what drives them. That's their mandate
is in the band. Trouble with that is it's only
just in the band. It's heading more towards the top
of the band. And here is the really big part.

(01:05):
Growth or large dollops of growth are not driving this inflation.
We're barely growing, if growing at all. And yet inflation
is still a thing that's not good for an economy,
and it's certainly not good for government. See the government,
namely Willis and Luxon. They leap and have leapt on
each announcement talking about the money coming back into the
economy as the interest rates drop. If the bank isn't

(01:25):
cutting rates aren't dropping, and we aren't spending or feeling
remotely bullish, the RB doesn't care that much because they're
fixated on inflation, whether it's driven by factors beyond our control,
things like insurance or shipping or sitting councils and rates
or what we really want growth. Yes, we've had growth
in Q one, quite good growth. The live GDP track

(01:46):
of those got Q two up a bit, but not much,
and it has annual numbers still in the negative inflation
trending up. What we need, broadly speaking, in the economy's help.
We're in a quagmire. We need to extricate ourselves out of.
The RB doesn't look like interested. For more from The
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