Vittoria Shortt: ASB Chief Executive on the OCR dropping by 50 basis points

Kiwis could expect another cut to the Official Cash Rate before Christmas. 

The Reserve Bank has cut the OCR by 50 basis points, following a 25-basis point cut in August. 

Banks are following through with further interest rate cuts. 

ASB Chief Executive Vittoria Shortt told Mike Hosking the neutral rate is about 3.25%, so the central bank still has a way to go. 

She says it could drop another 50 basis points next month, provided inflation is back under control. 

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Episode Transcript

Speaker 1 (00:00):
So fifty points it was. The Reserve Bank tells us
the cash right remains restrictive, so another fifty next month
isn't a guarantee, but the momentum appears to be there now.
The politicians leapt all over and of course suggesting better
days are ahead. ASP Chief Executive Victoria short with us
Victoria morning.

Speaker 2 (00:13):
Yeah, good morning, Mike.

Speaker 1 (00:14):
As an exercise and fiscal management over the last couple
of years, as we come out the other side of this,
how would you judge this this move?

Speaker 2 (00:25):
Look, I think it's great news for households and it's
great news for businesses. It means that inflation is getting
down to in that target range, and even though it's
going to take time to flow through. I think the
big question everyone's asking though, is where too from here?
So I think that's the thing that we're really turning
our attention to.

Speaker 1 (00:44):
Do you have any answers on that? Because the commentary
leading into yesterday was anywhere between twenty five and seventy
five and I've not seen that before. And there seems
to be some ankst around what comes next as well.
Does anyone actually know what's going on?

Speaker 2 (00:56):
Well, I mean, obviously the our central bank will make
their own independent decisions. But what we think is that
four seventy five the cash rate is still what we
describe as restrictive, and we think that the neutral rate
is around three point two five. So you can take
from that that there's a bit to go and we

(01:20):
always have to be careful though that. You know, world
events can change. But we do think that there is
further cuts ahead. We think it could be another fifty
basis points in November, but we think that will continue
next year. You know, we're just going to make sure
that inflation keeps coming down to their target range.

Speaker 1 (01:39):
Yeah, what's your sense on that? I was reading an
interesting thing out of Australia. Are the savings rates in
Australia are way higher there than they have been here
through this whole COVID period? In other words, are we
the sort of people who, when given a chance, will
run with it and start spending with alacrity or not?

Speaker 2 (01:56):
Yes, we do like to spend the care and we
certainly borrow more than we save, so you know, we
would always say that you think about your financial wellbeing
and if you're not sure, come and talk to us
and we can help.

Speaker 1 (02:12):
What I also read yesterday was zero point I think
it was zero point four percent, or might be zero
point six percent of mortgages were under some sort of
stress in general, which means the vast majority arn't are
we actually okay, and that we'll be going into the
reserve banks thinking. In other words, for all the dire talk,
it's not as dire as it could be. Therefore they
need to be careful.

Speaker 2 (02:33):
Yeah, so look, I think that's certainly what we're seeing.
We're actually seeing that households and businesses have actually navigated
this difficult period pretty well. And when I have a
look at our data of customers who are getting extra support,
those who are feeling stressed because of the interest rates
are about a third of our customers that we're supporting.

(02:57):
The other customers it's for actual sort of life events.
It's health reasons, losing a job, it's divorced, it's things
like that. So it's true that the majority of the
people that we're supporting as a result of life events
rather than interest rates.

Speaker 1 (03:11):
Good insight. I appreciate it very much. Victoria's short Who's
the ASP chief Executive? For more from the Mic Asking
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