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August 13, 2024 4 mins

The Reserve Bank is set to issue their latest OCR update tomorrow - and experts are divided about the outcome.

Some economists are predicting rate cuts will come now, while others believe the Reserve Bank will hold steady and announce cuts later in the year.

Infometrics Principal Economist Brad Olsen says the Reserve Bank needs to lay the groundwork for future rate cuts.

"The economy is in a darker place - but the Reserve Bank backed itself into a corner, all bets are off at the moment."

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Episode Transcript

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Speaker 1 (00:00):
Now. Obviously the countdown is on right now for the
most highly anticipated Reserve Bank decision in quite some time.
Economists are pretty divided on whether the Bank's going to
cut or hold the OCR At two tomorrow afternoon, Infametric's
principle economist Brad Olsen is with mehy Brad good evening.
Let me get this right. You don't think they're going
to cut, but you think they should cut. Is that right?

Speaker 2 (00:20):
Yeah? I mean that's broadly in the right ballpark. I
mean we think that, you know, the economy is clearly
weaker on most of the data that we would have
come through in the economy the last couple of months,
we would probably say enough is enough and it's time
to cut. But we don't think they will, and in
a sense I almost don't think they can, given how
much of a u turn they're taking. But what I

(00:40):
think they will do, and certainly what I think they
should do tomorrow given all of that, is they need
to make it pretty clear that they got it wrong
and may they were completely and utterly wrong. They need
to shift the dial and they need to start sort
of setting that the groundwork for making a move before
the end of the year. I don't know if that's
October or if it's November. Probably almost should be October,

(01:01):
but they've had some communication issues in recent times. I mean,
it is a little bit bizarre, right that, you know,
economists talk about whether or not a decision is live
or not could we get a change. You go back
to where they were in May, and honestly, there was
no hope of a change up or down in a
sense for another year. Now we're talking about it like
it could be, you know, locked in the markets of price.

(01:21):
I think sort of a seventy percent expectation that you
could see the official cash rate fall tomorrow. Economists seem
to be a little bit more circumspect about that. But
long story short, the economy is in a darker place,
but the Reserve Bank backs it south into a corner,
and so sort of all bets are off at the moment.

Speaker 1 (01:37):
Okay, so let me get this right. Tomorrow is a
monetary policy statement where they actually give a press conference.

Speaker 2 (01:42):
Yes, yes, so they give it the whole kid in
kaboodle in November. Yes that's correct, but not October.

Speaker 1 (01:50):
So listen, Brad. They can't they literally cannot hold the
country in this nonsense for six weeks extra or whatever
it is, because they're not holding a press conference. So
is it possible, which is what the discussion has been about,
why they can't cut in October because then they can't
hold a press conference. They just issue a press release.
Can they give a full press conference tomorrow where they
set it up beautifully for October and then just do

(02:11):
it via a press release in October? Is that possible?

Speaker 2 (02:14):
I think it is possible, and you know, in our
minds we are starting to wonder if that might be
the better move. Because you're right. I mean, so tomorrow
you get at two pm, you get the decision, but
you also get everything. You get all of the new
forecasts from the Reserve Bank. You get pages and pages
of analysis and understanding not only of what they think
their official cash rate could be over the next sort
of two years, but also what they think happens to

(02:36):
inflation in the economy, and similar an hour later at
three pm, the Governor will be standing out there two media,
speaking for nearly an hour on all of those views,
and then, like you say, in October, you get like
a page or two and so I think you're right.
This is where the setup needs to happen now if
they don't do that, and I think you know, we're
still holding our breath at Infametris. We're not going to
make a change until tomorrow afternoon, when we understand we're

(02:58):
on Earth, the bank is landed on all this, because
how many times have they done this? It flip flopp
between sort of.

Speaker 1 (03:03):
Hot and cold and hot and cold, hood and cold.

Speaker 2 (03:05):
So we are really sort of trying to figure out
what happens there. But once we know, that's when I
think we'll make a bit of a stronger call on
what comes through. Regardless, I think they need to acknowledge
tomorrow that they got it wrong at some point along
the way, but it is important. I think that if
they want to go in October, they need to set
that ground work up. Otherwise we might well come through

(03:26):
to November and all of a sudden they have to
go with a fifty basis point cup because all of
a sudden things have moved sort of too much.

Speaker 1 (03:32):
Further on, Brad, you make some excellent points, mate, Thank
you so much. Really looking forward to talking to you
again about this. Brad Olson in for metrics principle economist
put that in your diary for two o'clock tomorrow and
you can tune in and see rat adri and go
particularly red in the face. He's naturally quite florid, but
I think when the journalists start giving him a hard
time tomorrow, he's going to be going to he's going
to read and right up, he's going to go full

(03:53):
Tomato on us. For more from Heather Duplessy Allen Drive
Listen live and news talks.

Speaker 2 (03:59):
They'd be four pm weekdays, or follow the podcast on iHeartRadio.
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