Paul Bloxham: HSBC chief economist on the RBA hinting it's open to cutting rates

Over in Australia, the RBA says its upcoming May meeting would be an 'opportune time' to reconsider the OCR.

Experts believe that the global uncertainty over U.S. tariffs could have significant impact on markets all over the world.

HSBC chief economist Paul Bloxham says a lot has changed within the economy - and inflation has dropped down.

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
The Reserve Bank in Australia says that it's May meeting
would be a quote opportune time to reconsider the official
cash rate. Hgspec's chief economist Paul bloxhams with US Paul, Hello,
good a. So it's a cutter mark, thanks very much.
Made appreciate it. Cut on the cards, isn't it.

Speaker 2 (00:15):
I think so, yes, I think that's right. You know,
quite a lot has changed.

Speaker 3 (00:20):
I mean, part of it is, of course that Australia's
inflation has been gradually coming down and this has left
the RBA with an opportunity to consider to potentially consider cutting.
But I think the major force at work now is
what's happening globally, and that's going to be the force
that overwhelms all of these local stories. I guess the
way I'm framing this is, this is what's been happening

(00:41):
is global is downside risk for global growth, and typically
that is disinflationary for most of the world, and I
think it's going.

Speaker 2 (00:50):
To be disinflationary for Australia and New Zealand as well.

Speaker 3 (00:54):
You can certainly make the case that in the short
run there might be supply disruption that plays a role
and holds up that disinflationary force. But I think the
major one is going to be that there's going to
be a lot of manufactured goods in Asia that can't
necessarily be sold into the US market, and they'll show
up in our markets instead.

Speaker 2 (01:12):
So I think there's going to be a lot of
trade diversion and that's going to be.

Speaker 3 (01:14):
One of the factors that puts downward pressure on inflation
allows the RBA to move a bit faster.

Speaker 1 (01:19):
Do you think that the RBA is going to actually
look at what's happening globally right now and take that
into consideration or look through it.

Speaker 3 (01:27):
I think the first in the first instance, by May
will know that domestic inflation in Australia is low enough
for them to be.

Speaker 2 (01:33):
Able to consider cutting anyway.

Speaker 3 (01:35):
But I think when you're thinking about the pathway going
forward there, they'll be considering in their own set of
forecasts that the likely risk to their forecast for inflation
is more to the downside than to the upside given
what we're seeing globally, and so I think you're.

Speaker 2 (01:50):
Going to get a cut in May on the back
of the domestic.

Speaker 3 (01:52):
Story, followed by and also some sense that they're they're
you know, they're happy that they're considering that they're likely
to be lowering rates further because of what's happening globally.

Speaker 1 (02:01):
Yeah, how wise is it to start acting in anticipation
of what Donald Trump is going to do or how
long he may do it for because he's so unbelievably unpredictable.

Speaker 2 (02:10):
Well, this is a lot of what came out of
the minutes today.

Speaker 3 (02:12):
I mean, you know, when the last meeting that the
RBA had was in early April, obviously, and just before
the second of April, when we had all these big
announcements from the US administration, and the RBA wasn't prepared
to do anything because of course they didn't really know
what it was going to look like.

Speaker 2 (02:29):
And so I think that's exactly why the RBA.

Speaker 3 (02:31):
Part of the reason the RBA was on hold in
April was because they don't want to jump at shadows.

Speaker 2 (02:36):
They want to know what's going on.

Speaker 3 (02:38):
But the time we get to the main meeting and
then the ones that are subsequent to that will have
a bit more economic data that actually shows the effecta
all of these policy changes on the global economy and
then potentially the local economy as well.

Speaker 1 (02:49):
Yeah, obviously my first opportunity to talk to you about
what's going on with Donald Trump and the tariffs. Is
this blowing your mind with how stupid it is.

Speaker 3 (02:57):
There's a lot of change really really fast and having
pretty big implications for the overall global the overall global story,
and I think we all have to sort of reframe
how we think about things.

Speaker 2 (03:07):
But I think, you know, when I think about it
in the.

Speaker 3 (03:10):
Context, as I say, for Australia and New Zealand, I
think that the main forces are that it's downside risk
to global growth, but it's also likely downside risk for inflation,
and that means that the central banks should have scope
to be able to support the local economies by lowering
rates further.

Speaker 1 (03:30):
It's all right, hey, Paul, good to talk to you
as always. Thank you so much for talking to you
again soon. That's Paul Bloxham, HSBC's chief economist. For more
from Hither Duplessy Alan Drive, listen live to news talks.
It'd be from four pm weekdays, or follow the podcast
on iHeartRadio.