Christian Hawkesby: acting Reserve Bank Governor says there's reasons to be positive following latest OCR cut

There's cautious optimism from the Reserve Bank Governor after cutting the OCR by 25 basis points this afternoon.

Christian Hawkesby says the economy's been a bit stagnant, but there's reason to be positive.

"We've lowered interest rates a long way now, we've sent out a pretty strong signal that we're willing to lower them further, as required, we've got other drivers of the economy - like high commodity prices."

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Episode Transcript

Speaker 1 (00:00):
Afternoon. The ocr has been cut. It's come down twenty
five basis points to three percent, and the new projection
is it'll be cut a couple more times to two
and a half percent. Now the Reserve Bank thinks we're
through the worst with the recession, but didn't agree amongst
themselves on how much to cut. Most of the committee
today voted for twenty five basis points, but two of
them voted for a double cut. Christian Hawksby is the
acting Reserve Bank governor high Christian good what makes you

(00:22):
think that the worst is over?

Speaker 2 (00:26):
Because we've got with lowered interest rates a long way now,
we've sent out a pretty strong signal that we're willing
to lower them further as required. We've got other drivers
of the economy like high commodity prices, and when you're
add that all up, we think that Q two was
a bit of a bit of a blippin. With that support,

(00:48):
we should be coming out at the other end around now.

Speaker 1 (00:51):
How long before it feels better though, because I've been
speaking to some people who are in business who think
it might not be until the start of twenty seven.

Speaker 2 (00:59):
Absolutely, you know, just acknowledge also that it's a real
two speed economy at the moment, and it does depend
on who you talk to what part of the country.
The regions are doing much better than the cities, particularly
Auckland and Wellington are doing it tough at the moment.
Some of the data is actually picking up in July,
so we are seeing some of that data pick up.

(01:22):
It might not feel like it's roaring through the middle
of this year, but by the end of this year
and into the beginning of next year, we think it
will okay.

Speaker 1 (01:31):
Do you think you made a mistake not cutting in July.

Speaker 2 (01:36):
No, we just you know, we're always reassessing the economy
and where things are at. We saw early signs, you know,
that things were faltering, and we sent to a signal
in July that although we didn't cut, we were open
to it.

Speaker 1 (01:52):
Shouldn't you have I mean, if you could see that
things were faltering and you've cut now, you should have
cut in July.

Speaker 2 (01:58):
The beauty of monetary policy as we meet every six weeks,
and that means, you know, we can change course, and
we've changed course significantly. In August, we'll put out an
o CR projection which is significantly down on May, and
that's really provided a strong signal that interest rates are

(02:19):
falling in there to support the economy.

Speaker 1 (02:21):
Were you in the camp twenty five basis points or
fifty basis points?

Speaker 2 (02:25):
We don't disclose who voted what, but as chair of
the committee, I speak to you know the outlock and
the risks and where we landed collectively.

Speaker 1 (02:38):
I think you've made a mistake not going for fifty.
Do you think I'm wrong?

Speaker 2 (02:43):
Oh? Look, we had two members who were in your
camp and their views were I think all of us
acknowledged that there is a lot of there's both upside
and downside risk around our central outloock.

Speaker 1 (02:56):
Tell me the upside risk, Christian, tell me what's the risk?
And having gone for.

Speaker 2 (03:02):
The risk is that Q two was an aberration, that
it's a bit of a blip the economy kicks on.
But also you've got to remember that inflation is rising
and we're projecting CPI inflation to be at three percent.

Speaker 1 (03:19):
Yes, but you know that you need to look through
it because what's happening to goldal economy will bring our
inflation down again.

Speaker 2 (03:26):
That yes, and you've got onto the argument for the fifty.
The argument to do even no change is the risk.

Speaker 1 (03:33):
No, never mind that I want you to tell me
why not fifty because fifty is obvious.

Speaker 2 (03:39):
Two of our members voted for fifty and their view
was around providing that strong signal and getting that kickstart.
The reason not to do fifty is that by doing
twenty five and signaling putting out a forward track that
actually puts interest rates down to two and a half.
We send out a strong signal, we get marked at

(04:00):
rates moving which they have. Market rates have lowered because
we've surprised the markets today, and then we meet in
six weeks time and things will go bigger, running faster
or slower than the sum. Just adjust to that.

Speaker 1 (04:13):
Here's the thing you're going to cut in six weeks,
So why not why not double cut today? This is
a fighting charms Christian. There are businesses falling over today
because of what is going on.

Speaker 2 (04:26):
It feels different in different parts of the country, and
I think if we had we set interest rates for
Auckland and Auckland only, they'd probably be lower than where
we are. But we have to set interest rates for
the for the whole country. There are some parts of
the country that are doing quite well, and so we
just have to look at that an aggregate.

Speaker 1 (04:48):
Christian, Thank you so much for your time and to
appreciate a Christian hawksby acting Reserve Bank Governor. For more
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