Sharon Zollner: ANZ Chief Economist on the predicted cut to the Official Cash Rate

More interest rate cuts are on the horizon. 

The Reserve Bank expected to cut the Official Cash Rate again this afternoon. 

ANZ Chief Economist Sharon Zollner is tipping a 50 basis point cut to 4.75%,.  

She says it's what the market and most economists are predicting, and it’s become the default. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Right now, we're going to Sharon Zolner. This is the
ocr so big call today, all of our big banks
predicting fifty bases point cut, bringing it to four point
seventy five percent. There are also some slightly differing views.
Greg Smith from Devon Funds Management wants to see two
seventy five point cuts that'd be one and a half
percent by Christmas. So what's going to happen? Do we think?

(00:22):
Sharon Zolner, the Ain's and chief economists with me this morning. Sharon,
good morning, good morning, Good to have you on the show.
What do you reckon about the idea of a bigger
cut than fifty, Well.

Speaker 2 (00:35):
It's rapidly become the default expectation. Actually, interestingly, back in August,
if you look at what the Reserve Bank then thought
they would do, they thought they'd cut twenty five. That
was implied by their forecasts, and they haven't actually been
a huge number of data supply since then. However, was
nonetheless ended up in a situation with I think on
the Bloomberg survey, eighteen out of twenty two economists were

(00:56):
picking a fifth point cut, no one was picking a
seventy five and the market is certainly pricing accessity, so
that's certainly become the default. And the single piece of
data that was most important there was the Quarterly Business Opinion,
which showed sharply lower pricing intention and other other data
that would suggest that the reserve thing not necessarily will

(01:16):
be revising the inflation forecasts down particularly, but that they
can have more more confidence in them, more confidence that
the job is done.

Speaker 1 (01:23):
Yeah, because that report that you're talking about, it said that,
you know, activity and employment was weak currently, but the
outlook people were feeling optimistic about the future. But the difference,
the gap between the reality now and the promised land
of the future is aging or waving his magic wand
isn't it.

Speaker 2 (01:41):
Yeah, well, certainly, and our business monthly Business survey we
saw things lift the minute rates started to fall. It's
in dramatic in your business confidence at a ten year high.
Of course, it's one thing to say you think things
will be better in the future. It's it's another to
actually act on those expectations and higher someone or make
an investment. So so the bar is a bit higher
for that. But I mean, it wouldn't have problem necessarily

(02:02):
if the economy did rebound faster than expected. It would
be great as long as that fall and inflation and
inflation staying within the band is baked in. But looking
at that quarterly surveys opinion, the Reserve Bank will have
more confidence that there's lots of their capacity in the
labor market and businesses and the machine sitting idle, et cetera,

(02:24):
so that we could have a list of growth without
inflation igniting. That said, it's not risk free because in
both surveys costs were still very very high. Firms are
saying that their margins has been squeezed. But there is
a scenario still where the economy rebounds quickly and firms
use that recovery and demand to push through the price increases.

(02:44):
Have actually been wanting to do for ages that haven't
been able to yees.

Speaker 1 (02:51):
Okay, So final question, is there a scenario here? Is
there a possibility where the retail banks have already priced
in a fifty point cut fifty basis point cut, the
Reserve Bank comes out with twenty five and retail banks
have to increase mortgage rates again.

Speaker 2 (03:11):
Well, twenty five point cut would be the surprise now,
and you would certainly see the swap rates the wholesale
rates left I think on the day, and then over
sort of the one year horizon because it's baking in
quite a lot of cuts. But whether it's a mortgage
rates rise though, I think I think there's still enough
of a buffer there that banks have been sort of
waiting to see. Most banks so waiting to see what

(03:33):
happens today. So obviously I'm not part of those decisions,
but you'd have to I think you'd have to see
a bigger surprise than just at twenty five, because even
if they just cut twenty five, they're still likely to
concern that they're going to keep cutting in the future.
You need to see something quite extreme in the rhetoric,
I think, suggesting that they're getting very nervous about inflation.
That would definitely be one out of left field. That's

(03:54):
not something anyone's anticipating.

Speaker 1 (03:55):
Sharon, Zolna A and Z thanks so much for your time.
Just gone seven away from six. That announcement due out
at two o'clock this afternoon. For more from News Talk
st B, listen live on air or online, and keep
our shows with you wherever you go with our podcasts
on iHeartRadio.