Kelly Eckhold: Westpac Chief Economist on ahead of today's OCR announcement

Economists are expecting a 25 point basis cut from today's OCR announcement, but it could be the last one for a while.  

The Reserve Bank will announce it's decision at 2pm.  

Westpac Chief Economist Kelly Eckhold says last time around there were more notable arguments among the board.

He told Ryan Bridge at least one member of the board didn't want to cut last time around.  

Eckhold says with those sort of debates going around, it makes further cuts less certain. 

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Episode Transcript

Speaker 1 (00:00):
The cutting cycle continues. This morning, economists expecting the Reserve
Bank to cut the OCR twenty five basis points. That'll
get us down to three percent. We'll also get a
deeper look into inflation unemployment. There we get a monetary
policy statement, which basically means you get a bit more
meat on the bones. Kelly Ekol, there's Westpac chief economs
with me this morning. Good morning, good morning. So yes,

(00:20):
we will get a twenty five basis point cut today,
say most economists, how far? How many more you reckon?

Speaker 2 (00:28):
Well after that, I think they're going to be a
bit more cagey. I think they'll have a bias towards
looking at another ingistrate cut. But I think that's probably
about it for now. There might be another one in
them depending on how the data rolls between now and Christmas,
but I think that's probably about all we should reasonably

(00:50):
expect for now.

Speaker 1 (00:52):
They don't want to go too low and then and
risk over cooking later.

Speaker 2 (00:55):
Well, that's right. I mean, if you've looked at the
commentary in the Reserve Bank couple of meetings, you've said
there's been arguments on both sides of this. Now, there
was somebody who didn't even want to do the last cut,
and then there's a couple of others talking about, well
if we do a little bit more cutting, then we
put a bit more guard rails against weaker growth. We know,
when you've got those sort of debates going on, it

(01:17):
isn't a slam duck that you just keep on getting
our rates.

Speaker 1 (01:21):
That's the fact that we've got a temporary you know,
the Reserve Bank, and we've got Christian hawksby and there
the fact we haven't got a permanent replacement. Does that
mean that they'll be more cautious or is that just talk?

Speaker 2 (01:31):
Well, I think you should probably reasonably assume that they
can't tie themselves into a future strategy too much because
you know, if there's a new boss coming in a
couple of months, well they need to tell our a
little bit of room for them to work out what
they want to do. But you know, the data itself
also doesn't lendure just being too committed about what happens next,

(01:53):
because you don't know how things are going to evolve.
So hence that's why I think they should be just
a bit cagy.

Speaker 1 (01:58):
We've had positive signs from manufacturing and services just in
the last week, and they are you know, the high
frequency data that you talk about. Do you think these
are positive enough? Are we finally cracking the back of
this blip in our recovery?

Speaker 2 (02:15):
Oh? I think it's encouraging. I mean what we sort
of saw was some actually pretty decent growth right at
the start of the year. If you sort of were
talking to me about six weeks ago, would have looked
a lot more negative than that. Probably looks like it's
somewhere in the middle now, So we're expecting to be
back onto that kind of path of trend growth quite soon.

(02:36):
This sort of indicators have seen the last month or
so encouraging science that that's still a good view to have.

Speaker 1 (02:43):
Was reading yesterday that in order to hit the Reserve
Bank estimates for growth this year, the manufacturing and the
services indicators need to be fifty three. I mean, obviously
fifty and above is growing, and we had services still
below fifty but improving manufacturing and finally cracked it. To
hit those we need to hit fifty three. Is that true?

Speaker 2 (03:04):
Oh? I think that's a pretty rough estimate, to be honest, right,
I don't really abide by those sorts of numbers. A
few draw graphs of these sorts of things against growth,
you'll see that it's a rougher relationship than that. I mean,
if I look at where those purchasing manager indices are there,
if you average them out, then they're probably not too

(03:25):
far short of where they were in the first quarter,
and we got zero point eight percent growth in that quarter,
which is enough basically right now.

Speaker 1 (03:33):
Good stuff, Kelly, appreciate your time this morning. Kelly echoled
westpacchief economists.

Speaker 2 (03:38):
For more from earlier edition with Ryan Bridge. Listen live
to news Talks.

Speaker 1 (03:42):
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