The Country 04/06/25: Ben Picton talks to Jamie Mackay

It’s Acronym Day, and Rabobank’s Senior Macro Strategist comments on falls in the OCR and GDT, and the OECD slashing its annual growth report for the world economy.

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Everyone at Rabobank has a fancy title, and this man
is no exception. His name is Ben Pickton. He's a
senior macro strategist. That sort of means he's the chief economist. Ben.
Since we've last chatted, we've had a budget, we've had
a twenty five zero point two five percent cut in
the OCR and we've had a disappointing GDT auction overnight.

(00:21):
The world is starting to call its heels economy wise.

Speaker 2 (00:26):
Yeah, good a Jamie, it's good to chat again.

Speaker 1 (00:29):
Yeah.

Speaker 2 (00:29):
I think it's fair to say that that is probably
the case. We're starting to see some growth downgrades flowing
through from the likes of the OECD. That's probably no
surprise given all of the uncertainties around the impacts of
TASS and the expected flow through to the supply side
of the economy from that. So we are seeing growth downgrades,

(00:50):
and when you have weaker growth around the world, it
probably means that there's going to be slightly less bid
for commodities. Maybe we're seeing that reflected in the GDT overnight.

Speaker 1 (01:02):
Well, let's have a look at that OECD report. They've
slashed the annual growth report for the World economy and
they're blaming Trump's tariffs there, especially in the US. Growth
in the US this year was predicted to be two
point two percent now one point six percent. There's just
less money in the world's biggest economy, China, interestingly, is

(01:24):
predicted to go down from four point eight percent to
four point seven percent comparatively. That's a good result, but
we've got to remember China's coming off, coming down from
a very high bar.

Speaker 2 (01:37):
Yeah, that's right. It's interesting some of those growth projections
around the United States because the data flow out of
the US recently has actually been reasonably strong for most
of the data. We do have a pretty important number
that's coming out at the end of the week, which
is the US non Farm Payrolls report. That's effectively the
jobs report for the USA, and it will maybe give

(01:59):
economists arond the world a little bit more of an
insight into whether this recession that lots of people have
been expecting in the USA is really on the way
or not. But yes, overall, if you've got slower growth
in the USA and slower growth in China, they are
the two largest economies in the world, there's going to
be less economic activity overall, and that presents some headwinds

(02:22):
for our export performance in this part of the world.

Speaker 1 (02:25):
The good newsers interest rates are dropping. The banks here
are starting off a bit of a mortgage war. How
low can these rates go? OCR dropped to three point
twenty five percent. We know there's another cut or twenty
five basis point cut factored, and could it go lower
than that if the world economy slows too much?

Speaker 2 (02:45):
Yeah, so it certainly could, and itthing's possible. Our baseline
forecast is that we think that three percent is the bottom,
So we've got one more cut penciled in. We previously
had that in our forecast for July that we've pushed
that back to August now because the signal from the
RB and Z last week certainly seemed to be that

(03:07):
they think that they're pretty close to the end of
the cutting cycle. We had a bit of an extraordinary
circumstance where usually the decisions on the OCR are taken
by unanimous consent, but this time around they actually voted,
so there was a five to one split in favor
of a twenty five basis point cut. So one member

(03:29):
of the Monetary Policy Committee couldn't be convinced by all
of the others that cutting rates was the right thing
to do in May. So that's an interesting signal in itself.
So we think three percent, given what we know today,
is probably the bottom. But there's a massive amount of
uncertainty out there surrounding what the impact of tariff's will be,

(03:49):
what that will do to New Zealand's export performance, and
if the situation ends up being worse than what we
currently expect, there's certainly scopes for more cups.

Speaker 1 (04:01):
You won't have seen the latest Federated Farmers Banking survey,
but it's been good news for Rabobank. You've come out
kind of on top, and certainly when it comes to
overdraft rates you're doing a hell of a lot better
than some other banks shall remain unnamed.

Speaker 2 (04:16):
Well, that's great news. I haven't seen those results, but
I'll put it out there and say I'm never surprised
when rabou Bank does well and these sorts of things.

Speaker 1 (04:25):
You would say that, Ben, you are coming over to
New Zealand next week for Field Days and you're going
to be one of the keynote speakers along with Finance
Minister Nikola Willis at the Rabobank client breakfast on Thursday morning.
Looking forward to listening to what you have to say.

Speaker 2 (04:40):
Yeah, I am coming over, so I'll be there in
the tent on Thursday morning. Really looking forward to it.
I was at Sealed Days last year and it was
a fantastic event, so it'll be good to be there
again this year and on the panel with the Minister.

Speaker 1 (04:55):
That's breakfast sorted for me on Thursday morning after a
big night out on WEDNESDA Day, No doubt on the
tron have been picked and I will see you then to
the Dam