October 7, 2025 • 6 mins
Today's OCR cut probably won't be the last in the current cycle, according to new claims.
The Reserve Bank's Monetary Policy Committee agreed to cut the cash rate 50 basis points to 2.5 percent.
They expect the tough economic conditions to stop inflation getting too high.
NZ Herald Business Editor at Large Liam Dann says there's definitely scope for at least one more cut.
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Speaker 1 (00:09):
You're listening to a podcast from News Talks'd be follow
this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
The Reserve Bank has cut the OCR fifty basis points,
taking it from three percent to two point five percent.
For analysis, we joined once again by a New Zealand
Hero Business Editor at Large, Liam Dan Happy days ly
very exciting.
Speaker 3 (00:28):
Yeah, well, I mean, you know, something happened. Yeah, it
feels exciting, doesn't it.
Speaker 4 (00:33):
Yeah.
Speaker 5 (00:33):
It feels like some sort of positive decision, even though
it suggests that we're in a bad state.
Speaker 1 (00:39):
Yeah.
Speaker 4 (00:39):
Yeah, I feel like people are crying out for that
if the government's listening, you know, that sort of that
sort of vibe.
Speaker 1 (00:45):
Yeah.
Speaker 3 (00:45):
I mean, let's.
Speaker 4 (00:46):
Remember that there are probably some listeners who have their
mortgage paid off or don't have a mortgage and have
some money in a bank and bank deposits going.
Speaker 3 (00:53):
Those people are coming through on the nine two nine
two around our woos.
Speaker 4 (00:55):
So it's important to mention them. But I guess in
terms of putting money back in the pockets of a
large chunk of New Zealand, this will do that. The
Monetary Policy Committee talked a lot about inflation risks and
then sort of talked about why they could look through them.
So they did warn that, you know, inflation is currently
(01:17):
two point seven, might go to three, might even go
above it. And so they really had to sort of
make the case that they think things like food prices
and power prices and the rates and so on will ease,
and that they're confident that there is what they call
enough spare capacity in the economy, which what we would
say is the economy is stuffed enough to mean that
(01:41):
inflation will keep coming down.
Speaker 5 (01:43):
So a lot of people, myself included, was saying fifty
points should have been the amount last time, including members
of the Monetary Policy Committe. Obviously they were unanimous last time.
So were they slow? Yeah, did they miss a trick.
Speaker 4 (01:59):
Maybe, you know, like they don't always get it right,
And part of it is, I mean it certainly that
second quarter was uglier than people thought. But they did
actually say that they haven't adjusted their you know, that
ugly second quarter GDP minus zero point nine. They say
they haven't adjusted their view on that as much as
(02:21):
they might have because there is some weird accounting stuff
in that they think it will reverse out. And they
said a few positive things about the recovery getting underway.
Did they get it wrong?
Speaker 3 (02:33):
Yeah? Probably, But I mean.
Speaker 4 (02:35):
With hindsighth it's not for you that because you called it,
but you know, they do have to look at inflation
quite seriously. But I think what's certainly what's happened since
that last call is there's been nothing, nothing, much to
make them feel more heartened that the economy is coming
back on its own. They feel like it needs that
fuel and Genetah.
Speaker 2 (02:52):
Yeah, just on that inflation question, I mean, isn't it
the case now that in general, we're older, we're wiser,
We're not going to be going out spending to the
same level that we were when inflation started a skyrocket.
It's just not those same dangers exist in the economy
that is going to see those levels again.
Speaker 4 (03:09):
I would like to think that, but I sort of
almost can remember even in that post COVID phase, people
going oh, well, this is different, this is going to
be a short term inflationary spike. We can look through
this one, and it just kept going and going. So
you have to be a bit careful, you know, and
you are always vulnerable to you know, we still don't
know quite what the final impact of tariffs and things
(03:31):
will be whether that's inflationary or the opposite, because you know,
we might be getting cheap goods out of China and things,
but some of those big things, I think power prices
should start to ease, or at least the rate of
increase will ease. Food prices we've already seen, you know,
dairy prices coming down. I think you'll start to see
butter come down in the supermarket finally, and so that
(03:52):
should ease. And then the more core inflation in the economy,
which is, you know, the amount we pay each other
for services and get things done. You know that's that's
coming off because people basically are more desperate for work. Then,
you know, that's what they mean by spare capacity. We're
just not running. The economy is not running at full
steam by any stretch.
Speaker 3 (04:11):
How much lower can they go? The Reserve Bank must
be running out of wiggle room pretty soon.
Speaker 4 (04:15):
Well, it's not bad. I mean two point five they
could go. Well, they've implied that they'll go to two
point two five and that's sort of priced and expected
by the end of the year. They could go to two.
If things don't really pull up, they could go to zero.
They could go to Actually, you know, if you look
at what Sweden did in like the two thousand and
(04:36):
sixteen era or something like that, you can go negative,
which it gets very very weird. They start paying you
to take money.
Speaker 3 (04:43):
I think, yeah, what's stagflation.
Speaker 4 (04:45):
Stagflation, Well, that is when you've got the two worst
things in the economy happening at once, which is higher
unemployment and higher inflation. And we've kind of got a
little bit of that at the moment, and you don't
you know, that's a bad place to be because you'd
like to think the Reserve Bank can sort of move
the lever to pull one up and one down when
(05:05):
both are you know, when both are happening at once,
that is pretty ugly because dropping the dropping the ocr
does probably help inflation get a foothold.
Speaker 2 (05:15):
Yeah, early early days. At the moment, it's only released
forty minutes ago, but any word from the bank shit
about dropping some of those deposit rates, those interest rates
a little bit further.
Speaker 4 (05:26):
I haven't seen anything yet. I would say they did
move a little bit in advance of this. We saw
some of the one year and two year fixed rates
come down, so we might not see the fixed move
too fast. Until I get a bit of a feeling
the market. It's a feeling for where things go next.
Floating rates should move quickly and we should start to
see that come through. Sometimes the banks are quicker with
(05:49):
those press releases. I don't know. They must be here, yeah.
Speaker 2 (05:53):
Yeah, breather, yeah, absolutely, Thank you very much. Liam. There's
a bit of excitement out there in the newsroom, so
we'll see what happens over the next quarter.
Speaker 4 (06:02):
But great to get your analysis as always, good stuff.
Cheers guys.
Speaker 2 (06:04):
That is Liam Dan New Zealand Heeral Business Editor at
Large and just repeating that news. The Reserve Bank cut
the official cash rate fifty basis points, taking it from
three percent to two point five percent.
Speaker 1 (06:15):
For more from newstalkst B, listen live on air or online,
and keep our shows with you wherever you go with
our podcasts on iHeartRadio.
You're listening to a podcast from News Talks'd be follow
this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
The Reserve Bank has cut the OCR fifty basis points,
taking it from three percent to two point five percent.
For analysis, we joined once again by a New Zealand
Hero Business Editor at Large, Liam Dan Happy days ly
very exciting.
Speaker 3 (00:28):
Yeah, well, I mean, you know, something happened. Yeah, it
feels exciting, doesn't it.
Speaker 4 (00:33):
Yeah.
Speaker 5 (00:33):
It feels like some sort of positive decision, even though
it suggests that we're in a bad state.
Speaker 1 (00:39):
Yeah.
Speaker 4 (00:39):
Yeah, I feel like people are crying out for that
if the government's listening, you know, that sort of that
sort of vibe.
Speaker 1 (00:45):
Yeah.
Speaker 3 (00:45):
I mean, let's.
Speaker 4 (00:46):
Remember that there are probably some listeners who have their
mortgage paid off or don't have a mortgage and have
some money in a bank and bank deposits going.
Speaker 3 (00:53):
Those people are coming through on the nine two nine
two around our woos.
Speaker 4 (00:55):
So it's important to mention them. But I guess in
terms of putting money back in the pockets of a
large chunk of New Zealand, this will do that. The
Monetary Policy Committee talked a lot about inflation risks and
then sort of talked about why they could look through them.
So they did warn that, you know, inflation is currently
(01:17):
two point seven, might go to three, might even go
above it. And so they really had to sort of
make the case that they think things like food prices
and power prices and the rates and so on will ease,
and that they're confident that there is what they call
enough spare capacity in the economy, which what we would
say is the economy is stuffed enough to mean that
(01:41):
inflation will keep coming down.
Speaker 5 (01:43):
So a lot of people, myself included, was saying fifty
points should have been the amount last time, including members
of the Monetary Policy Committe. Obviously they were unanimous last time.
So were they slow? Yeah, did they miss a trick.
Speaker 4 (01:59):
Maybe, you know, like they don't always get it right,
And part of it is, I mean it certainly that
second quarter was uglier than people thought. But they did
actually say that they haven't adjusted their you know, that
ugly second quarter GDP minus zero point nine. They say
they haven't adjusted their view on that as much as
(02:21):
they might have because there is some weird accounting stuff
in that they think it will reverse out. And they
said a few positive things about the recovery getting underway.
Did they get it wrong?
Speaker 3 (02:33):
Yeah? Probably, But I mean.
Speaker 4 (02:35):
With hindsighth it's not for you that because you called it,
but you know, they do have to look at inflation
quite seriously. But I think what's certainly what's happened since
that last call is there's been nothing, nothing, much to
make them feel more heartened that the economy is coming
back on its own. They feel like it needs that
fuel and Genetah.
Speaker 2 (02:52):
Yeah, just on that inflation question, I mean, isn't it
the case now that in general, we're older, we're wiser,
We're not going to be going out spending to the
same level that we were when inflation started a skyrocket.
It's just not those same dangers exist in the economy
that is going to see those levels again.
Speaker 4 (03:09):
I would like to think that, but I sort of
almost can remember even in that post COVID phase, people
going oh, well, this is different, this is going to
be a short term inflationary spike. We can look through
this one, and it just kept going and going. So
you have to be a bit careful, you know, and
you are always vulnerable to you know, we still don't
know quite what the final impact of tariffs and things
(03:31):
will be whether that's inflationary or the opposite, because you know,
we might be getting cheap goods out of China and things,
but some of those big things, I think power prices
should start to ease, or at least the rate of
increase will ease. Food prices we've already seen, you know,
dairy prices coming down. I think you'll start to see
butter come down in the supermarket finally, and so that
(03:52):
should ease. And then the more core inflation in the economy,
which is, you know, the amount we pay each other
for services and get things done. You know that's that's
coming off because people basically are more desperate for work. Then,
you know, that's what they mean by spare capacity. We're
just not running. The economy is not running at full
steam by any stretch.
Speaker 3 (04:11):
How much lower can they go? The Reserve Bank must
be running out of wiggle room pretty soon.
Speaker 4 (04:15):
Well, it's not bad. I mean two point five they
could go. Well, they've implied that they'll go to two
point two five and that's sort of priced and expected
by the end of the year. They could go to two.
If things don't really pull up, they could go to zero.
They could go to Actually, you know, if you look
at what Sweden did in like the two thousand and
(04:36):
sixteen era or something like that, you can go negative,
which it gets very very weird. They start paying you
to take money.
Speaker 3 (04:43):
I think, yeah, what's stagflation.
Speaker 4 (04:45):
Stagflation, Well, that is when you've got the two worst
things in the economy happening at once, which is higher
unemployment and higher inflation. And we've kind of got a
little bit of that at the moment, and you don't
you know, that's a bad place to be because you'd
like to think the Reserve Bank can sort of move
the lever to pull one up and one down when
(05:05):
both are you know, when both are happening at once,
that is pretty ugly because dropping the dropping the ocr
does probably help inflation get a foothold.
Speaker 2 (05:15):
Yeah, early early days. At the moment, it's only released
forty minutes ago, but any word from the bank shit
about dropping some of those deposit rates, those interest rates
a little bit further.
Speaker 4 (05:26):
I haven't seen anything yet. I would say they did
move a little bit in advance of this. We saw
some of the one year and two year fixed rates
come down, so we might not see the fixed move
too fast. Until I get a bit of a feeling
the market. It's a feeling for where things go next.
Floating rates should move quickly and we should start to
see that come through. Sometimes the banks are quicker with
(05:49):
those press releases. I don't know. They must be here, yeah.
Speaker 2 (05:53):
Yeah, breather, yeah, absolutely, Thank you very much. Liam. There's
a bit of excitement out there in the newsroom, so
we'll see what happens over the next quarter.
Speaker 4 (06:02):
But great to get your analysis as always, good stuff.
Cheers guys.
Speaker 2 (06:04):
That is Liam Dan New Zealand Heeral Business Editor at
Large and just repeating that news. The Reserve Bank cut
the official cash rate fifty basis points, taking it from
three percent to two point five percent.
Speaker 1 (06:15):
For more from newstalkst B, listen live on air or online,
and keep our shows with you wherever you go with
our podcasts on iHeartRadio.
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