October 9, 2024 • 4 mins
We chat to Brad Olsen economics commentator!
- Will the offical cash rate go back up?
- We test our economics knowledge...
- How to sound smart in the office talking about finance!
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Yesterday there was news. It's been all over the news
the last twenty four hours. A Reserve Bank cuts OCR
by fifty basis points. And I have had conversations with people,
and I'll be honest, I didn't really know what I
was saying about it.
Speaker 2 (00:13):
The general vibe you get is that it's a good thing, yes,
and I know that it stands for official cash rap yeah.
Speaker 3 (00:19):
Yeah.
Speaker 2 (00:19):
But other than that, I'm like, oh.
Speaker 1 (00:22):
So, we thought maybe we could ask some what we
think might be silly questions, dumb questions to someone who
knows all about it, and hopefully they can explain it
so we can all learn and we can all have
those conversations with a little bit more confidence than I've
had over the last twenty four hours.
Speaker 2 (00:36):
Brad Olson is a chief economist, and he knows what
he's talking about, and he is very good at explaining
things in movement's terms. Good morning, Brad, How are you well?
Speaker 1 (00:46):
You got We've got nice to talk to you a lot.
We've been struggling all morning wondering how to approach this
news about the OCR for the fact that we don't
really know entirely what it means other than people keep saying.
Speaker 2 (00:57):
It's good and we know that it stands for official
cash right, Yes.
Speaker 3 (01:00):
Yeah, I mean I've got a good, good solid start,
the good solid start we were.
Speaker 1 (01:05):
Going with, Okay, so please help us out. What's so,
what's happened yesterday? And really like just dumb it down
and then dumb it down some more.
Speaker 3 (01:13):
Okay. So effectively, the Rezono Bank didn't want people to
spend as much money because there's too much inflation when
all the prices kept going up and up and up,
so they raised the official cash rate because basically, the
official cash rate is the mortgage rate that your retail
bank pays, so as in your beans in there, the
OCO is their mortgage rate. So if then mortgage rate
(01:34):
comes down, then they can drop your mortgage rate that
you pay on your house. And that means that everyone can,
if they don't have to pay as much on their mortgage,
can spend a bit more money out there in the economy.
Speaker 2 (01:44):
I have never heard anyone explain it that clearly.
Speaker 1 (01:48):
Yeah, okay, so that's comes down, So this is good
news for people their own houses, right, and what about
Wihen you go like to buy things at supermarket things
like that doesn't mean prices will come down, or does
it mean that people maybe have more money in their
account more.
Speaker 3 (02:01):
That second option, And it's not going to be immediate, right,
the Reserve Bank cut the official cash rate yesterday, It's
not like everyone goes to refix their mortgage five minutes later.
So at some point over the next six, nine, twelve
months or so, people will go and refix their mortgage.
They'll refix it lower. Therefore they'll won't have to pay
quite as much as they did before on the mortgage.
They've got a bit more cash left so that they
(02:24):
can spend to the shops and do whatever else. Because
basically the Reserve Bank said, look, we were spending too
much and we were generating too much inflation. They raised interstrates. Therefore,
at the moment, we're now not spending enough and no
one is raising prices, so we've probably overcooked it too much.
On the other side, so now they're saying, actually we
need people. We want people to spend a bit more money.
They can go and spend a bit more, so we're
(02:45):
providing a bit more relief.
Speaker 2 (02:47):
Here's my question is that because inflation has come down,
it's now at three percent, which is quite low considering
what it has been everyone, and it's coming up to Christmas,
everyone is going to start spending a bit more money.
How volatile is it? Like, can OC then go back
up again?
Speaker 3 (03:02):
Technically it could very unlikely at the moment because realistically
the OC is still a lot above where it sort
of should be to just have sort of normal economic functions.
So it's still going to be limiting people. And I
think going into Christmas, people are going to be barging
hunting a lot because people are still still worried about
their jobs, are still worried about how high interest rates are.
(03:22):
Someone the other days so said they wouldn't get out
of bed for anything less than a seventy percent discount
at Brisco, So you know, like it's quite big to
get you to spend. So it's good news, but it's
not immediately like we're just going to go and run
to the shops and spend it up large. It's a
bit better than before, but it's not sort of rocket
ship to the moon.
Speaker 1 (03:39):
If we want some banter to say to people in
the office today, what's one line that will make us
sound like we're smart?
Speaker 3 (03:45):
Oh, what's what's your pick for Novembers? Osi rcut.
Speaker 1 (03:48):
Okay, oh okay, I love that.
Speaker 2 (03:50):
What's your peck?
Speaker 3 (03:51):
Yeah?
Speaker 1 (03:51):
What do they said to us?
Speaker 4 (03:52):
And what's your pack?
Speaker 1 (03:53):
That we it's tough, it's too hard to say at
the stage, or what do you think?
Speaker 3 (03:57):
Look, my my peck is fifty, but there's an outside
charge of seventy five, so much bigger cat to try
and stimulate that, we'll spitting again. They didn't really set
the pigeons.
Speaker 1 (04:06):
That's what I was thinking. I was thinking somewhere between
fifty and seventy when you mean yeah.
Speaker 4 (04:10):
Yeah, yeah, they really see the cadet four of the summarison,
I thought. But anyway, that was really that the cat
was getting into the pigeons. Then, Brad, thank you so
much for helping us out this morning. We really do
appreciate it.
Speaker 1 (04:20):
It's a good night to talk to you.
Speaker 2 (04:23):
There is a trouble in your households
Speaker 1 (04:26):
Not to do with the OC
Yesterday there was news. It's been all over the news
the last twenty four hours. A Reserve Bank cuts OCR
by fifty basis points. And I have had conversations with people,
and I'll be honest, I didn't really know what I
was saying about it.
Speaker 2 (00:13):
The general vibe you get is that it's a good thing, yes,
and I know that it stands for official cash rap yeah.
Speaker 3 (00:19):
Yeah.
Speaker 2 (00:19):
But other than that, I'm like, oh.
Speaker 1 (00:22):
So, we thought maybe we could ask some what we
think might be silly questions, dumb questions to someone who
knows all about it, and hopefully they can explain it
so we can all learn and we can all have
those conversations with a little bit more confidence than I've
had over the last twenty four hours.
Speaker 2 (00:36):
Brad Olson is a chief economist, and he knows what
he's talking about, and he is very good at explaining
things in movement's terms. Good morning, Brad, How are you well?
Speaker 1 (00:46):
You got We've got nice to talk to you a lot.
We've been struggling all morning wondering how to approach this
news about the OCR for the fact that we don't
really know entirely what it means other than people keep saying.
Speaker 2 (00:57):
It's good and we know that it stands for official
cash right, Yes.
Speaker 3 (01:00):
Yeah, I mean I've got a good, good solid start,
the good solid start we were.
Speaker 1 (01:05):
Going with, Okay, so please help us out. What's so,
what's happened yesterday? And really like just dumb it down
and then dumb it down some more.
Speaker 3 (01:13):
Okay. So effectively, the Rezono Bank didn't want people to
spend as much money because there's too much inflation when
all the prices kept going up and up and up,
so they raised the official cash rate because basically, the
official cash rate is the mortgage rate that your retail
bank pays, so as in your beans in there, the
OCO is their mortgage rate. So if then mortgage rate
(01:34):
comes down, then they can drop your mortgage rate that
you pay on your house. And that means that everyone can,
if they don't have to pay as much on their mortgage,
can spend a bit more money out there in the economy.
Speaker 2 (01:44):
I have never heard anyone explain it that clearly.
Speaker 1 (01:48):
Yeah, okay, so that's comes down, So this is good
news for people their own houses, right, and what about
Wihen you go like to buy things at supermarket things
like that doesn't mean prices will come down, or does
it mean that people maybe have more money in their
account more.
Speaker 3 (02:01):
That second option, And it's not going to be immediate, right,
the Reserve Bank cut the official cash rate yesterday, It's
not like everyone goes to refix their mortgage five minutes later.
So at some point over the next six, nine, twelve
months or so, people will go and refix their mortgage.
They'll refix it lower. Therefore they'll won't have to pay
quite as much as they did before on the mortgage.
They've got a bit more cash left so that they
(02:24):
can spend to the shops and do whatever else. Because
basically the Reserve Bank said, look, we were spending too
much and we were generating too much inflation. They raised interstrates. Therefore,
at the moment, we're now not spending enough and no
one is raising prices, so we've probably overcooked it too much.
On the other side, so now they're saying, actually we
need people. We want people to spend a bit more money.
They can go and spend a bit more, so we're
(02:45):
providing a bit more relief.
Speaker 2 (02:47):
Here's my question is that because inflation has come down,
it's now at three percent, which is quite low considering
what it has been everyone, and it's coming up to Christmas,
everyone is going to start spending a bit more money.
How volatile is it? Like, can OC then go back
up again?
Speaker 3 (03:02):
Technically it could very unlikely at the moment because realistically
the OC is still a lot above where it sort
of should be to just have sort of normal economic functions.
So it's still going to be limiting people. And I
think going into Christmas, people are going to be barging
hunting a lot because people are still still worried about
their jobs, are still worried about how high interest rates are.
(03:22):
Someone the other days so said they wouldn't get out
of bed for anything less than a seventy percent discount
at Brisco, So you know, like it's quite big to
get you to spend. So it's good news, but it's
not immediately like we're just going to go and run
to the shops and spend it up large. It's a
bit better than before, but it's not sort of rocket
ship to the moon.
Speaker 1 (03:39):
If we want some banter to say to people in
the office today, what's one line that will make us
sound like we're smart?
Speaker 3 (03:45):
Oh, what's what's your pick for Novembers? Osi rcut.
Speaker 1 (03:48):
Okay, oh okay, I love that.
Speaker 2 (03:50):
What's your peck?
Speaker 3 (03:51):
Yeah?
Speaker 1 (03:51):
What do they said to us?
Speaker 4 (03:52):
And what's your pack?
Speaker 1 (03:53):
That we it's tough, it's too hard to say at
the stage, or what do you think?
Speaker 3 (03:57):
Look, my my peck is fifty, but there's an outside
charge of seventy five, so much bigger cat to try
and stimulate that, we'll spitting again. They didn't really set
the pigeons.
Speaker 1 (04:06):
That's what I was thinking. I was thinking somewhere between
fifty and seventy when you mean yeah.
Speaker 4 (04:10):
Yeah, yeah, they really see the cadet four of the summarison,
I thought. But anyway, that was really that the cat
was getting into the pigeons. Then, Brad, thank you so
much for helping us out this morning. We really do
appreciate it.
Speaker 1 (04:20):
It's a good night to talk to you.
Speaker 2 (04:23):
There is a trouble in your households
Speaker 1 (04:26):
Not to do with the OC
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