Christoph Schumacher

The conversation has shifted.

In the last meetings, it was all about keeping the OCR low.

In the April meeting for the first time, it wasn't about keeping it low.

It was about what might need to happen if inflation rises.

And our new Reserve Bank governor sort of hinted by saying, well, if there's a hike, it will be in 0.25 percentage point increases maybe every other meeting.

She said.

So the question is, when does it start?

Quite tricky to predict why, because we have a new reserve bank governor.

We have not had her make a decision about interest rate rises.

And if you go back in history,

Reserve bank governors had a specific characteristic how to deal with it.

We have some reserve bank governors who were very aggressive, who believed inflation needs to be nicked in the butt straight as it happens.

And we had reserve bank governors who were very late in raising and believed the market will regulate.

We haven't quite figured out what our new Reserve Bank governor will do simply because she's new to the job and had not had to raise the interest rate.

She arrived when the rate was at 2.25 and hasn't changed it.

So very hard to make a prediction how proactive the Reserve Bank now will be.

I don't think anyone would think we are not seeing a rise.

Maybe not in the next meeting, but probably for the second half of the year, I think is a pretty fair guess, especially if the inflation rate comes in for the second quarter at about 4.2%, which is the current forecast.

That's a bit more than just outside the band.

And I think we will see a response sooner rather than later.