Podcast Appearances
know yeah argues for for flatter official cash rate flatter mortgage rates you know yes there's other influences on mortgage rates what's going on in global markets that's that's i think seen a couple of banks at least raise their raise their mortgage rates in the past couple of days but yeah if you want to take a if you've got debt and you want to take a a positive view of this the positive view is that it you know argues for for lower for longer interest rates
so um yeah i think i mean do we do we pay too much attention to gdp numbers probably not it's it's kind of old news um but there is that sort of silver lining in there for people who who want interest rates to stay low i mean in terms of what the reserve bank does well yeah we'll see what what comes out over the next couple of days um you know like i say they've been pretty clear all along i think the speaker pass spare productive capacity out there so not necessarily going to be in any rush to raise the official cash rate and of course
there's nothing they can do about higher oil prices and higher imported petrol prices and all of that anyway.
So those sort of so-called first-round inflation effects, what we're all paying now at the petrol station, that's something they simply can't do anything about.
So that fact, as well as the spare capacity I think is out there, I guess for me just means it's, you would hope for now...
a sort of yep we're not losing sight of inflation for sure you know we're still worried about it but we don't necessarily think there's a need to rush either you would you would hope that's the the sort of communication message that that came through and actually that was sort of the message at the last monetary policy statement even before this this whole thing kicked off they acknowledged yep we're probably gonna have to raise the official cash rate at some point but we're not gonna do it yet so
know maybe that line sticks around a lot more uncertainty around that now of course but yeah that you think underlying it all is is hopefully that message so um yeah it's kind of where i sit
Yeah, I mean, in lieu of having a big sort of massive spreadsheet model of the economy and how all these things interact and what the weightings are, I've got a spreadsheet in my head that's kind of a bit of a gut feel.
I mean, yeah, there's a few things going on there.
I mean, the second round inflation effects, people might start to hear that mentioned.
It's all about, it's not just that straight up immediate, hey, price at the petrol station went up.
It's
that's sort of direct first round impacts that that's what the reserve bank can't control they're not necessarily worried about i mean they're going to be worried about it but um only to the extent that that flows through to lasting so-called second round effects which is where a trucking company to you know to get goods around the country that they're paying more for fuel as well so they're going to have to raise their selling prices that feeds into input costs for somebody else you know a supermarket has to charge more because it's costing them more to get the goods in um
farmers you know diesel prices going up for that production I mean farmers are largely price takers I guess they can't really set prices but still across the economy that second round impact is the wider you know that flow through from higher fuel prices what that does to costs of production and then how that feeds through to kind of more lasting inflation manufacturers they use energy as well so their costs are going up they're going to have to pass that on if they can I mean in a
in a sluggish economy there's there's a limit to how much price rises can be passed through but you know all these things get really circular in this kind of this interaction thing so so yeah that the second round impacts are all it's it's that it's that that flow through to the wider economy wider production costs how that comes through to inflation and i guess also how it impacts inflation expectations you know if people are thinking gee
this thing's going to last for a while petrol prices are going to be higher for a while diesel costs are going to be higher for a while you know i'm going to have to actually pass this through i can't absorb it i'm going to have to pass it on so you know the inflation kind of becomes a bit more embedded and and that's where
the Reserve Bank will get more concerned about it if it's passing through to what people are expecting as well, because that plays a role in what the Reserve Bank does.
But yeah, at the same time, if things are costing more, if you're paying more for your petrol, if firms are paying more for petrol, diesel, all of this, there's less discretionary money available for other things.
I mean, households are going to have to pay more at the petrol station.
There's less to spend at the grocery shop or