Official cash rate: To raise or not to raise? | Ryan Bridge TODAY

Added: 2026-05-27

[00:00:00]is I see out today day to day, of course. It is likely to be held steady.

[00:00:04]Right now, it's at 2.25%, which is where a number of economists believe it's going to stay when the Central Bank makes its decision at 2:00 p.m.

[00:00:13]Of course, it is the track, the forward track, where does it go after today, assuming it stays on hold, that people really care about, including Tony Alexander, independent economist with us live this morning. Tony, good morning.

[00:00:24]Morning, Ryan. So, when do you think cuz I mean there's a lot of pics the market was saying 2 weeks ago today it would go up.

[00:00:31]>> Yeah. Uh and now they've pulled back from that. When do you think they'll actually start hiking? Very late this year. I think they'll leave it as as late as humanly possible given, first of all, all the uncertainty out there about, you know, oil prices and the feed-through into inflation uh generally, plus also the established tendency for our Central Bank to tighten too late each cycle, then tighten too much, then they loosen too late, and then they loosen too much in Ireland.

[00:00:54]I'm not convinced that's changed yet.

[00:00:56]>> Okay. What about for people out there who are looking at fixing or um or more getting a new mortgage, how long do you fix for, do you reckon, at the moment?

[00:01:05]>> Yeah, most people are looking at 2 years, and personally I'll be looking either the year or maybe the 3-year time period. There's just massive uncertainty about what inflation is going to do, not just because of the war um in Iran, but also because it looks like the Reserve Bank took the cash rate too low last year at 2.25%.

[00:01:22]Um you know, subsequently we've seen inflation come out about 0.8% higher than they were expecting with only 0.1% of that attributable to the war in fact.

[00:01:30]So, you know, they'll be a bit cautious I I think regarding you know inflation going forward. I think they're going to wait for some time, and yeah, I'd look in the 2- to 3-year area.

[00:01:38]>> Okay. You did say to us, didn't you, a little while ago that we should fix for five.

[00:01:42]>> Yep. Yep.

[00:01:43]>> Which would have been a good idea. Well, I was a strong advocate. Well, first of all, over uh 2020-2021 when it was uh 2.99%.

[00:01:50]That's not relevant now, but from about the middle of October through to I think it was early January this year, the 5-year rate was still below 5%.

[00:01:57]>> It was. It was a gimme. It was a beautiful rate really on in hindsight, wasn't it? Looking where the world is now.

[00:02:04]Um so, what about that two-year special rate that people love to jump at? It's actually gone up from my calculations by about 3/4 of a percent on average since the end of last year anyway, even though the OCR hasn't. Is it likely we will see rates continue to go up even if the OCR doesn't move?

[00:02:19]>> Well, yeah, look, let's get this week out of the way, the OCR out of the way, the budget out of the way. The banks are going to be looking at their books and uh and recognizing that their margins on fixed-rate lending are actually about 0.2 to 0.4% below average. So, quite frankly, next week I wouldn't be surprised to see the mortgage rates go up slightly even without any change in the in the cash rate.

[00:02:39]>> Right. How much do you reckon? Uh I think they'll be fairly tentative the banks initially. They're just figuring out how this housing market is changing away from investors towards first-home buyers. Maybe just a point one, a point one five. And if it's not next week, it'll be the week after, or maybe the week after that. But the pressure is there. Cameron, have you been watching what's happening in Australia with the capital gains tax, the negative gearing changes, and what it's potentially going to do to one, their prices? Not much.

[00:03:04]Yeah. And B, they're talking about the fact that you get all these people crowding into affordable housing areas, the investors going in there. So, it would have the opposite of effect of what they wanted. What did you make of all of that? Yeah, first of all, my name is Tony. Oh, sorry.

[00:03:17]What What I'm going to let you get away with that.

[00:03:19]>> Forgive me. What did I call you?

[00:03:21]>> [laughter] >> Uh never mind. Uh yeah, the Aussie housing market is tight. The vacancy rate for rental property is only about 0.7% nationwide. So, the natural pressure is upward, the construction costs are rising. In places like Queensland, they've got all their Olympic facilities to build as well, so that's going to place extra upward pressure on on prices. And yeah, for the investors and first-home buyers, they they feed in the same sort of pool, the same price range. And with the 5% um deposit scheme, which is now available for people, it's adding some extra upward pressure on prices as well. So, you know, when Kiwis are moving to Australia, just keep in mind you're not moving to an easy housing market.

[00:03:55]>> No, absolutely not. Far from it. And I know you do regular surveys with property investors here. Are they worried about the potential for the interest deductibility coming back if Labour gets in? Is that kind of something they're flagging with you?

[00:04:08]>> Yeah, there are concerns about that. For the moment, their bigger concerns are about the cost of insurance and council rates, of course. Um, in particular, they're still finding it difficult to get a good tenant. And of course, people have to remember we've got a lot of baby boomers, old people who had bought, you know, a few decades ago, and now looking to sell their property to finance their retirement, which is much more expensive than anyone ever expected.

[00:04:29]>> Yeah, good point. Tony Alexander, lovely to have you back on the show this morning. Thank you very much for being with me. Independent economist Tony Alexander with us.