haidi: welcome to "daybreak: australia." we are counting down to asia's major market opens. annabelle: the top stories this hour, asia's chip and tech stocks sent to take the spotlight after nvidia delivers a bullish sales forecast, bolstering confidence in the ai frenzy. haidi: anglo american agrees to talks with bhp, opening the door to what could become the biggest mining deal in over a decade. annabelle: plus, we speak would live with rbnz governor adrian orr about the central bank's office hold and why he is still worried about sticky inflation. haidi: that is a big conversation as we continue to talk about risks when it comes to economies deciding when the first easing move will comp it we have more data coming through across the bloomberg and it australia pmi. the may flash manufacturing pmi coming in unchanged.

still in the contraction territory. the composite number coming in at 52.6. also that a bit of weakness from the previous reading of 53. the preliminary services number maintaining a little bit of strength above 53, but still some softening from the previous reading. we have seen recently the rba resuming that conversation about rate hikes potentially at its previous may policy meeting before deciding to stand pat. on these balance of risks we are seeing some signs that economic indicators are starting to soften after a string of tightening. let's look at how all of this is feeding through as we look at the futures picture across australia. seeing quite a bit of weakness expected. we have sydney futures down by about 1%. even as of course we have seen the big risk factor of what we saw across markets this week, the nvidia forecast shattering estimates. the ai boom still intact.

some of these concerns about the fed minutes showing higher for longer narrative remains very much on hold. we are seeing a bit of a struggle for sentiment today. new zealand looking pretty flat. chicago net -- and nikkei futures. watching the chip related sectors to outperform. china looking weaker as well. annabelle: it really is that focus on nvidia and the performance we are seeing after-hours as well. you can see this climb of around 6%. you mentioned some key takeaways from the numbers so far, really strong sales, a bullish outlook. we have a stock split coming. we have a lot of coverage coming up with our team, but let's take a look at what happened in the intraday broader session. futures are just coming online this morning. and you are seeing them again modestly higher but fairly range bound. intraday, it actually was a story of declines that came through. we had the fed meeting minutes coming out telling us that officials, no rush at this point to cut rates.

we saw the two-year yield climbing somewhat. the dollar a little higher as well. but the action, very much what is happening in after-hours today. yes, nvidia. another one is what is happening with live nation. we're seeing that stock dropping as much as 10%. we do understand the u.s. justice department is seeking to break up live nation and ticketmaster. that is a bloomberg scoop and we will have more details on that just ahead. but really, that emphasis and attention, everything over the course of this week comes back to nvidia. bloomberg intelligence says the company's results prove the continued strong demand momentum for its ai chips. our senior semiconductor analyst joins us now for more. we know the expectations going into this number was sky high. yet again the company seems to have been able to meet those or even exceed them. kunjan: this has become the new norm now. we did expect exactly what

happened. however, i want to point out the magnitude of the beat this time was a bit lower than what we have grown accustomed to seeing, in the high single digits or double digits. but we think the capital return to shareholders, 10 to 1 stock split, 150% increase in dividend, and the cash flow increase, should offset if there were any concerns around growth. haidi: how much longer can this extend? just every time we are more than impressed by the stock and by the company and by the outlook. is this sustainable? kunjan: from the visibility we have, it looks like it is sustainable. again, it is very hard. you don't see such stories, at least i have not seen a story in this sector for the past 20 years. so, something very unique. we are going from visibility year round. at this point, the demand

signals continue to be strong. the top four cloud and hyper scalars have increased spending for calendar 2024 by 44%. those make up about 40% of nvidia's revenue. if you just focus on those were spending almost 50% or more this year, that alone could drive this rally. we are also seeing significant demand outside of this cloud customer base coming from other companies, which the company positively guided to the high single billion dollars this year. a lot more demand from other areas coming and supporting this continuation of growth. so, for as much as we have visibility into 2025 and 2026 fiscal, we think this can continue. annabelle: it is that question of where you're at in the demand cycle. this is something jensen wong has been speaking about in the earnings call if we take a listen to what he said. >> the next industrial

revolution has begun. companies and countries are partnering with nvidia to shift to shift the trillion dollar installed base of traditional data centers to accelerated computing. and build a new type of data center, ai factories, to produce a new commodity, artificial intelligence. annabelle: it is not just about of course the focus on the data centers. what else are we hearing about the other business divisions and these new chips it is bringing onto the market? kunjan: like i said, growth you are starting seeing -- the next chip, the architecture which we expect to sustain this growth rally, is not even really a chip, it is a system, it is a platform solution.

don't forget, there is a big piece of software offering that they have which has just started. but we expect almost 100% growth in that business as well which will start showing up in significant billions of dollars of revenue in the next two to three years. haidi: there was talk about new pipeline offerings. is there any indication that there is a risk of self cannibalization for its products if people are more interested in what is to come? kunjan: i would not say it is self cannibalization. i would say that there could be some timing shifts, where if a customer had an option to wait a couple of quarters to get the more better performing product, they might decide to do so. however, the supply for all products remain constrained, so they can easily ship that product to a customer willing to take that right now. so it could cause an intermediate short-term time

shift, but it should not cannibalize any of their use. annabelle: that was our bloomberg intelligence senior semiconductor analyst kunjan sobhani. let's get more on the broader market analysis and a key takeaways for investors about the nvidia numbers. let's bring in our guest, deborah cunningham, joining us in the hong kong studio. as we were saying, there were so many expectations for a lot of investors that we would see if further rally perhaps if nvidia managed to impress the market. and also perhaps that it could broaden out to other sectors as well. what is your view on that? deborah: i think my slightly exceeding expectations and getting to a point that may be is lowering some of the expectations going forward, it allows for the market continued -- to continue on its pace, but i don't know if it causes a huge rally going forward.

i know that certainly the outlook from an ai perspective and nvidia and other tech companies allows for amazing assumptions of growth, given this is a sector that is going to be impacting the education sector, the defense sector. i'm in the asset management sector, we have various uses we are using, business, social. so i think there is plenty of room to go. i am not sure it is today, based on these earnings. annabelle: what do you see testing then? if you are saying the rally will not be sustained, what drives it weaker? do you see weakness in the consumer sector? deborah: i am not saying it will not be maintained. i don't think it will go too much further. i think it will be maintained at the levels it is now. expectations could be higher if the u.s. economy continues to perform quite well.

when you look at the employment situation, there is no real thought process that that will be slowing down at any point in the near term. inflation, the fed's notes just came out that basically confirmed higher for longer for a period of time, that where we are is going to be the place we stay at, that is restrictive enough. they don't need to go higher or lower because inflation still has some stickiness. so i think we are looking more for, at least in the initial timeframe, maintenance rather than continued outperformance. haidi: maintenance, does that also include perhaps more rotation out of the rate sensitive sectors? and maybe taking a closer look at value? deborah: definitely value we think is on the upswing. it was beaten down very far for a long period of time. we're now to the point where we

think that turnaround is solid and will continue. so yes, we do think that value in a broader base of stocks may be what sustains and is providing the next leg forward. haidi: you say cash remains king. how much would there be in a balanced portfolio at this point for cash? deborah: when we were in a zero rate environment for such a long period of time, 10 of 12 years, people got really good at bucketing their cash. only operating cash at that point remained in the cash sector. very small, probably 5% sector of most people's allocations. ultimately at this point i think we have a lot of operating core cash because rates are greater than 5%. and to go with that longer data cash into other sectors at this point, you take a hit in what you're getting from -- not guaranteed, but a pretty much

solid 5%-p -- 5%-plus at this point. i think there will be some rotation out, but not the 5% level it was in the zero rate environment. i think that was kind of a floor. we are looking at something that is being maintained somewhere in the 5% to 10% area. haidi: speaking of unusual rate environment, it has been a very busy year for japan. what expectations have you built around what the boj will do, and how much, how exciting this next leg of the rally might be? given we have seen a pullback and redirection of flows either to domestic bond markets or other markets, be it india or china. deborah: we certainly think that there is positive momentum in japan, and what we have seen from -10 basis points to positive 10 basis points from an

official rate perspective is leading that. it's hard to see where it gets to a point -- i mean, i think the economy has to continue to be diverse and growing. with gdp negative in the first quarter, there is room to grow obviously at this point. so the expectations are, again, sort of tempered because of where we think kind of the diversity and growth is coming from in japan. probably you get that diversity and that growth when you go more broadly into other asian sectors at this point. annabelle: and what are those other asian sectors you are looking at in particular? in hong kong now, you mentioned you were in singapore. what is standing out to you? deborah: full employment picture seems to be everywhere. the consumer seems to be very strong in most regions. china definitely has slowed down, but seems to have reached kind of a bottom plateau and is

starting to pick back up again. so, i'm not sure there is outstanding growth in any particular area at this point, but we are also very long in a business cycle. just to be able to maintain and keep going i think is proof of our session or something that is negative from a growth perspective being on the horizon. it is not great, outstanding growth we are looking for, but more broadly diversified across the region, maintained growth. annabelle: thank you for your time this morning. deborah cunningham, cio for global liquidity markets. you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. of course that focus very much on nvidia. it's available on dayb on the terminal and on mobile in the bloomberg anywhere app. we will have more ahead on "daybreak: australia." this is bloomberg. ♪

annabelle: time for morning calls ahead of the asia trading day. the goldman sachs ceo says he currently expects the fed will not cut rates this year. he still does not see compelling data that would support the move. but he adds that the average american is already feeling the pinch from inflation. he says that could heighten the risk of a real and palpable economic slowdown.

meanwhile, some investors see a week chinese currency burnishing the appeal of hong kong listed shares over there is on the mainland. they expect hong kong stock to draw in more capital as a local currency pegs the dollar for higher for longer u.s. rates. they add fears of a yuan devaluation could further motivate investors to favor h-shares instead. this year's hong kong investment conference is beginning thursday and we will hear from seymour capital's wendy chen joining us in the next hour for a preview and we will have more in store for you friday was special guests joining us live during daybreak: asia. haidi: it is the bank of korea decision day today expected to keep the benchmark rates steady and releasing new policy decision in the next few hours. the central bank may also be revising its growth forecast higher. let's bring in our korea economy editor for more.

like a lot of these regional central banks they are having to recalibrate what the trajectory it looks like in the cycle. potentially does that include pushing back easing expectations given we have seen rate of growth, some other indicators coming hotter than expected? sam: you are quite right about it. i think the bank of korea is one of several banks that have to recalibrate because the economy is doing too well. especially with south korea come of the exports are doing very well. better than expected. that is larger because there is a lot of semiconductor demand and korea happens to be the biggest maker of memory chips, advanced memory chips that get supplied to companies like nvidia. and that is really leading the gauge in exports and helping the economy expand much faster. which means that the bank of korea has no real incentive to

go ahead with a policy pivot. so we are expecting a rate hold again today and we might seeing that for some time to come, too. annabelle: that is what i was going to ask. is that the expectation, that we just a standing pat for quite a period to come for the bok? sam: that's right. for today, it's very likely because the economists that we have surveyed come everyone of the 21 economists we have talked to expect a rate hold today. many of them are thinking that a rate cut is going to happen probably sometime in the fourth quarter. the governor said earlier this month the b.o.k. might have to reconsider whether a rate cut is even needed this year. we are going to have to watch whether he retracts that comment today or even builds upon it. but for the time being because

the economy is doing so well, it expanded much faster than anyone forecast in the first quarter. we are thinking that a rate hold is going to stay for quite some time. haidi: what are some of the other concerns for the broader economy that would be weighing on the mind of the b.o.k. committee as they make these decisions? sam: i think one factor that could be taken into consideration going forward is the credit market. there has been sort of a slump in the real estate sector with a lot of developers struggling with the debt that piled up during the pandemic era. how will that unfold in the coming month with so much debt? there is going to be a lot of restructuring. if that plays out in a way that hurts the economy i think the b.o.k. is going to be taking that into consideration as it recalibrate his timing for the

rate cut, potentially. a private spending slowdown could be one concern for the b.o.k., but we are seeing resilience in consumer spending for now. it's -- so there are a few factors, but for now, things look pretty strong. haidi: our korea economy editor sam kim. we will be speaking with the rbnz governor adrian orr to talk about what is coming next for the rbnz after that hawkish hold yesterday. this is bloomberg. ♪

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like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. haidi: another story we are following, shares of live nation entertainment falling. bloomberg revealing a justice

department move seeking a breakup over the business over antitrust violations. the case is related to ticketmaster's unrivaled control of concert ticket sales. the 2010 merger of live nation as well as ticketmaster has been the subject of several antitrust investigations ongoing. so this is such an interesting case in terms of this antitrust suit now upon them. some of the details, it will be filed in the southern district of new york. the dispute will be seeking remedies including the breaking up of live nation. this is really according to bloomberg sources who have asked not to be named, given this has confidential information. we saw a big reaction of about 10% or so from live nation trading in the late part of the session. but this really is one of the latest antitrust measures being taken by the biden administration, given that we have also seen cases against the likes of alphabet, amazon.com as well. so, this is the biggest u.s.

concert promoter. it will be very, very interesting. and trickling down in terms of the huge criticism that we saw over the taylor swift tickets in 2022, and the massive demand we saw in some of that and how it played out. annabelle: well, they certainly bungled that, which of course sparked a lot of interest in it. the massive demand for taylor swift tickets that we saw last year. but again, it is interesting when you put it in the context of what we have seen from the biden administration over the past few years, which is making competition a really key component of its economic policy. that is why we are seeing these cases against companies like alphabet, amazon as well. but this one here, the latest. live nation, the biggest u.s. concert promoter, it merged with ticketmaster in 2010. there were a lot of provisions around that deal. it seems like the company's perhaps, according to the doj,

violated some of those conditions of the deal, and that is why that investigation is coming about just now. so we will see what happens from the u.s. doj, given right now it is a bloomberg scoop. haidi: yep. and we will continue to watch that. of course concertgoers will be very interested in what is going on there. take a look at how u.s. features are ticking along. seeing a little bit of optimism. interesting reaction, almost a non-reaction across the equity side when it comes to the big nvidia numbers. we had tech up in late hours. really emboldened by another set of all around stronger

annabelle: here we can until there."

the top-two that you are with you are still there. . israel is a calling elizabeth a little island, and norway of the does after the three countries backed a resolution formally recognizing the palestinian state. the move underscores how israel's war in her magic fingers a focusing attention on the issue of palestinian statehood. taiwanese opposition lawmakers are set to make a final push them further to pass a bill aimed at reining in the new president pledging to super's administration. protesters gathered outside the legislature this week to voice their anger. they say the amendments could be used to undermine the new government. u.k. prime minister rishi sunak has called a snap general election for july 4. it set his conservative party of four a bruising six-week battle trying to stop keir starmer's

the labour party from taking part. debra has led opinion. since u.s.m.c.a. took over in 2022. -- labour has led opinion polls since rishi sunak took over interconnecting. >> now it is time to decide whether we want to build on the progress we have made or go back to my plan and uncertainty. earlier today, i spoke with his majesty to request the dissolution of parliament. the key has granted this request and we will have a general election on july 4. haidi: let's look at how commodities are faring. a big rally largely drawn by copper prices and also the enthusiasm across other classes like iron ore as well. copper, we are seeing a bit of a pullback which is interesting given the big run-up in the short squeeze we have seen. that retreat from profit-taking, a drop in demand as well.

it's the biggest intraday drop in two years. it's been a pretty fast and furious pullback from record highs we saw just earlier monday. clearly investors are taking profits off the table. also new signs of demand weakness are emerging from china as well. copper is still up by over 20% this year with a big rush of investors worried about the market. also watching aluminum. it's also seeing a pullback after aluminum surged to a 23 month-high with the force majeure being declared on the shipment from rio tinto. that is seeing a bit of consolidation in the price. with record gold prices as well, the dollar affirming and that is also playing into that. crude is holding steady at $77 a barrel. fairly rangebound for that. those hawkish fed minutes seeing a bit of a pullback in oil.

the hp, trading begins in australia in the next hour. the world's biggest miner has won an extra week to convince america to agree to that $49 billion takeover plan. for more, let's bring in our communities reporter martin ritchie. will they have enough time to get this done? what do we expect in this extra time that there is for reconsideration? martin: yes, the saga continues. we thought yesterday it was a case of walking away or going ahead with the deal. but bhp, as you said, has another week. look, the thorny question is very south africa. it looks like anglo is now happy with valuation bhp is proposing, but the significant acids of anguilla are proving to be the most difficult part of this. ph.d's plant is complicated.

it involves anglo spinning off two of his companies, a platinum producer and iron ore producer listed in south africa, before bhp goes and buys the whole anglo is concerned that this puts too much risk on the shareholders of those two companies, because south africa's government might impose conditions on them and that might be unfair to them. so it looks like this extra time has been granted by our to sort of let's bhp perhaps come up with some kind of the structure, some kind of other plan. it's a little complicated. it's interesting also that the deadline is also now the date of the south african election which is becoming a political issue in south africa as well. annabelle: that is what i wanted to ask about, because of the approvals required for any deals

here are likely to include those of south africa as well. is this as bs-ing in the u.s., for instance,, the nippon steel proposed takeover of u.s. steel, when factor into election politics? martin: i think the south african government has declined to make any comments at all. there have been some figures in south african politics more generally, who have said they are personally opposed to the deal. bhp had said before they would prefer to wait until after the election to do this. it's a complicated time to be engineering a bid for a company that has a very long history of more than a century in south africa, but their hand was forced. it all relies on the south african businesses, and what bhp does with the structure of this view to ameliorate those concerns.

that is what we will be looking for next week. haidi: how much would they realistically try to sweeten the deal? isn't it the argument that they could just wait? i know the next few years we would imagine there will be greater competition and maybe a higher valuation after the restructuring has happened. martin: we have already had three bids. the last 1, 40 $9 billion. all of them rejected by anglo. i think the signals bhp is standing so far, is that this is final, that valuation is final. anglo with think, is also happy with the valuation. but it is the structure that is important. to the point about waiting until angle itself is a structure that has its own plan, if bhp doesn't

make the bid now, it might be that i would years from now is much higher and they have missed their opportunity to do it this time around. we think that's what they're going for there. annabelle: communities reporter martin ritchie there. we are just under 20 minutes away from the opens in sydney, seoul and tokyo and the outlook for equities is mixed. a few different themes we tracked overnight. firstly the nvidia numbers after the bell. that stock rising 6%. even another bar is so high, the company jumped over it. really exceptional numbers and the really great outlook. at the same time, you had the fed minutes discussing the need for the fed to stay higher for longer, what we had been hearing from fed speakers over the course of this week. a couple of different themes we are tracking today in the session. continuing to monitor chinese equities in particular because

they are poised to deliver their best quarterly returns in more than five years. a currency perhaps not quite the same story there, there are questions about capital flight. but part of that optimism around chinese equities is coming down to what we are hearing around the property sector. now we understand china's megabanks are urging their branch managers to learn the state of companies buying up unsold homes. it indicates the urgency to implement a realistic rescue package that was unveiled last week. stephen engle is our chief north asia correspondent and he joins us now. what do we know at this point in time about this? stephen: it is underscoring their urgency, absolutely. one of the biggest complaints about the government efforts to put a floor of the real estate crisis is that it has been a piecemeal approach and it has been born the fruit of the policy yet. also the implementation has been

criticized. what have -- why haven't we seen a floor yet. because sales keep dropping and default keep rising. so this is interesting in that we are hearing from sources that already, after the pboc announcement that it would have a nationwide program to provide 41 .5 billion u.s. dollars in cheap funding for soes to go in and buy out the excess inventory out there, there is three point 6 million square feet of unsold inventory of homes in china as of the end of 423, the highest since 2016. for there is urgency. this bloomberg's group yesterday is saying that china's megabanks are urging branch managers to act quickly to get loans south to soes so they can buy up those unsold homes. we don't know if this will lead to a massive surge in new lending, because once again, they are also being urged to do

the proper division for, again, ensure that the fund's lent out will be used for the intended purpose of buying up unsold units for pennies on the dollar and then perhaps turning them into affordable housing. other areas like the stock market, where they could get better returns for the soes -- not implying that the soes would be something nefarious, but it has happened in the past there was another government program into a 22 that offered investors loans guaranteed by the state. haidi: how did that play out? stephen: yes, there was a program back into 2022 where authorities would basically lend developers with loan guarantees by the state back to china bond insurance company. ok? so that was intended to give the support signal to developers in the market that they would support developers.

but essentially what has happened over the time is that it hasn't happened that there has been is equally necessary to prevent these defaults. agile is one of the latest ones. in missed a payment on the publicly issued bond for the first time last week and it is one of a dozen developers that issued you an notes guaranteed through the china insurance company. according to the bloomberg school? this morning, 13 private developers including agile head issued a total of 36 bonds via the program, with only $5 billion raised. that is a drop in the bucket compared to the size of the liabilities. without a visible improvement in contracted sales in china and of sales dropped again in april, without a sizable increase, most likely, the defaults will continue by these private developers that just don't have the proper liquidity.

so that program into 2022 which was supposed to indicate to the investors enter the market that the state would come to the rescue has not necessarily found out. this program announced by the pboc last week is a different take on that essentially to buy up excess inventory. as i mentioned a minute ago. and that is just showing, again, that the policy in 2022 do not work. other piecemeal policies are not works to restore confidence and improve their sales at these developers, which is really the only solution to prevent a further wave of defaults at this point. haidi: chief north asia correspondent student angle there. we have more ahead on "daybreak: australia." ♪

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haidi: look at her koefs are trading the day after the rv and said, they set the cash rate cuts will start later in 2025. kind of joining the over all human we are hearing from central banks of staying higher-for-longer and pushing back expectations of easing. this is the picture in kiwi stocks. a bit of negative in equities.

mixed fixture in asia. still digesting the big nvidia numbers and also from the fed, that chorus of higher-for-longer . the kiwi dollar is maintaining gains, 61 point 03. we saw a big jump in the q. week. leading the g10 space at one point after the decision, as well as rising yields. the rv and the governor says inflation is that happening across all sectors in the economy, signaling that policy will stay tight after keeping rates unchanged for a seventh straight meeting. joining us from wellington is the rbn that governor adrian orr. you have interest doing a lot of talking. we wanted to ask you for more insight on that decision and again, much like the last time we spoke, the possibility of further tightening was flagged particularly when it comes to the elements that domestically have been perhaps more resistant to monetary policy. i guess the question would be,

with another rate hike be meaningful when it comes to getting those aspects of inflation lower? governor orr: another rate hike with only meaningful if we sought inflation expectations -- if we thought we were starting to rise because of the persistence of actual inflation. we know that forward-looking inflation is heavily influenced by the current level of inflation. so that is our main concern. persistence raises the risks that expectations don't do the job that is needed. we know and we are confident, that we will get inflation down to the 1-3 percent band. we would just like to make sure we get there soon without risking another blow out expectations. haidi: you talked about risk appetite. the ability to withstand the risk of higher inflation. do you see that increased risk with some of these elements that

are leading through to a kind of more difficult to shake inflation expectations? governor orr: we spent a lot of time on the document yesterday really getting down to the nuts symbols on the consumer price index. the parts that are persistent. we have seen a lot of success in getting the cost of housing construction down. a lot of other services processes down. the goods prices, easier to move. the ones that are left are insurance -- they all have their own idiosyncratic story -- insurance premiums because of what has been happening globally around the extreme climate for that we have central and local government rates arises only flagged -- local government rates arises only land. so we are not far from getting

there. we are showing patients, but we have -- we are showing patience, but we have to be ready for further upward space and what it might mean for price setting behavior. haidi: continue. governor orr: we have just been trying to emphasize that we accept that we will be in the low-inflation environment, wage expectations and actual widgets have come down considerably. so we are just working through this last part of the puzzle. no difference to effectively what you are seeing globally, tradable goods prices fell very quickly, and then this homegrown, domestic stuff is always more sticky. haidi: i get the nontradable

elements will be crucial here as well. he said you have limited tolerance for inflation surprises to the upside. is that patience running out? do you look at the second quarter cpi print of the one that makes or breaks that decision to go up again or not? governor orr: we are not hedged from one statistic. patience has not run out. we are showing that we have a lot of patience. the projection is to keep the official cash rate at 5.5% until early next year. we believe that will have inflation back down, then at that point, we can start thinking about normalizing interest rates. that is all in our projection. the sticky prices i have talked about particularly in the next couple of quarters have been well-signaled and they are in our inflation projections. so it would have to be something over and above that, again, to surprise us and we think the risks are balanced. the.

-- the period i had that matters for us is this time next year. without a doubt suck the economy is performing below its potential. an output gap is opening up. we feel comfortable, but when you are starting from a higher inflation position, when you have low productivity, the central bank has to remain -- annabelle: do you think, though, that given your seeing the trends coming in and getting weaker or softer economic data, even though you have that component where nontradable inflation data is still elevated, do you think there is that need to get inflation back to the target band first before cutting, given. that led transmission effect as well -- given their is that lagged transmission effect as

well? governor orr: the projections have as easing into this with me for inflation and back at that midpoint. you are right, we have economic growth picking up here in new zealand and/or -- in our projections from this quarter forward. but economic activity is still below the potential. so we can start to ease before cpi inflation exactly hits the midpoint of the target, and that is what our projection has. our projections have us around 2.9% in the fourth quarter of this year. you know, that is a toss of the coin. it's not soon after that that we signal lower interest rates beyond that. so what did we do to surprise the market that it is not happening next week? we have been saying that for some time. [laughter] annabelle: please do seem to have caught investors on the hop in the last few months. governor he said you expect growth to pick up. where do you think the growth is

coming from, and why do you think that is the length economy is able to cope with such a sustained periods of elevated rates? governor orr: it is coming through from government spending and government investment. we are looking at private investments that have come back, and importantly, we have had a 3% per annum growth in our working age population. the really tough stuff is that aggregate demand has been rising . per capita spend has been followed. the difference is the population has been growing. this has been putting the upward pressure on rents, on demand for dwellings, that is taking construction activity back up. the pipeline for infrastructure investment for new zealand is long. and of course of the world is

-- has opened up again so tourism is finding its feet. and with global growth expected to pick up, trade has also grown. so there are lots and lots of economic growth. but there is that rebalancing from consumption to production. haidi: last time we spoke, the elementia talked about, the dwellings, rental costs rising, if there is a sharper than expected decline in immigration, wooded meaningfully change your outlook when it comes to growth? does that have more impact on the labor market side or when it comes to the inflationary demand-side? governor orr: the real challenge is you can't just change one thing and everything else i changed. the scenario with migration slowing much quicker than aggregate demand, we wouldn't be as exercise about the level of interest rates. so when the facts change, your opinion has to change the way through. likewise, we continue to have a

dwelling shortage in new zealand. it's not unique. there are countries that have extremist rapidly high immigration. we need to keep building dwellings. public, student housing, public dwellings, private housing, so on and so forth. housing construction costs have come up. we have been successful in achieving that, but rental costs are higher because there is still more demand than supply for people who don't on their own home but want to rent who don't own their own home, but they want to rent. haidi: you talk about fiscal spending be one of the pressures ahead of the budget. do you expect that tension to continue, we have seen across other economies where the fiscal side has inadvertently or not really undermine the effect of monetary policy? governor orr: is a global and forever challenge. the synchronized monetary and

fiscal policy is extremely difficult. we have been fortunate in new zealand over the last couple of years, government spending as a proportion of potential output has been declining. the reserve bank has been this inflicting of the way through. that is still the expectation from the official projections to date. of course we will wait to see what the budget has. but in the absence of physical discipline, yes, monetary policy would have more work to do. we will have to see what if any additional government spending with growth will be, and the impact of tax changes. haidi: governor, really great to have you with us.

her uncle's unhappy. i'm sensing an underlying issue.

it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for.

annabelle: this is "daybreak: asia." we are counting down to asia's major market opens. [laughter] haidi: we are both counting down to the start of markets coming online. there, sorry. we are a bit excited. it may be because of the nvidia numbers. there has been a big way of release in big parts of the market when it comes to the bulls being validated by a huge set of numbers there. i suspect that is one of the things you will be watching for in today's session. annabelle: absolutely. as you said, we are very -- [laughs] -- excited about the results from nvidia after the bell today. and i the backdrop of the central banks and economy that you are tracking as well. haidi: and that is the thing, right, with this out of the way, we go back to basics,