Bruce Whitfield:
John Loos, the very patient John Loos, has been holding on for the last 12 minutes.

John Loos:
I’ll forgive you this time Bruce; it was enjoyable listening to him.

Bruce Whitfield:
Certainly the MPC statement from Tito Mboweni was very effervescent and positive about the economy. I suppose the downside is the current account deficit, and also you’ve got the manufacturing sector suffering a bit.

John Loos:
Yes it was a lot more positive than the sounds he was making a few weeks ago.

The rand has recovered nicely, and that’s a key factor in inflation. And the oil prices have dropped a little as well. I’m pretty bullish on the inflation outlook.

Yes, you do have manufacturing slowing and sign that the economy and credit growth might be starting to slow. So from a growth point of view it looks a bit slower in 2006 but from an inflationary point of view it also possibly looks under control.

Bruce Whitfield:
A question after the MPC meeting from Vernon Wessels at Bloomberg was quite neatly dodged by the governors as to whether there might be a rate cut next year. Are there mechanisms for a potential rate cut next year?

John Loos:
My personal view is that there will be rate cuts next year, for the reason that a slowing global economy will soften crude oil prices a little bit more.

When the US starts ending its interest rate hikes early next year, the dollar will come under a little pressure again and the rand will perform well. This is supported by the precious metals which are also doing well. So I really believe there is scope for a minor reduction in inflation.

Bruce Whitfield:
There’s lots of talk about the end of the super-cycle for commodities. The say the commodities sector is still strong, and we see gold at $517 an ounce tonight and platinum just off $1000. Are you one of the believers in the continued strength of the commodity cycle?

John Loos:
There will be a few dips here and there in the short term, but there seem to be a lot of capacity problems on the supply side when it comes to the commodity sector. Not only in oil, but in others too. Just as we had a downward trend in the commodities cycle for about two decades — the 1980s and 1990s — I believe its possible they could do quite well for some years to come, while the capacity constraints problem is sorted out

Bruce Whitfield:
When the governor was asked about how worried he is about the current account deficit, he seems to be suggesting that the economy is growing a lot quicker than the official stats suggest. And if that’s the case he’s not too concerned.

John Loos:
Well I tend to agree. My gut feel is that the economy has been overshooting the actual growth figures. You have the US being able to run a big current account deficit for many years. They had better growth than many countries so they were able to attract that growth seeking capital.

If they had tried to curb the economic demand by hiking interest rates in the 90’s more severely, they may have not attracted that capital and not been able to sustain even a small current account deficit. Hiking interest rates to curb that economic demand is not the solution.

Bruce Whitfield:
John Loos, thank you very much for your contribution this evening. Absa senior conomist John Loos on the line to us from Johannesburg.

There’s a story off the wires about the fuel price in Zimbabwe. It has been unofficially hiked six times, according to reports coming out of Zimbabwe today. Petrol now selling openly for up to Z$120 000 per litre. It’s only R10.17, little more than twice what we pay in South Africa.