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Speaker 1: Welcome to Ask Fear and Greed, where we take your

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Speaker 1: questions and do our best to answer them. I'm Michael Thompson,

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Speaker 1: and good afternoon, Sean Aylmer.

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Speaker 2: Good afternoon, Michael, Sean.

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Speaker 1: We take questions for this podcast from anywhere. It maybe

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Speaker 1: through our website Fearangreed dot com, dot A. You might

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Speaker 1: be on LinkedIn or Facebook, or it might be on Instagram,

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Speaker 1: where Arabella slid into our DMS and asked, you, guys

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Speaker 1: talk about headline inflation and underlying inflation. Can you give

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Speaker 1: a simple and look if you could underline on Instagram,

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Speaker 1: I suspectially would have underlined simple explanation of the difference

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Speaker 1: between the two and why it matters. This question could

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Speaker 1: have come from me. I've asked you this question about

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Speaker 1: kind of what a dozen times now, so I am

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Speaker 1: very grateful to Arabella for asking this because it gives

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Speaker 1: me a great chance to put you under pressure once

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Speaker 1: again for a simple explanation.

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Speaker 2: Show. The very simple explanation is the difference between headline

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Speaker 2: and underlying inflation is that all the items that move

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Speaker 2: around a lot in any quarter, be that positive or negative,

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Speaker 2: are taken out and it's actually the seventy percent in

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Speaker 2: the middle that they look at. They take out fifteen

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Speaker 2: percent on one side, fifteen percent on the other side,

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Speaker 2: like the up and the down, and they only look

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Speaker 2: at the seventy percent. Now often that means electricity prices

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Speaker 2: and petrol and fruit and veggies, but doesn't have to

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Speaker 2: be them.

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Speaker 1: It's just whatever happens to fall into the Yeah, it

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Speaker 1: has moved the most, is it. Yeah?

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Speaker 2: Yeah. So that's a very simple explanation. I'm sure Arabella

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Speaker 2: wants to hear a little.

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Speaker 1: Bit more so far just keeping up with you. So

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Speaker 1: this is good yep.

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Speaker 2: So we measure inflation from the Australian Bureau Statistics. They

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Speaker 2: have quarterly releases. More recently they've had monthly measures, but

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Speaker 2: we really focus on the quarterly ones and we've got

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Speaker 2: one due out tomorrow. What it is is a percentage

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Speaker 2: change in a basket of goods and services that households

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Speaker 2: consume and how much that's changed between one quarter and

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Speaker 2: the next quarter. There are literally thousands of items in

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Speaker 2: those baskets and they're kind of shaped into eighty seven categories.

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Speaker 2: They include what they call goods, so good might be

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Speaker 2: a fridge to TV and services think insurance, rent, stuff, like.

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Speaker 1: That, and just eighty seven categories.

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Speaker 2: Yeah, there are eleven groups, eighty seven categories and thousands

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Speaker 2: of items.

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Speaker 1: Wow, okay, yeah, go on.

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Speaker 2: The biggest chunks last year, because they do change is

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Speaker 2: pricing change. So housing is the biggest. That's about a

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Speaker 2: fifth or bit more than that. Actually, food and drink

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Speaker 2: non alcohol drink is a big chunk as well, so

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Speaker 2: to recreation and culture. Transports a big one, and then

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Speaker 2: furnishings and household equipment and stuff like that.

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Speaker 1: When you're describing chunks, you're just saying, these are the

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Speaker 1: biggest kind of components overall. These aren't the ones, These

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Speaker 1: aren't volatile ones necessarily, These are just overall.

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Speaker 2: Okay, yeah, these are overall what really contributes a lot

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Speaker 2: to your inflation figure. We talked about that, you know,

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Speaker 2: the trimmed mean is the one that Reserve Bank likes. Literally,

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Speaker 2: they're trimming away the big rises and trimming away the

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Speaker 2: big falls and the basket of goods and just taking

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Speaker 2: that middle seventy percent. Now, that trim mean in more

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Speaker 2: recent times has taken out energy costs, for example, because

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Speaker 2: the government's had energy rebates, so they've dropped the price

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Speaker 2: of energy has dropped enormously as a result of that

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Speaker 2: very volatile that's sort of been trimmed away. Remember when

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Speaker 2: banana prices went through the roof about fifteen years ago cyclone, Larry,

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Speaker 2: it was maybe it's longer than that. Now, you know,

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Speaker 2: a banana we're talking about ten or twelve dollars a kilo.

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Speaker 1: I remember that. And bananas were always kind of like

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Speaker 1: if they were at three dollars, they were too expensive,

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Speaker 1: and all of a sudden there were ten to eleven

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Speaker 1: and they became a luxury good totally.

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Speaker 2: And I had young kids at the time, and bananas

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Speaker 2: you live. You know, when you got young kids, you

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Speaker 2: live for bananas.

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Speaker 1: They are your staple.

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Speaker 2: That's absolutely the changes the GST in two thousand, like

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Speaker 2: they were trimmed away, the government energy REBATESE were trimmed away.

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Speaker 2: So that's what it is. It's basically the seventy percent

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Speaker 2: in the middle and the volatile items taken out. Arabella,

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Speaker 2: Why does it matter, Well, at the end of the day,

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Speaker 2: the Reserve anks is looking for a trend in prices,

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Speaker 2: what's happening, and the trimmed mean gives them the trend.

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Speaker 2: You know, one office and that sort of stuff are

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Speaker 2: taken out, So it's just a better reading on what's

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Speaker 2: happening to inflation in the economy.

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Speaker 1: You know what they use that in universities, right and schools?

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Speaker 1: You know what primary are high? I think, yeah, prime primary.

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Speaker 1: Let's start them young. Come on, uncle Sean's going to

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Speaker 1: going to teach teach you about the trimmed mean. I

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Speaker 1: don't know whether that's going to take off, but I mean, honestly,

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Speaker 1: that was a really, really good explanation. I followed every word.

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Speaker 1: Banana's helped to illustrate it.

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Speaker 2: Yep, yep. Anytime you use bananas in anything, it's going

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Speaker 2: to work. Yeah.

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Speaker 1: No, I love that. Okay, Arabella, let us know if

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Speaker 1: you're satisfied with that answer.

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Speaker 2: Yep, not.

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Speaker 1: We can do a follow up. We can do it

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Speaker 1: all again. We can put Sean under some more pressure

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Speaker 1: with another question, but hopefully that one will be satisfactory.

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Speaker 1: Thank you very much Sean for answering the question.

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Speaker 2: Thanks Michael, Thanks Arabella, Thank.

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Speaker 1: You Arabella for sending one in. If you have your

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Speaker 1: own question, then you too can slide on into our

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Speaker 1: dms on Instagram or at Facebook or LinkedIn, or if

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Speaker 1: you want to go the old school way, you can

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Speaker 1: send it via email on our website.

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Speaker 2: Going to they can actually post it to us. But

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Speaker 2: perhaps I can't do that anymore. We've got an address.

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Speaker 1: No, we'll give Adams address.

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Speaker 2: We'll give Adams address.

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Speaker 1: That's good our Fear and Greek colleague, Adam Lang.

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Speaker 2: I reckon he'd still get the mail. Yeah, I do

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Speaker 2: find it. I mean, I'll go to mailbox, but it's

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Speaker 2: probably once a week, and you've got all this mail

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Speaker 2: there every day.

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Speaker 1: I go every day, even though I don't even think

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Speaker 1: the post you delivers every day, but I still go.

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Speaker 1: I'm an optimist, Sean. I just I live for good

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Speaker 1: news in the mailbox, though I don't remember the last

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Speaker 1: time anything good came in the mail.

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Speaker 2: But JB Hi Fi catalog or something like that, mament.

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Speaker 1: Yes, and you love a good Aldi catalog as well.

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Speaker 1: The Aldi special buyers are going to be yeah, yea.

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Speaker 1: I will never ever ever put a no junk mail

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Speaker 1: thing on my mailbox ever ever. All right, we are

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Speaker 1: united on this. I've completely forgotten where we're going. This

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Speaker 1: is as Fear and Greed. Make sure you hit follow

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Speaker 1: on the podcast. Done again next time