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Speaker 1: COOOKI welcome back, mate. What a year.

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Speaker 2: I mean the stuff that's happening for twenty twenty five,

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Speaker 2: property prices, interest rates, people's ability to borrow. What the

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Speaker 2: reserving's going to do on the seventeenth and eighteenth new

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Speaker 2: Board meeting?

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Speaker 1: Is this the first meeting new board?

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Speaker 3: No, the new Board meeting is not until the first

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Speaker 3: of April. The newboard takes effect at the first of March.

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Speaker 3: So this is the last.

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Speaker 1: Meeting of the old board, the traditional old boards.

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Speaker 3: So do they want to leave us with a bit

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Speaker 3: of good news or do they want to keep us

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Speaker 3: under the thumb a bit longer?

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Speaker 1: Well, what do you reckon?

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Speaker 2: So let's just get through this early stage because they've

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Speaker 2: got a whole lot to.

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Speaker 1: Talk about inflation. Let's do the easy stuff first.

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Speaker 2: Unemployment. So often you talk about it in your chart,

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Speaker 2: the unemployment number. There's being a bit of a benchmark

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Speaker 2: indicator to the RBA as to whether they should be

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Speaker 2: rates up or down or living where they are. Where's

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Speaker 2: unemployment at the moment.

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Speaker 3: Since we last chatted, we had the December monthly unemployment number.

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Speaker 3: It went from three point nine to four point zero percent,

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Speaker 3: and that is still within and I like to make

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Speaker 3: this point that it's still within half a percent of

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Speaker 3: being at a fifty year low. About eighteen months ago,

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Speaker 3: when we got to three point five percent, that was

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Speaker 3: the lowest since nineteen seventy four. Heaven forbid. Now it's

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Speaker 3: gone up as the economy slowed down, and a lot

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Speaker 3: of people, including Treasury, including the RBA, and dare I say,

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Speaker 3: all of the bank economist teams that I that I

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Speaker 3: look at, we're expecting that unemployment rate to get to

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Speaker 3: four and a half, four point seventy four point eight.

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Speaker 1: It's still at four even the RBA model.

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Speaker 3: Even the RBA were four and a half yep or thereabouts. Now,

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Speaker 3: the fact that we're at four percent is a good

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Speaker 3: news story, you know, just taken away from interest rates

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Speaker 3: for one second. You know, you and I have had

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Speaker 3: this conversation for years and years and years. I like

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Speaker 3: an economy where everybody has a job. You know, that's

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Speaker 3: that's great. Everybody's got a purpose that money it's goalie locks, yeah,

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Speaker 3: and they're working, they're earning money. It's good for society,

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Speaker 3: it's good for the economy. It's good for everybody to

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Speaker 3: have very low unemployment. It's bad to have high on employment.

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Speaker 3: So that's a good story. That's a good story when

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Speaker 3: it comes to interstrates for those people who have got

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Speaker 3: chunky dead or you know, sort of holding their breath

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Speaker 3: for a rate cuts during the course of this year,

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Speaker 3: they're sort of saying, well, and the RBA is saying

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Speaker 3: the same sort of thing from their statements of late

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Speaker 3: last year. When the unemployment rate and i'll use too

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Speaker 3: low in inverted commas, is too low, what it means

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Speaker 3: is that wage pressures are probably high because there's a

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Speaker 3: shortage of labor.

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Speaker 1: When you say too low. In other words, everybody's employed effectively,

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Speaker 1: and I want to.

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Speaker 3: Hire someone, I can't find anybody, So I've got to

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Speaker 3: put wages up. As a business person, when I put

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Speaker 3: wage up, how do I maintain my profit? I put

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Speaker 3: up my prices. What's putting up my price? That's inflation

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Speaker 3: and that's what the RBA is fighting against. So it's

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Speaker 3: not the RBA being mean, you know, oh, got to

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Speaker 3: get unemployment up. You know, they're not being tough, vasty people.

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Speaker 3: They're using as part of their model for forecasting where

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Speaker 3: inflation is going to be, and this is where that

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Speaker 3: four percent unemployment rate is certainly debatable at the moment

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Speaker 3: because it's actually happened. When wages growth, it's still wage goes,

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Speaker 3: it's still pretty decent three and a half percent, but

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Speaker 3: that was it six months before that, it was four

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Speaker 3: point three percent. So wages growth has actually come off

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Speaker 3: the boil with an unemployment rate of four percent. And

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Speaker 3: as we're probably going to discuss in a minute, the

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Speaker 3: inflation rates come down quite nicely, including the trims mean

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Speaker 3: in the December quarter, and so the RBA is sort

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Speaker 3: of weighing up all these sort of things and thinking, well,

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Speaker 3: hang on, remember the narrow path that the previous governor

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Speaker 3: Phil Low talked about. The narrow path just to tell

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Speaker 3: everyone was he wanted to get the economy along the

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Speaker 3: paths to get inflation back on target without causing mass unemployment.

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Speaker 3: You know what, they might be damn close to achieving that.

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Speaker 2: And and what's interesting about that, or what's sort of

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Speaker 2: what's called so shocking about that outcome potentially happening is

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Speaker 2: it was generally speaking, if inflation is high and the

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Speaker 2: interest rates go up, unemployment usually follows because business have

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Speaker 2: to put people off, and as a result of that,

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Speaker 2: people lose their jobs, and then inflation.

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Speaker 3: Comes back down because wages come down.

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Speaker 2: Because wages come down, and people have less money to spend,

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Speaker 2: and people less a bit more nervous about their life,

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Speaker 2: and people keep talking about the unemployment number, and employees

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Speaker 2: starting everyone starts to sort of bunk it down a

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Speaker 2: little bit and spend less money. And you know, that's

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Speaker 2: how they control of the economy. That's how they control

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Speaker 2: our behavior. It's interesting in just conceptual in a policy sense,

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Speaker 2: it's in the past, it's nearly been as opposed to

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Speaker 2: this time, it's nearly been a trade off by saying

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Speaker 2: inflation is a bigger bogie man than unemployment. We would

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Speaker 2: rather have inflation under control, because inflation effects.

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Speaker 3: Everyone and the population one hundred percent.

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Speaker 1: Of the population.

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Speaker 2: It has a concentrated effect on a very large percentage

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Speaker 2: of the popular life who are on less wages than say,

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Speaker 2: the rest of the economy. But unemployment only effects a

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Speaker 2: small percentage of the population.

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Speaker 1: So it's a bit of a trade off.

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Speaker 3: Yes, But what.

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Speaker 2: They've done here, what you said, this is very important.

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Speaker 2: They have looks like they may have managed to keep

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Speaker 2: unemployment pretty steady. In other words, people are mostly employed

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Speaker 2: in this country, and at the same time looks like

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Speaker 2: inflation is going in the right direction, and.

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Speaker 3: That's been the remarkable thing. Now there's still a little

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Speaker 3: bit of time to go before we can put our

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Speaker 3: hand on our heart, and so yet they've done it.

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Speaker 3: But the way that that unemployment number over the last

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Speaker 3: few months of twenty twenty four has panned out is

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Speaker 3: getting more credence to what the RBA was doing. And

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Speaker 3: so the fact that we've actually had that occurring with

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Speaker 3: the wage growth decelerating and as I said, with inflation

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Speaker 3: coming down, Sure the economy is weak. We know that.

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Speaker 3: That's been the thing that is sort of again the

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Speaker 3: other surprise because a point zero point eight annual GDP

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Speaker 3: normally expect firms to be saying, oh, Joe, I don't

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Speaker 3: need to hire any stuff because my business is so poor.

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Speaker 1: But we've seen these hiring numbers.

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Speaker 3: Well it's in the public government sector, yeah, sort of

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Speaker 3: indis and education and healthcare, so that's so important, but

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Speaker 3: it's still jobs being created.

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Speaker 1: I was going to say, it doesn't really matter.

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Speaker 3: And a funny way, it's a little bit like would

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Speaker 3: you prefer a business to be government run or private

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Speaker 3: sector run? Now, generally there's one or two exceptions always

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Speaker 3: to this rule. Generally private firms are better and more

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Speaker 3: efficient running a big business. Generally. There's one or two exceptions,

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Speaker 3: of course, but the government does things that the private

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Speaker 3: sector do because they're not profitable for the private sector

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Speaker 3: to do them. The classic one is defense. Don't have

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Speaker 3: a private sector, aren't you. So we need the government

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Speaker 3: to spend tens of billions of dollars per annum on defense,

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Speaker 3: on border force to protect our borders. And I think

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Speaker 3: most people agree fair enough. You know, we want to

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Speaker 3: be having our defense forces in a good position because

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Speaker 3: we don't we don't want to be invaded or anything

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Speaker 3: like that. So that's one business, if you like, if

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Speaker 3: we call them a business, that the government does better

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Speaker 3: than the private sector. So healthcare is a debatable one.

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Speaker 3: Age care and all the ndis and all these other

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Speaker 3: things debatable in education, and there are components of the

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Speaker 3: private sector within that. But where that extra spending has

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Speaker 3: been in the public sector that's fed into public sector

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Speaker 3: jobs has been in areas that are for people in

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Speaker 3: age care. So people who sort of can't afford to

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Speaker 3: fork out lots of money for good quality private sector

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Speaker 3: age care or health care or private schools, they go

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Speaker 3: to a public school, and you know, I want my

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Speaker 3: kids and grandkids and to be educated. Yeah, it's part

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Speaker 3: of a good society, so we do need to. So

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Speaker 3: it's this debate about, oh, here's the public sector always bad? No,

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Speaker 3: not always? Is the private sector always good? No, not always.

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Speaker 3: There's a balance, and I think we've just we're just

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Speaker 3: traversing that right now. And I think we've still got

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Speaker 3: a bit of a hangover from the COVID issue, where

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Speaker 3: the government sector, you know, God old Josh Friedenberg Coppt

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Speaker 3: a bit of flack. I think it little unfairly because

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Speaker 3: what he did to what do we call it, negotiate

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Speaker 3: that health pandemic. In terms of the economics, yeah, there

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Speaker 3: are a couple of things that might have been a

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Speaker 3: bit extravagant and spent a bit too much money. But

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Speaker 3: at the end of the day, we got through that

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Speaker 3: with the public you know, voters, if you like saying,

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Speaker 3: the government actually did an okay job. And there is

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Speaker 3: a role for government. It's not just private sector a good,

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Speaker 3: public sector bad. There's a bit of a role for

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Speaker 3: the government sector. And that's where we sort of are

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Speaker 3: of the employment side right now.

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Speaker 2: So the unemployment number In other words, a number of

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Speaker 2: people as a percentage of the total population of people

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Speaker 2: employable is pretty.

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Speaker 1: Good, pretty good.

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Speaker 2: Yeah, our long term average is more like five percent,

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Speaker 2: but like all which is pretty good. And so in

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Speaker 2: other words, the employment market has intaked. That'll keep correct,

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Speaker 2: that'll keep the unions happy, it'll keep generally people have

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Speaker 2: happy who are losing their jobs, and we know that

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Speaker 2: a lot of jobs have been made able in the

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Speaker 2: public sector.

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Speaker 1: But like we're not here to pull that apart of

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Speaker 1: the moment. That's more a political policy issue.

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Speaker 2: And believe that between Dunton and alban easier to argue

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Speaker 2: that one. So only point we've dealt with that one.

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Speaker 2: Now let's look at GDP numbers. We're not really getting

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Speaker 2: too much in GDP.

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Speaker 3: We haven't had one since the early December. The next

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Speaker 3: one comes out in about three to four weeks in

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Speaker 3: early March, we get the December quarter GDP numbers, they're

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Speaker 3: probably going to be okay. By bats retail saltail sales

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Speaker 3: kicked up in the December quarter, and if you can

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Speaker 3: believe it, we've had a little bit, I don't want

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Speaker 3: to overstate a little bit of an upturn in dwelling

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Speaker 3: construction activity. Despite a lot of the building companies in trouble,

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Speaker 3: there's been a little bit of an upturn there, and

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Speaker 3: even though exports weaker, they're not that bad. So if

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Speaker 3: you put up your your components of GDP, I think

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Speaker 3: the latest forecast I saw from a couple of the

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Speaker 3: big banks was about zero point seven for the water.

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Speaker 1: That's pretty good, which brings.

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Speaker 3: Your annual rate up from zero point act to about

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Speaker 3: zero pardon me, to about one point four percent. Yeah, okay,

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Speaker 3: not great, but we've got that turning point. You know,

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Speaker 3: the thing in economics is turning points. We had that

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Speaker 3: long run period of weakness. Maybe the December quarter signals

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Speaker 3: just a bit better news.

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Speaker 2: Interestingly enough, those two things you're telling me about unemployment

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Speaker 2: looking pretty good on their own, and you know, GDP

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Speaker 2: looking good on its own doesn't necessarily indicate a rate reduction.

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Speaker 1: But we'll move on.

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Speaker 3: I know which is where, which is where the debate

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Speaker 3: was really which will touch on?

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Speaker 1: So let's let's look at in places.

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Speaker 2: So we got we got the two point four headline

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Speaker 2: rate that came out last week I think it was.

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Speaker 2: That's for the December thirty one, which is great when

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Speaker 2: you think about it, like you and I are talking

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Speaker 2: maybe two years ago. When the December twenty two number

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Speaker 2: of number came out, it was like seven point eight.

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Speaker 3: I think the peak was.

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Speaker 2: Yeah, it was less than half and a lot less

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Speaker 2: and half for nearly a quarter. And of course, the

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Speaker 2: trim mean, which is the like I said, let's call

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Speaker 2: it the adjusted inflation ray when you take a few

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Speaker 2: things out, is coming at three point two and it's

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Speaker 2: down for three point five, which was the read we

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Speaker 2: got at the end of October. I think it was

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Speaker 2: for the correct for the September quarter. So that's on

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Speaker 2: the improve. That's very good. But there's something more. There's

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Speaker 2: a there's another and you and I have discussed as

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Speaker 2: many times of it.

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Speaker 1: But the quarterly number was very good.

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Speaker 3: The quarterly number for the trimmed mean that underlies more

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Speaker 3: inflation was zero point five percent.

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Speaker 1: In other words, for that quarter. When you take out

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Speaker 1: all the little.

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Speaker 2: All these and all this stuff, and when you take

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Speaker 2: that out, it's only point five for the quarter.

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Speaker 1: And then if you if you extrapolate that forward.

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Speaker 3: You're getting two points something. And just to remind everybody,

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Speaker 3: everybody should know this by now, inflation target of the

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Speaker 3: RBA is between two and three.

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Speaker 1: Percent, and today want to remon too.

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Speaker 3: Indeed, that's their preferred measure, while you and I pay

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Speaker 3: the headline rate. That trim demains sort of like a

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Speaker 3: measure of demand in the economy and supply, so that

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Speaker 3: whole supply chain issue from a couple of years ago,

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Speaker 3: is demand too hot? All that sort of stuff. So

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Speaker 3: if you look at the number that we saw in

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Speaker 3: the December quarter and project through the course of twenty

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Speaker 3: twenty five, even with you know, relatively conservative forecast, like

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Speaker 3: not just choosing a low number for the hell of it,

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Speaker 3: but choosing what's probably going to be happening to inflation.

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Speaker 3: What do we know about demand? What do we know

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Speaker 3: about food prices and energy prices, not with the substance,

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Speaker 3: but your oil prices and things like that. What are

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Speaker 3: we seeing in the global economy really important for us?

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Speaker 3: You know what's happening in China, what's happening in the US. Well,

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Speaker 3: maybe not the policy of mister Trump, but you know,

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Speaker 3: the US has still got its economy functioning, and you know,

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Speaker 3: the Fed's still adjusting interest rates and they didn't do

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Speaker 3: it last time, but you know they've already cut I

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Speaker 3: think one hundred basis points. So if you look around

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Speaker 3: all this, what's going to happen to around inflation rate? I

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Speaker 3: think it's pretty safe to say that when the RBA

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Speaker 3: on the eighteenth of February, because they'll be releasing their

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Speaker 3: revised forecasts. They do it every every quarter, so it'll

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Speaker 3: be the Quarterly Statement on Monetary Policy two thirty pm.

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Speaker 1: East Coast time set two thirty one.

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Speaker 3: To thirty one. Yes, it takes me. You will see

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Speaker 3: their revised forecasts and I will g I'll be shocked

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Speaker 3: if they don't revise down their inflation forecasts. So the

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Speaker 3: GDP will probably be similar to what they were forecast

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Speaker 3: because they did have a recovery unemployment. They might revise down,

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Speaker 3: but the thing that matters to them is that they're

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Speaker 3: revised down. They're trimmed mean because the number that we

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Speaker 3: saw in the quarter was considerably lower, about point two

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Speaker 3: point three lower than they are forecasting. And nothing has

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Speaker 3: happened since then to say, well, gee, that was a

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Speaker 3: one off. It might have been, you know, something a

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Speaker 3: bit quirky, not at all, because we're seeing all of

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Speaker 3: the other things that drive inflation continuing to point to

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Speaker 3: sustain low inflation three, twenty twenty five.

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Speaker 2: So we're not going to get some sort of shock

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Speaker 2: adjustment for school fees education because everything resets, veeb.

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Speaker 3: Everything resets, and they do take account of that well.

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Speaker 3: In the year they did March quarter becaich is when

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Speaker 3: school fees are usually reset on one January one February,

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Speaker 3: when kids go back to school stuff, they're going to

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Speaker 3: be up a lot. They were probably going to be

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Speaker 3: five or six percent, but they're only one that's the

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Speaker 3: only time of the year they change, So the rest

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Speaker 3: of the other eleven months they don't change. So what

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Speaker 3: they're the trim may trims that out because it's a

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Speaker 3: one off, big effect and while yeah, people pay it,

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Speaker 3: they take it out because it's not really a sign

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Speaker 3: of demand in the economy. Similar with things like when

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Speaker 3: there's huge volatility in petrol prices both up and down,

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Speaker 3: they take them out. And as I said, with the

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Speaker 3: electricity subsidies that the government, in their wisdom they paid out.

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Speaker 1: There so that there's only two more of those to go,

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Speaker 1: two more of us to go.

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Speaker 3: So there's all those things are trimmed out. But even

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Speaker 3: we and they're the things that we know about, we

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Speaker 3: are going to be getting good new on inflation through

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Speaker 3: the course of this year, so the RBA will be

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Speaker 3: reflecting that in their updated forecast in a week and

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Speaker 3: a half time, and that'll be the reason that Michelle

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Speaker 3: Bullock is our RBA governor. When she does a press

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Speaker 3: conference after the announcement, will say, look, we've got enough

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Speaker 3: information to deliver a twenty five basis point cut. I

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Speaker 3: think the other part of what she might say is

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Speaker 3: don't get too excited. We're not about to return to

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Speaker 3: you one percent cash rate. We're currently four point three five.

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Speaker 3: I think she'll sort of temper that language by saying, well,

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Speaker 3: here's a rate cut. We can, you know, reward the economy,

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Speaker 3: if that's the right wording, because inflation's improved, but will

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Speaker 3: continue to monitor the economy for further years, and inflation's

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Speaker 3: under control, that unemployments at a favorable level for us.

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Speaker 3: So probably simply there'll be a couple more rate cuts

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Speaker 3: to come, but not seven, eight, nine, ten rate cuts.

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Speaker 3: I think we can rule that out.

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Speaker 2: Okay, let's just look at the other side of the argument, though,

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Speaker 2: look at your board shortly, but let's look at the

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Speaker 2: other side of the argument though, Cookie, what about if

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Speaker 2: she says, Look, zero point five is a really good

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Speaker 2: quarterly number, but I want to look at what happened

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Speaker 2: in the previous quarter of the previous QURD in the

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Speaker 2: previous quarter, obviously that's three point two correct. Maybe I'll

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Speaker 2: drop the first quarter off and I'll go three quarters

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Speaker 2: two quarters back and do two quarters forward with the

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Speaker 2: same point five number. And I haven't got the numbers

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Speaker 2: in front of me in my mind, but I don't

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Speaker 2: know where that where that will land.

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Speaker 3: That it probably get us down to the about two

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Speaker 3: point seven if my memories correct.

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Speaker 1: So even if we do that, it's still.

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Speaker 3: Under Still, it's still under three. Now that's important. It

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Speaker 3: is important, just and just again to remind myself and

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Speaker 3: you and everybody listening that with the revision to the

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Speaker 3: RBA functioning that treasure Jim Chalmers delivered a year or

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Speaker 3: so ago, while we and we still I still talk

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Speaker 3: about it the RBA having a range of two to

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Speaker 3: three percent. So in a sense, two point nine or

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Speaker 3: two point one are within the range, but they're a

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Speaker 3: very different inflation result. The revised wording that Michelle Bullock

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Speaker 3: looks at, we're aiming for the midpoint of the target range.

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Speaker 3: So they're still aiming for two point five. So if

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Speaker 3: we just, for example, if we did get through the

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Speaker 3: course of this year, we had two point nine two

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Speaker 3: point eight, two two point eight, they would be a

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Speaker 3: little annoyed. Yes, it's in the target range, but they

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Speaker 3: wanted to get more. And you know the odd quarter

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Speaker 3: when things sort of occasionally spike up or down, then

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Speaker 3: they're not going to get worried about that. But they

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Speaker 3: want a couple of quarters where there is a two

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Speaker 3: point sustainably a two point five or two point four,

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Speaker 3: not just on the headline, but in that core figure

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Speaker 3: to me.

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Speaker 1: And then if then if she says, well, the Fed.

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Speaker 2: Didn't move and they made a mistake doing to behalves

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Speaker 2: and maybe they went too early because America's on fire

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Speaker 2: and Trump's been Trump is now the president who knows

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Speaker 2: what's gonna what inflationary effects of his various policies that

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Speaker 2: he's threatening will be. Do you think there's an argument

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Speaker 2: for her to say, I just want to wait for

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Speaker 2: one more set of numbers, which will be the next

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Speaker 2: set of numbers will be April.

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Speaker 3: Correct, yeah, correct, Now we still get the monthly inflation numbers,

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Speaker 3: but yeah, they don't like them. Further court includes Lockstock.

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Speaker 1: And Barrel quarterly numbers.

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Speaker 3: I think it's it'd be the end of April, say,

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Speaker 3: for the May board meeting, which I think if I remember,

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Speaker 3: it's about twentieth of May, so after the election. Yeah. Yeah,

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Speaker 3: the good for Gym or anyone, but the issue there

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Speaker 3: does come through. She might look. The funny thing about

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Speaker 3: the RBA, since the minutes of the December meeting were released,

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Speaker 3: you know, well before Christmas, they haven't said anything. Here

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Speaker 3: we are in February, a couple of assistant governments given

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Speaker 3: speeches on payments and cryptocurrencies, and god knows well, but

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Speaker 3: there hasn't been an RBA official, let alone the governor

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Speaker 3: or the deputy governor give you talk about the economy.

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Speaker 3: So we're going to be sort of flying blind in

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Speaker 3: a sense. So that's why we tend to be focusing

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Speaker 3: on what's happening globally. So your point about the US

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Speaker 3: is a very good one, because the Fed, having cut

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Speaker 3: a few times already, did pause just this week. Last week,

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Speaker 3: they did pause because they're sort of saying, look, were

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Speaker 3: as you said, the economy is still resilient. You know,

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Speaker 3: they've got really low unemployment, they've got wages growth, their

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Speaker 3: stock markets on fire, so the wealth effects from American

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Speaker 3: citizens is pretty good. And of course Donald Trump and

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Speaker 3: without getting into the nitty gritty, I'm not quite sure

401
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Speaker 3: what the effect will be. Yes, I think nobody knows

402
00:19:35,560 --> 00:19:38,120
Speaker 3: because that tariff issue is inflationary, but you know it's

403
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Speaker 3: going to cut taxes and then you know what. So

404
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Speaker 3: in a sense, they're playing their own game, if you like.

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Speaker 3: But if I look around, what's happening in the other

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Speaker 3: parts of the world, because the other parts of the

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Speaker 3: world do matter. European Central Bank cut, Bank of England

408
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Speaker 3: last night, cut KIWIS. They're going to cut another fifty

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Speaker 3: their unemployment number and their economy is shocking. They've really

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Speaker 3: screwed up. Canada they cut last week. So you look

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Speaker 3: at comparal countries to US and US, Canada, UK, Europe

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Speaker 3: and KIWIS, they're all cutting still and they've already cut

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Speaker 3: one hundred and fifty basis points. Now they had rates

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Speaker 3: higher than we had, so maybe they're catching up. And

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Speaker 3: we're now in the pack if you like, where we're

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Speaker 3: gonna be.

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Speaker 1: We're still a little bit below some of them.

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Speaker 3: We below a couple of them. We're a different couple

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Speaker 3: of them. So now we're in the middle because I

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Speaker 3: think the Canadians cut to three if I remember correctly,

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Speaker 3: the UK cut to four point zero and we're four

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Speaker 3: point three five, so and the Americans are still four

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Speaker 3: point five, so they're a little above us. So yeah,

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Speaker 3: we sort of in the middle of the pack. But

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Speaker 3: that is important for us too. Yeah, and again, yeah,

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Speaker 3: we don't move in lockstep with every other country. But

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Speaker 3: if you see that global inflation rate, you know every

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Speaker 3: country's got a different inflation rate. But on the way

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Speaker 3: up during the pandemic, every country went up at about

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Speaker 3: the same rate. It will take a percent or two

431
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Speaker 3: everybody's come down, so you know the supply chains have

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Speaker 3: been fixed, and that's a global inflation issue. Oil, this

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Speaker 3: is global inflation issue. And then the effect of those

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Speaker 3: rate hikes in every country, because they all delivered rate hikes,

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Speaker 3: called the economies down.

436
00:21:08,960 --> 00:21:14,040
Speaker 2: So then if Michelle Bullock and the old Board are

437
00:21:14,040 --> 00:21:17,680
Speaker 2: sitting there and they're looking at because no doubt they'll

438
00:21:17,680 --> 00:21:19,400
Speaker 2: have to say, what are the reasons why we shouldn't

439
00:21:19,400 --> 00:21:22,679
Speaker 2: cut I mean, someone's going to put the debate up, Yeah,

440
00:21:22,720 --> 00:21:24,359
Speaker 2: what are the reasons why they shouldn't cut.

441
00:21:25,280 --> 00:21:27,639
Speaker 3: If I was to sort of say, okay, why you

442
00:21:27,640 --> 00:21:29,879
Speaker 3: shouldn't cut, let me put you on the I'll be

443
00:21:29,880 --> 00:21:32,000
Speaker 3: on the I'll have the case of negative. I would

444
00:21:32,080 --> 00:21:35,760
Speaker 3: say that the reasons would be the labor market. Well,

445
00:21:35,760 --> 00:21:37,000
Speaker 3: I know, we just spent a whole lot of time

446
00:21:37,000 --> 00:21:41,360
Speaker 3: talking about the labor market strong and why yeah, why

447
00:21:41,359 --> 00:21:45,840
Speaker 3: it's probably doesn't go against a rate cut. But if

448
00:21:45,880 --> 00:21:48,080
Speaker 3: you sort of focus on the fact that the unemployment

449
00:21:48,160 --> 00:21:51,280
Speaker 3: rate is four percent, that the NAB survey which came

450
00:21:51,359 --> 00:21:55,600
Speaker 3: out earlier this week, said that firms are still having

451
00:21:55,720 --> 00:22:00,840
Speaker 3: some difficulty finding labor, so by definition, they're probably having to,

452
00:22:01,240 --> 00:22:04,399
Speaker 3: you know, maybe tweak up their wages growth. I would

453
00:22:04,400 --> 00:22:07,639
Speaker 3: say global uncertainty is one where we might just hold back.

454
00:22:07,680 --> 00:22:09,600
Speaker 3: We'll wait and see what the Trump tariffs are. I am.

455
00:22:10,480 --> 00:22:12,280
Speaker 1: I'm not saying that we might be reduction this year.

456
00:22:12,560 --> 00:22:14,400
Speaker 1: I'm just thinking about, Oh wait.

457
00:22:14,600 --> 00:22:17,840
Speaker 3: If Michelle Bullock and her board come out and say

458
00:22:17,920 --> 00:22:22,159
Speaker 3: we've held rates, it'll be labor market, global uncertainty, and

459
00:22:22,359 --> 00:22:25,240
Speaker 3: the tariff effect and the thing that they mentioned. You've

460
00:22:25,280 --> 00:22:27,720
Speaker 3: only got a line in the or a couple of

461
00:22:27,760 --> 00:22:30,399
Speaker 3: lines in the RBA Minutes which came out last time.

462
00:22:30,920 --> 00:22:35,080
Speaker 3: They said explicitly Australia is going to benefit from the

463
00:22:35,080 --> 00:22:40,359
Speaker 3: policy stimulus in China, which it hasn't rolled out yet.

464
00:22:40,440 --> 00:22:43,720
Speaker 3: But in a funny way, we could just sit back

465
00:22:43,720 --> 00:22:46,240
Speaker 3: and if China recovers, which it hasn't just by the way,

466
00:22:46,640 --> 00:22:49,680
Speaker 3: but if China were to recover very strongly, we could

467
00:22:49,680 --> 00:22:51,359
Speaker 3: just sit back and think, well, we've got to export

468
00:22:51,600 --> 00:22:55,480
Speaker 3: truckloads and iron ore and gas and coal and people

469
00:22:55,480 --> 00:22:58,560
Speaker 3: will visit here a really positive issue for the Australian

470
00:22:58,560 --> 00:23:01,960
Speaker 3: economy without us suggesting trastrates. So they're the sort of

471
00:23:01,960 --> 00:23:04,400
Speaker 3: factor is that she might be having at the back

472
00:23:04,440 --> 00:23:05,800
Speaker 3: of her mind or at the front of her mind

473
00:23:05,800 --> 00:23:09,120
Speaker 3: and the board discussion on why they won't. But I

474
00:23:09,200 --> 00:23:11,440
Speaker 3: think the if we can call them the interest rate

475
00:23:11,480 --> 00:23:14,160
Speaker 3: dubs on the board, the people who sort of saying, oh,

476
00:23:14,160 --> 00:23:16,679
Speaker 3: we might need to trim rates would focus on the

477
00:23:16,720 --> 00:23:20,240
Speaker 3: actual inflation data and the fact that GINDP is still weak.

478
00:23:21,040 --> 00:23:23,000
Speaker 3: Even though we're going to get a better December quarter number,

479
00:23:23,280 --> 00:23:25,040
Speaker 3: it's still below where we should be.

480
00:23:25,760 --> 00:23:26,200
Speaker 1: Yeah, so.

481
00:23:28,480 --> 00:23:31,919
Speaker 2: What do you think this could do if we have

482
00:23:31,960 --> 00:23:33,600
Speaker 2: a rate reduction? What do you think this could do

483
00:23:33,640 --> 00:23:34,760
Speaker 2: to property prices?

484
00:23:35,119 --> 00:23:38,879
Speaker 3: Yeah? Look, this is obviously at face value. If there

485
00:23:38,960 --> 00:23:41,960
Speaker 3: is a rate cup and it's passed on, there's a

486
00:23:41,960 --> 00:23:43,080
Speaker 3: cash flow effect.

487
00:23:42,800 --> 00:23:46,399
Speaker 2: To about to pass on. Yeah, what's the normal convention?

488
00:23:47,720 --> 00:23:50,960
Speaker 2: The normal convention, let's go back twenty years.

489
00:23:51,359 --> 00:23:54,119
Speaker 3: Yeah, if they if the RBA hikes are cuts, but

490
00:23:54,359 --> 00:23:56,520
Speaker 3: we'll talk a rate cup. They cut twenty five basis

491
00:23:56,520 --> 00:24:00,679
Speaker 3: points on the official cache, right, the banks pass it

492
00:24:00,720 --> 00:24:03,720
Speaker 3: on to depositors and to borrowers.

493
00:24:03,960 --> 00:24:04,560
Speaker 1: Passed a lot.

494
00:24:05,880 --> 00:24:08,119
Speaker 3: You've got a term deposit at four and a half percent,

495
00:24:08,160 --> 00:24:10,159
Speaker 3: it'll probably reduce to four and a quarter. If you've

496
00:24:10,160 --> 00:24:12,800
Speaker 3: got a mortgage at six point four, brut drops to

497
00:24:12,840 --> 00:24:16,679
Speaker 3: six point one. Five normally just passes through back in

498
00:24:16,720 --> 00:24:19,359
Speaker 3: the day, conventional wisdom. And I know we're in a

499
00:24:19,440 --> 00:24:22,359
Speaker 3: very different, very very different, a very competitive and a

500
00:24:22,480 --> 00:24:27,600
Speaker 3: very oh problematic market for mortgages. Count Yes, and so

501
00:24:27,640 --> 00:24:28,919
Speaker 3: there's a whole lot of other things going on in

502
00:24:28,920 --> 00:24:32,360
Speaker 3: the mortgage market. So that old way that we used

503
00:24:32,359 --> 00:24:36,080
Speaker 3: to get that transmission from an official rate to the

504
00:24:36,560 --> 00:24:40,080
Speaker 3: actual rate that people paid was pretty simple, pretty straightforward.

505
00:24:40,440 --> 00:24:42,840
Speaker 3: Now with different sorts of mortgage, you know, fixed and

506
00:24:42,880 --> 00:24:45,440
Speaker 3: floating in two years and a mortgage offset account. Yeah,

507
00:24:45,480 --> 00:24:48,320
Speaker 3: there's I'm telling you nothing. Yeah, there's a whole lot

508
00:24:48,320 --> 00:24:50,280
Speaker 3: of different mortgages you can take out, and they're all

509
00:24:50,320 --> 00:24:52,720
Speaker 3: priced differently, and they're all priced to investor owned rocketpar

510
00:24:53,280 --> 00:24:56,199
Speaker 3: you know, interest only twenty five years thirty years. So

511
00:24:56,240 --> 00:24:57,800
Speaker 3: there's I don't know how many mortgages is, but yeah,

512
00:24:57,800 --> 00:25:01,360
Speaker 3: there must be dozens, and they're all from a different

513
00:25:02,400 --> 00:25:06,080
Speaker 3: set of inputs. They're largely the same, but there's a

514
00:25:06,080 --> 00:25:09,359
Speaker 3: few different inputs and a different risk assessment. Is this

515
00:25:09,440 --> 00:25:12,600
Speaker 3: line a little bit more risky than that loan, you know?

516
00:25:12,920 --> 00:25:15,200
Speaker 3: So there's all priced slightly differently. So to say that

517
00:25:15,520 --> 00:25:17,160
Speaker 3: this is going to be a pretty much a straightforward

518
00:25:17,200 --> 00:25:21,639
Speaker 3: pastor of twenty five basis points across the board probably

519
00:25:21,640 --> 00:25:25,280
Speaker 3: won't happen. Well, it'll be on the standard variable they will.

520
00:25:25,720 --> 00:25:27,080
Speaker 3: But I don't know how many people have a stands

521
00:25:27,119 --> 00:25:30,000
Speaker 3: variable rate anymore. It's a smaller proportion than back in

522
00:25:30,000 --> 00:25:31,280
Speaker 3: the old days where everybody.

523
00:25:31,000 --> 00:25:34,000
Speaker 1: Has worries me just on that point.

524
00:25:34,240 --> 00:25:36,840
Speaker 2: The vast majority of borrows in Australia variable radis, you

525
00:25:36,880 --> 00:25:45,800
Speaker 2: know these days, and I think that the banks have

526
00:25:45,880 --> 00:25:48,520
Speaker 2: been I think there's going to be a debate the

527
00:25:48,560 --> 00:25:51,480
Speaker 2: banks have been chasing because the insurrate has been high

528
00:25:52,119 --> 00:25:56,159
Speaker 2: and the market growth has been low. The banks have

529
00:25:56,240 --> 00:25:59,120
Speaker 2: been chasing market growth against each other, so they've been

530
00:25:59,200 --> 00:26:04,440
Speaker 2: actually have been operating very tight. What do I member

531
00:26:04,520 --> 00:26:06,679
Speaker 2: that has been pricing very tight, in other words, not

532
00:26:06,720 --> 00:26:11,960
Speaker 2: baking much margin into their loans, and the banks have

533
00:26:12,040 --> 00:26:14,360
Speaker 2: been sort of not lost leading, but.

534
00:26:15,080 --> 00:26:17,000
Speaker 1: Not too far away. There's not a lot of money

535
00:26:17,040 --> 00:26:17,280
Speaker 1: in it.

536
00:26:17,320 --> 00:26:21,680
Speaker 2: So eighty percent of the lending for prime prime loans

537
00:26:21,720 --> 00:26:22,640
Speaker 2: just covers your cost.

538
00:26:22,720 --> 00:26:24,000
Speaker 1: Twenty percent makes money.

539
00:26:24,480 --> 00:26:27,720
Speaker 2: And they're making the money in the big loans, you know,

540
00:26:27,840 --> 00:26:30,280
Speaker 2: the one million, two million dollar loans, the big loans

541
00:26:30,280 --> 00:26:32,440
Speaker 2: that they're making two people who have had a job

542
00:26:32,480 --> 00:26:34,680
Speaker 2: for five years. There's no risk associated with them. They're

543
00:26:34,680 --> 00:26:37,640
Speaker 2: making good money. They're only borrowing sixty five percent, they're

544
00:26:37,640 --> 00:26:39,840
Speaker 2: not borrowing eighty percent or whatever the case and b

545
00:26:40,480 --> 00:26:44,160
Speaker 2: et cetera. That's that's the big loans. That's twenty percent

546
00:26:44,160 --> 00:26:45,959
Speaker 2: of the market. The other eighty percent of the market,

547
00:26:46,680 --> 00:26:48,639
Speaker 2: there hasn't been a great deal of profit sitting in it,

548
00:26:48,720 --> 00:26:50,840
Speaker 2: and the banks have an obligation to.

549
00:26:50,840 --> 00:26:53,440
Speaker 1: Their shoholders to maximize profit now.

550
00:26:54,160 --> 00:26:56,920
Speaker 2: And I'm not suggesting the banks acting all the same

551
00:26:56,920 --> 00:26:59,399
Speaker 2: time because they don't. They know, they're all competitors and

552
00:26:59,440 --> 00:27:01,560
Speaker 2: they all got make their own decisions, but they're all

553
00:27:01,720 --> 00:27:02,879
Speaker 2: struck stricken by.

554
00:27:02,720 --> 00:27:03,520
Speaker 1: The same issue.

555
00:27:03,880 --> 00:27:06,720
Speaker 2: They haven't been making money on a vast proportion of

556
00:27:06,800 --> 00:27:10,520
Speaker 2: their new lending over the past five six years. You know,

557
00:27:10,600 --> 00:27:15,240
Speaker 2: bear in mind that the the the the government funding

558
00:27:15,920 --> 00:27:19,640
Speaker 2: policy that came in during the Liberal Party government during

559
00:27:19,880 --> 00:27:22,800
Speaker 2: the COVID period. These people, these beans have had to

560
00:27:22,800 --> 00:27:25,240
Speaker 2: pay all that back. Great that that that.

561
00:27:25,040 --> 00:27:29,680
Speaker 3: That that's the point one term funding, the t f s.

562
00:27:31,080 --> 00:27:35,879
Speaker 1: Whatever it is that has to be paid back, and

563
00:27:35,880 --> 00:27:37,520
Speaker 1: they're paying it back and I think it has to

564
00:27:37,560 --> 00:27:38,720
Speaker 1: be paid back by the end of the year.

565
00:27:38,880 --> 00:27:42,399
Speaker 3: Yes, so sooty.

566
00:27:42,680 --> 00:27:43,160
Speaker 1: Four points.

567
00:27:43,560 --> 00:27:48,239
Speaker 2: Sometimes the hybrids. Hybrids were issued six percent, and so

568
00:27:48,280 --> 00:27:50,800
Speaker 2: the cost of funds is quite high. So you know,

569
00:27:51,119 --> 00:27:51,720
Speaker 2: I would have.

570
00:27:51,600 --> 00:27:53,159
Speaker 1: To question for those people who listening to this, and

571
00:27:53,200 --> 00:27:56,199
Speaker 1: people should just think about this. It may not be

572
00:27:56,280 --> 00:27:58,359
Speaker 1: while the Reserve might do its job and you know.

573
00:27:58,359 --> 00:28:00,560
Speaker 2: Because they're happy with all the data they're getting and

574
00:28:00,600 --> 00:28:02,640
Speaker 2: they may reduce the interest rates. I just think people

575
00:28:02,640 --> 00:28:06,560
Speaker 2: should be careful that banks. Some banks might not pass

576
00:28:06,600 --> 00:28:08,879
Speaker 2: on the whole trin if I base points, or they might.

577
00:28:08,760 --> 00:28:12,920
Speaker 3: Wait you've triggered something in my mind. Here if you

578
00:28:12,960 --> 00:28:15,320
Speaker 3: go to the rb A dot gov dot AU website,

579
00:28:15,359 --> 00:28:18,359
Speaker 3: so the Reserve Bank of Australia website. In the top

580
00:28:18,359 --> 00:28:21,800
Speaker 3: panel there's the chart pack, which is a range of

581
00:28:21,880 --> 00:28:26,520
Speaker 3: I don't know, one hundred charts. Love it. You've sparked

582
00:28:26,520 --> 00:28:28,440
Speaker 3: one that caught my eye when I was going through

583
00:28:28,480 --> 00:28:32,480
Speaker 3: this over the summer holidays. As you do towards the back,

584
00:28:32,520 --> 00:28:34,359
Speaker 3: it might have been about the second last page is

585
00:28:34,400 --> 00:28:39,080
Speaker 3: a really simple chart NIM net interest margin.

586
00:28:38,720 --> 00:28:40,800
Speaker 1: And by the way of that bank critical to us

587
00:28:41,320 --> 00:28:44,080
Speaker 1: all is the number.

588
00:28:44,320 --> 00:28:48,760
Speaker 3: Correct, It's the most There's a lot of important numbers

589
00:28:48,760 --> 00:28:51,200
Speaker 3: in this economy, the net for the banks and the

590
00:28:51,440 --> 00:28:54,080
Speaker 3: pass through of rb A, rate hikes, rate cuts, all

591
00:28:54,080 --> 00:28:56,640
Speaker 3: the rest of it. It is bloody important.

592
00:28:57,000 --> 00:28:58,520
Speaker 1: It's called the NIM and it's actually called the NIM.

593
00:28:58,720 --> 00:29:02,320
Speaker 3: Yep. If you go, if listeners, go to the RBA

594
00:29:02,560 --> 00:29:05,840
Speaker 3: web page chart click on chart pack and it's it's

595
00:29:05,840 --> 00:29:08,400
Speaker 3: about the second last page. There's a whole lot of

596
00:29:08,400 --> 00:29:11,280
Speaker 3: stats on banks there, profits and stuff, but the one

597
00:29:11,320 --> 00:29:14,440
Speaker 3: that hit me between the eyes was the NIM and

598
00:29:14,600 --> 00:29:18,040
Speaker 3: it goes back about twenty five years. It's been crushed

599
00:29:18,440 --> 00:29:21,400
Speaker 3: and back in the day when Wizard came along, it.

600
00:29:21,360 --> 00:29:24,640
Speaker 1: Narrowed so it was for and came down about two

601
00:29:24,680 --> 00:29:25,280
Speaker 1: point four.

602
00:29:25,320 --> 00:29:27,480
Speaker 3: Correct, and then it's pobvered around that up and down,

603
00:29:27,680 --> 00:29:29,760
Speaker 3: a little bit up and a little bit down for years.

604
00:29:30,120 --> 00:29:33,360
Speaker 3: Because you know, the competitive pressures are pretty good. Just

605
00:29:33,400 --> 00:29:35,600
Speaker 3: the last couple of years, well the last year, not

606
00:29:35,640 --> 00:29:37,560
Speaker 3: the last couple is the last year. It's got a

607
00:29:37,560 --> 00:29:40,840
Speaker 3: lot of two percent percents, about one hundred and eighty

608
00:29:40,880 --> 00:29:45,280
Speaker 3: basis points, which, okay, that's what I think what you're

609
00:29:45,280 --> 00:29:49,440
Speaker 3: alluding to. There's competitive pressure, a generally weak house price

610
00:29:49,600 --> 00:29:52,040
Speaker 3: environment out there. You know, we were all worried about,

611
00:29:52,280 --> 00:29:54,120
Speaker 3: you know, what's going on in the housing market. So

612
00:29:54,160 --> 00:29:57,880
Speaker 3: the banks to maintain market share, you know, jostling with

613
00:29:57,960 --> 00:30:01,600
Speaker 3: each other, which is probably good for consumers. But this

614
00:30:01,680 --> 00:30:03,720
Speaker 3: is the butt that I think you're getting to. When

615
00:30:03,880 --> 00:30:06,200
Speaker 3: our friends at the if our friends, when our friends

616
00:30:06,200 --> 00:30:09,360
Speaker 3: at the RBA start trimming interest rates, the banks might say, oh,

617
00:30:09,360 --> 00:30:12,120
Speaker 3: thank goodness for that, we might only pass on ten bases.

618
00:30:12,320 --> 00:30:15,479
Speaker 2: Yes, and I'm not suggesting a bank will do that,

619
00:30:15,520 --> 00:30:17,560
Speaker 2: but by the way, it'll be of a discussion they'll

620
00:30:17,560 --> 00:30:18,560
Speaker 2: have in the Treasury department.

621
00:30:18,600 --> 00:30:20,000
Speaker 1: I can guarantee you.

622
00:30:20,360 --> 00:30:22,920
Speaker 3: Or they might do it on their on their high

623
00:30:23,200 --> 00:30:24,840
Speaker 3: they might pass with the full twenty five one they

624
00:30:24,920 --> 00:30:27,440
Speaker 3: what do we call it the high profile mortgage rate.

625
00:30:27,480 --> 00:30:29,120
Speaker 1: Well, they might do it on new borro the might

626
00:30:29,160 --> 00:30:31,160
Speaker 1: new borrowers. They might just say new borrowers.

627
00:30:31,200 --> 00:30:33,120
Speaker 3: And for the old borrows or the ones that have

628
00:30:33,120 --> 00:30:35,600
Speaker 3: got a thirty year loan or whatever, they might just

629
00:30:35,640 --> 00:30:40,440
Speaker 3: trim it ten fiftewelve, fifteen and get that NIM an

630
00:30:40,440 --> 00:30:43,560
Speaker 3: interest margin back up another five ten basis.

631
00:30:43,320 --> 00:30:45,280
Speaker 1: Which is and that's their job, by the way.

632
00:30:46,080 --> 00:30:48,600
Speaker 2: That's that's that's their job as showers because what they've

633
00:30:48,600 --> 00:30:51,680
Speaker 2: got the NIM represents the gross profit on their operations,

634
00:30:52,200 --> 00:30:54,200
Speaker 2: which is the reason why NIM by the way, and

635
00:30:54,280 --> 00:30:55,920
Speaker 2: a lot of people go on about how the banks

636
00:30:55,920 --> 00:30:58,880
Speaker 2: have to closing their branch et cetera. Well, part of

637
00:30:58,880 --> 00:31:00,640
Speaker 2: that reason they do is because don't make as much

638
00:31:00,640 --> 00:31:02,560
Speaker 2: money out of the mortgage and people myself, well, I

639
00:31:02,560 --> 00:31:04,520
Speaker 2: don't feel sorry for CBA because it makes ten billion

640
00:31:04,560 --> 00:31:05,680
Speaker 2: dollars a year, But at the end of the day,

641
00:31:05,720 --> 00:31:08,320
Speaker 2: reason CBO makes ten billion dollars later a year as

642
00:31:08,360 --> 00:31:10,479
Speaker 2: they're making it a much lower NIM. Just this so

643
00:31:10,560 --> 00:31:11,800
Speaker 2: they've got such a big book.

644
00:31:11,840 --> 00:31:14,640
Speaker 3: It's just such a One of the issues about Australa's

645
00:31:14,680 --> 00:31:17,360
Speaker 3: population growth is that when you know, we talk about

646
00:31:17,360 --> 00:31:20,480
Speaker 3: immigration impacting you know, the whole economy, labor supply and

647
00:31:20,520 --> 00:31:23,520
Speaker 3: all these other things. I dare say every immigrant it

648
00:31:23,560 --> 00:31:26,560
Speaker 3: comes opens a bank account, yeah, with one of the banks.

649
00:31:26,600 --> 00:31:29,800
Speaker 3: Then they have transactions to the banks make money from.

650
00:31:30,000 --> 00:31:31,840
Speaker 3: They get a credit card, they get a loan, they

651
00:31:31,880 --> 00:31:34,360
Speaker 3: get a car loan, and they get a mortgage. And

652
00:31:34,400 --> 00:31:37,240
Speaker 3: that it's just what do we call it, the critical

653
00:31:37,280 --> 00:31:39,600
Speaker 3: mass all the economies of scale that them is just

654
00:31:39,600 --> 00:31:41,400
Speaker 3: going so you can sort of get.

655
00:31:41,560 --> 00:31:44,560
Speaker 2: But not because it's not because they're gouging people on

656
00:31:44,640 --> 00:31:46,800
Speaker 2: the mortgage. In just that's that's sort of our point.

657
00:31:47,440 --> 00:31:51,120
Speaker 2: And if and banks have an obligation to get a

658
00:31:51,200 --> 00:31:55,520
Speaker 2: return on capital, you know, and you know, row return

659
00:31:55,600 --> 00:31:58,920
Speaker 2: equity is a big marker for how banks are priced.

660
00:31:59,120 --> 00:32:03,320
Speaker 2: And an Australian by the way, have an unbelievable value

661
00:32:03,320 --> 00:32:06,200
Speaker 2: share value relative to other banks around the world in

662
00:32:06,280 --> 00:32:08,680
Speaker 2: terms of total valuations. And this might be an opportunity

663
00:32:08,680 --> 00:32:10,160
Speaker 2: for banks to tell a little bit back you and I

664
00:32:10,160 --> 00:32:11,760
Speaker 2: shouldn't pint it too much on it. I just wanted

665
00:32:11,760 --> 00:32:13,800
Speaker 2: to raise it because I think it's an important point

666
00:32:14,440 --> 00:32:16,760
Speaker 2: the old days straight.

667
00:32:16,560 --> 00:32:19,480
Speaker 3: Away gets passed on and just just one other side

668
00:32:19,480 --> 00:32:22,680
Speaker 3: before we move on. The RBA will look at that too. Yeah,

669
00:32:22,760 --> 00:32:26,560
Speaker 3: they want because the officially interestraight, no one other than

670
00:32:26,600 --> 00:32:29,160
Speaker 3: the banks pay it sort of thing. Yeah, they want

671
00:32:29,160 --> 00:32:31,720
Speaker 3: to get the They if they're worried about growth and

672
00:32:31,720 --> 00:32:35,240
Speaker 3: low inflation or whatever their whatever their assessment of the

673
00:32:35,280 --> 00:32:41,000
Speaker 3: economy is, they want the interest rate cuts to impact

674
00:32:41,600 --> 00:32:44,760
Speaker 3: on the punters out there. They want them to get

675
00:32:44,760 --> 00:32:46,840
Speaker 3: that cashlight. So if they deem that a rate cuts

676
00:32:46,920 --> 00:32:51,240
Speaker 3: needed and it's not passed on curiously, they'll probably cut

677
00:32:51,280 --> 00:32:54,440
Speaker 3: a little bit more than the market's currently priced. And

678
00:32:54,520 --> 00:32:56,640
Speaker 3: if we don't get that passed through, because they want

679
00:32:56,680 --> 00:32:59,760
Speaker 3: to see the what is it the two trillion dollars

680
00:32:59,760 --> 00:33:01,440
Speaker 3: of more wages that are out there give will take.

681
00:33:01,880 --> 00:33:04,040
Speaker 3: They want to see people saving some money on that

682
00:33:04,080 --> 00:33:06,480
Speaker 3: so they can spend, get the economy growing and keep

683
00:33:06,520 --> 00:33:09,400
Speaker 3: that unemployment rate nearer four than rather than coming up

684
00:33:09,400 --> 00:33:10,640
Speaker 3: to four and a half or five percent.

685
00:33:10,720 --> 00:33:12,240
Speaker 2: So just so I don't but I don't want to

686
00:33:12,480 --> 00:33:14,160
Speaker 2: give her own brain image.

687
00:33:13,760 --> 00:33:17,680
Speaker 1: But if I could just.

688
00:33:17,120 --> 00:33:23,280
Speaker 2: Just you said something quite interesting then to me, why

689
00:33:23,280 --> 00:33:29,200
Speaker 2: would the Reserve Bank reduce interest rates? And let's assume

690
00:33:29,240 --> 00:33:32,840
Speaker 2: that the banks pass them on, and let's assume the

691
00:33:32,920 --> 00:33:37,240
Speaker 2: pass on effect is stimulation and the economy when they

692
00:33:37,600 --> 00:33:40,840
Speaker 2: think it's not too bad at the moment, I mean,

693
00:33:40,880 --> 00:33:42,520
Speaker 2: why do they want to stimulate the company?

694
00:33:42,560 --> 00:33:44,600
Speaker 1: Is it about Steve is about?

695
00:33:44,880 --> 00:33:47,960
Speaker 2: Is it about stimulating the economy, or is it about

696
00:33:47,960 --> 00:33:49,640
Speaker 2: stop punishing an economy.

697
00:33:49,840 --> 00:33:52,360
Speaker 3: The latter, stop punishing the economy, and it's about where

698
00:33:52,400 --> 00:33:54,400
Speaker 3: the economy is going to be in six to nine

699
00:33:54,480 --> 00:33:55,200
Speaker 3: to twelve months.

700
00:33:55,200 --> 00:33:56,800
Speaker 1: So they always still at the medium term.

701
00:33:56,760 --> 00:34:00,720
Speaker 3: Because a rate cup today or on the eighteenth of February,

702
00:34:00,960 --> 00:34:03,320
Speaker 3: if that's when we get it, will not impact the

703
00:34:03,320 --> 00:34:05,920
Speaker 3: economy on the nineteenth of February or the nineteenth of March,

704
00:34:05,960 --> 00:34:08,240
Speaker 3: even you know, there is a little bit of a

705
00:34:08,440 --> 00:34:11,600
Speaker 3: time that the banks and other institutions pass it on.

706
00:34:11,719 --> 00:34:13,600
Speaker 3: Fair enough, takes a little bit of while to organize

707
00:34:13,600 --> 00:34:16,799
Speaker 3: these things and then for the borrowers to recognize the

708
00:34:16,800 --> 00:34:19,440
Speaker 3: fact that it's been delivered. So again, assuming it's passed on,

709
00:34:19,480 --> 00:34:22,160
Speaker 3: because so for someone who's got a big mortage, they

710
00:34:22,200 --> 00:34:26,680
Speaker 3: get the first rate cut in March or April, on

711
00:34:26,719 --> 00:34:29,920
Speaker 3: their scheduled repayments, because that's when their next three payments due.

712
00:34:30,040 --> 00:34:32,120
Speaker 3: They save I don't know, one hundred bucks whatever that

713
00:34:32,200 --> 00:34:34,719
Speaker 3: number is per month on their moulage repayments, and might think, oh,

714
00:34:34,800 --> 00:34:37,279
Speaker 3: that's good, and then in May they realize a bit

715
00:34:37,280 --> 00:34:40,000
Speaker 3: more and then oh, finally it's sort of It's not

716
00:34:40,040 --> 00:34:43,239
Speaker 3: because consumers are silly. They're not. They're very, very astute.

717
00:34:43,680 --> 00:34:47,799
Speaker 3: But it takes a while for that lag between when

718
00:34:47,840 --> 00:34:50,200
Speaker 3: I pull the trigger on a rate cut and when

719
00:34:50,239 --> 00:34:52,279
Speaker 3: it has its full effect on the economy. And it's

720
00:34:52,280 --> 00:34:55,400
Speaker 3: been modeled a thousand times, as you know, Mark, it's

721
00:34:55,440 --> 00:34:59,520
Speaker 3: between six and twelve ish months. Sometimes it's a little

722
00:34:59,520 --> 00:35:01,600
Speaker 3: bit longer if there's different things happening in the economy.

723
00:35:01,880 --> 00:35:04,320
Speaker 3: But if you cut interest rates today, the full effect

724
00:35:04,440 --> 00:35:05,840
Speaker 3: there'll be a little bit of effect earlier on, but

725
00:35:05,880 --> 00:35:08,719
Speaker 3: the full effect of that rate cuts not for six months.

726
00:35:08,560 --> 00:35:11,000
Speaker 3: That's why the rate cut in February will have its

727
00:35:11,000 --> 00:35:13,480
Speaker 3: impact in the second half let's call it of twenty

728
00:35:13,520 --> 00:35:14,680
Speaker 3: twenty five and into twenty.

729
00:35:14,440 --> 00:35:18,799
Speaker 2: Twelve in terms of responses and results. But what you watch,

730
00:35:18,840 --> 00:35:20,719
Speaker 2: you Ray, Who's why I wanted to go to this point.

731
00:35:21,040 --> 00:35:25,920
Speaker 2: So if the because of the lag effect, and who

732
00:35:26,000 --> 00:35:27,680
Speaker 2: really knows how long it's going to be. Let's say

733
00:35:27,680 --> 00:35:30,080
Speaker 2: it's somewhere between six and twelve months, in other words,

734
00:35:30,080 --> 00:35:32,400
Speaker 2: before people start to feel the benefit.

735
00:35:32,040 --> 00:35:34,960
Speaker 1: Of a rate reduction and or rate reductions plural.

736
00:35:35,920 --> 00:35:38,840
Speaker 2: Let's say it's you know, July August, maybe longer, but

737
00:35:38,920 --> 00:35:40,680
Speaker 2: let's say it's sometime in the second half of this

738
00:35:40,760 --> 00:35:43,440
Speaker 2: calendar year. What's important about what you just said, and I.

739
00:35:43,400 --> 00:35:45,160
Speaker 1: Think we should have expressed listeners, is.

740
00:35:45,120 --> 00:35:50,320
Speaker 2: This therefore, if that, if therefore, if that rate cut

741
00:35:51,880 --> 00:35:56,160
Speaker 2: doesn't really drop into everyone's back pocket for a bit

742
00:35:56,160 --> 00:36:01,920
Speaker 2: of time, then between the December numbers which came out

743
00:36:01,960 --> 00:36:04,960
Speaker 2: the end of January, the read on inflation at three

744
00:36:05,000 --> 00:36:09,799
Speaker 2: point two trim mean underlying inflation, and the day that

745
00:36:10,080 --> 00:36:14,560
Speaker 2: this money sorts of drop into everybody's pocket, the expectation

746
00:36:15,520 --> 00:36:18,359
Speaker 2: of the Reserve Bank will be that the inflation run

747
00:36:18,440 --> 00:36:20,000
Speaker 2: should keep running downs.

748
00:36:20,040 --> 00:36:21,319
Speaker 1: It doesn't stimulate day one.

749
00:36:21,880 --> 00:36:24,799
Speaker 2: So therefore, if it's on its way down, if they're

750
00:36:24,920 --> 00:36:28,640
Speaker 2: convinced that interest rates are inflation is coming down coming down.

751
00:36:29,000 --> 00:36:31,640
Speaker 2: By the time the interest rate reduction that they announced

752
00:36:31,640 --> 00:36:35,000
Speaker 2: on the outlay of February has any effect, inflation is

753
00:36:35,000 --> 00:36:37,480
Speaker 2: probably going to be down to two and a half percent.

754
00:36:37,520 --> 00:36:41,720
Speaker 3: Which is why we haven't spoken about the futures market,

755
00:36:42,040 --> 00:36:45,480
Speaker 3: which I do love. It's not always accurate, so it's

756
00:36:45,480 --> 00:36:48,080
Speaker 3: always accurate, but sometimes gets it wrong. But as we

757
00:36:48,080 --> 00:36:49,719
Speaker 3: sit here this morning, I checked before we came in

758
00:36:49,760 --> 00:36:54,440
Speaker 3: for the recording. We do have between now early February

759
00:36:55,000 --> 00:36:57,520
Speaker 3: and the first half of twenty twenty six, so the

760
00:36:57,560 --> 00:36:59,799
Speaker 3: next fifteen odd months, which is where the future are

761
00:36:59,800 --> 00:37:04,640
Speaker 3: gen most traded, we have just under one hundred basis

762
00:37:04,719 --> 00:37:07,600
Speaker 3: points of rate cuts priced into the futures market. So

763
00:37:07,640 --> 00:37:10,400
Speaker 3: the money market investors who trade these things, and the

764
00:37:10,440 --> 00:37:12,840
Speaker 3: banks who buy the money and hedge their money on

765
00:37:12,920 --> 00:37:15,719
Speaker 3: bank bill markets and all this other stuff are effectively

766
00:37:15,760 --> 00:37:18,200
Speaker 3: saying here and now, we think there's going to be

767
00:37:18,320 --> 00:37:23,239
Speaker 3: seventy five, maybe one hundred points of cuts between today

768
00:37:23,520 --> 00:37:26,759
Speaker 3: and early twenty twenty six. So the official cash eight

769
00:37:26,760 --> 00:37:30,319
Speaker 3: four point three five today could be three point three

770
00:37:30,440 --> 00:37:33,759
Speaker 3: five three point five ish, you know, without putting a

771
00:37:33,800 --> 00:37:37,239
Speaker 3: pinpoint accurate number on it. And to me, that's about right.

772
00:37:37,520 --> 00:37:40,880
Speaker 3: And if the RBA, well, we'll see what Michelle Bullock

773
00:37:40,880 --> 00:37:44,960
Speaker 3: says at her press conference in a week or two.

774
00:37:45,200 --> 00:37:47,160
Speaker 3: She'll probably say that that's a reason I think she'd

775
00:37:47,239 --> 00:37:51,239
Speaker 3: last that's a reasonable assessment of what we might Well.

776
00:37:51,239 --> 00:37:52,960
Speaker 2: That worries me a little bit, coug you know, I'll

777
00:37:52,960 --> 00:37:55,680
Speaker 2: see why because if we look at what, you know,

778
00:37:55,760 --> 00:37:59,880
Speaker 2: the net zero proposition, if it's a three point five fraging.

779
00:38:00,000 --> 00:38:01,759
Speaker 2: So let's say we get one hundred three point three five,

780
00:38:01,800 --> 00:38:03,439
Speaker 2: one hundred base points for the reduction, its three point

781
00:38:03,480 --> 00:38:03,839
Speaker 2: three four.

782
00:38:04,800 --> 00:38:06,280
Speaker 1: It's not zero, because.

783
00:38:06,080 --> 00:38:07,360
Speaker 2: I mean, there's no way in the world they're going

784
00:38:07,360 --> 00:38:09,000
Speaker 2: to give us a hundred base points if they think

785
00:38:09,280 --> 00:38:12,920
Speaker 2: inflation is going to be a three No, it's going

786
00:38:12,960 --> 00:38:15,279
Speaker 2: to be They need to see each each number. Yeah,

787
00:38:15,320 --> 00:38:17,000
Speaker 2: it's going to be way way lower than that. It's

788
00:38:17,000 --> 00:38:19,200
Speaker 2: going to be two and a half minimum.

789
00:38:18,600 --> 00:38:21,640
Speaker 3: It's correct. And as I said, as we said earlier,

790
00:38:21,680 --> 00:38:24,440
Speaker 3: they target to the midpoint of the target range, and

791
00:38:24,480 --> 00:38:25,799
Speaker 3: for the other quart of it's two point seven. They

792
00:38:25,800 --> 00:38:27,080
Speaker 3: don't care two on three, they don't care as long

793
00:38:27,120 --> 00:38:29,279
Speaker 3: as it's roughly two and a half. Yeah. Yeah, but

794
00:38:29,320 --> 00:38:32,279
Speaker 3: we're coming from such a high starting point. Yeah, you know,

795
00:38:32,360 --> 00:38:34,640
Speaker 3: and here we are, we're just sort of al alujah,

796
00:38:34,640 --> 00:38:36,560
Speaker 3: and we've got it. We've got it down a bit.

797
00:38:37,200 --> 00:38:41,520
Speaker 3: But again, we want confirmation. You know, it's like need

798
00:38:41,760 --> 00:38:45,120
Speaker 3: leading the Grand Final ten they're after ten minutes. Great start,

799
00:38:45,160 --> 00:38:46,600
Speaker 3: but you haven't won the game yet. There's a lot

800
00:38:46,640 --> 00:38:48,640
Speaker 3: of teams playing against Penrith have found out the last

801
00:38:48,640 --> 00:38:52,360
Speaker 3: few years. You know, it's good start and you're happy

802
00:38:52,560 --> 00:38:55,520
Speaker 3: as a fan, as a fan of low inflation, you'll

803
00:38:55,560 --> 00:38:59,640
Speaker 3: be thinking we're we're on track. But then the bouts

804
00:38:59,640 --> 00:39:02,440
Speaker 3: of the ball goes the wrong way. Trump tariffs do something,

805
00:39:03,360 --> 00:39:07,239
Speaker 3: you know, China's stimulus measures. You know, a myriad of

806
00:39:07,320 --> 00:39:10,759
Speaker 3: things happen. We've got an election here probably in May.

807
00:39:11,320 --> 00:39:13,480
Speaker 3: And by the way, I loved both of your interviews

808
00:39:13,480 --> 00:39:16,960
Speaker 3: with mister Dutnan and mister Albanesi. They were sensational, so

809
00:39:17,080 --> 00:39:20,080
Speaker 3: recommended for everybody who missed because it's they were very personal,

810
00:39:20,239 --> 00:39:21,680
Speaker 3: I found and I thought they.

811
00:39:21,600 --> 00:39:24,040
Speaker 1: Were you know, they both did a good job, but they.

812
00:39:24,000 --> 00:39:27,839
Speaker 3: Were both good interviews. Like you know. So just by

813
00:39:27,880 --> 00:39:30,520
Speaker 3: the way, no policy, no, no, no, but there will

814
00:39:30,520 --> 00:39:33,360
Speaker 3: be policies involved with the election of correction, so labor

815
00:39:33,400 --> 00:39:36,440
Speaker 3: liberal liberal, labor, whatever, and you know, fine, that's what

816
00:39:36,480 --> 00:39:39,239
Speaker 3: we're having a vote about, you know, but that could

817
00:39:39,239 --> 00:39:42,680
Speaker 3: come along and create some issue for the RBA. You know,

818
00:39:42,880 --> 00:39:44,560
Speaker 3: maybe you know, I don't know. I'm just making this

819
00:39:44,640 --> 00:39:48,040
Speaker 3: up at the moment. So that trajectory of a hundred

820
00:39:48,120 --> 00:39:50,080
Speaker 3: or nearly one hundred points of rate cuts priced into

821
00:39:50,120 --> 00:39:52,800
Speaker 3: the market, that can change, That can change very quickly,

822
00:39:54,640 --> 00:39:58,880
Speaker 3: for as news comes out. And indeed, thinking back to

823
00:39:58,920 --> 00:40:01,239
Speaker 3: that inflation which out at the end of January a

824
00:40:01,320 --> 00:40:06,120
Speaker 3: couple of weeks ago, that caused the market to rally

825
00:40:06,120 --> 00:40:08,440
Speaker 3: in price. And before that we only had sort of

826
00:40:08,680 --> 00:40:10,680
Speaker 3: two and a half rate cuts. So when that number

827
00:40:10,760 --> 00:40:12,680
Speaker 3: came in nice and low and everybody was able to

828
00:40:12,760 --> 00:40:15,480
Speaker 3: analyze it, oh, hell, we better reprice to three and

829
00:40:15,520 --> 00:40:16,280
Speaker 3: a half rate cuts.

830
00:40:16,960 --> 00:40:20,640
Speaker 2: So just just before we go to your table, do

831
00:40:20,719 --> 00:40:25,640
Speaker 2: you think the RBA in their half yearly review, which

832
00:40:25,680 --> 00:40:27,920
Speaker 2: is which comes out in February or with late February

833
00:40:27,920 --> 00:40:30,520
Speaker 2: guests these days, when they after they have the meeting

834
00:40:30,560 --> 00:40:31,840
Speaker 2: on the they usually put.

835
00:40:31,760 --> 00:40:33,200
Speaker 3: They usually have that simultaneously.

836
00:40:33,200 --> 00:40:36,440
Speaker 1: Now the same day, so we'll get the half year

837
00:40:36,440 --> 00:40:36,879
Speaker 1: the view.

838
00:40:36,880 --> 00:40:39,400
Speaker 3: There's so much information that Oh, it's a dream for

839
00:40:39,480 --> 00:40:40,640
Speaker 3: us economists.

840
00:40:40,200 --> 00:40:42,960
Speaker 2: Because she's going to be because she has been saying

841
00:40:44,520 --> 00:40:49,160
Speaker 2: twenty sixteen, twenty six is the twenty twenty six is

842
00:40:49,160 --> 00:40:50,759
Speaker 2: the time when we're going to start seeing flash in

843
00:40:50,760 --> 00:40:51,520
Speaker 2: the right territory.

844
00:40:51,800 --> 00:40:55,320
Speaker 1: Yes, so you reckon she will review that, bring that forward, right.

845
00:40:57,360 --> 00:40:59,080
Speaker 3: I was crunching some numbers the other day. I reckon,

846
00:40:59,160 --> 00:41:00,960
Speaker 3: they'll bring it forward by six months. Wow.

847
00:41:01,800 --> 00:41:04,040
Speaker 1: So I think you're saying smart twenty twenty six.

848
00:41:04,160 --> 00:41:05,759
Speaker 3: So I think they'll bring it through. She might be

849
00:41:05,760 --> 00:41:07,320
Speaker 3: a little bit vague and say the second half.

850
00:41:07,160 --> 00:41:08,960
Speaker 1: Of twenty twenty four, right, right, that's interesting.

851
00:41:09,560 --> 00:41:13,279
Speaker 3: September quarter or December quarter. That was why, you know,

852
00:41:14,200 --> 00:41:16,839
Speaker 3: just hammer this point home. That was why when that

853
00:41:16,920 --> 00:41:21,080
Speaker 3: December quarter inflation number came out, we saw the point

854
00:41:21,120 --> 00:41:23,799
Speaker 3: five trimmed me more, you know, more importantly than the

855
00:41:23,840 --> 00:41:27,640
Speaker 3: headline figure. When it came out, people thought, wow, even

856
00:41:27,680 --> 00:41:30,080
Speaker 3: and I'm not throwing stones at anybody here, but even

857
00:41:30,600 --> 00:41:32,640
Speaker 3: you know, good old Warren Hogan, who are expect immensely

858
00:41:32,680 --> 00:41:34,279
Speaker 3: He came out and said, well, no worry.

859
00:41:34,160 --> 00:41:35,919
Speaker 1: He said text, he said it's going to happen.

860
00:41:36,239 --> 00:41:38,920
Speaker 3: He said, gee, that's a low result. And you know

861
00:41:38,960 --> 00:41:39,840
Speaker 3: he's as hawkish as that.

862
00:41:40,160 --> 00:41:41,120
Speaker 1: And Chris Joan and even.

863
00:41:41,040 --> 00:41:44,040
Speaker 3: Chris Yes, so two people are really hawkish on rates.

864
00:41:44,040 --> 00:41:47,399
Speaker 3: Smart smart economists, you know, they know their stuff as well.

865
00:41:47,400 --> 00:41:50,320
Speaker 3: As most as well as anyone who were really hawkish

866
00:41:50,320 --> 00:41:52,319
Speaker 3: and fair enough said I'm not having to go at

867
00:41:52,360 --> 00:41:54,959
Speaker 3: them for one second. But they've come out and said, well, gee,

868
00:41:54,960 --> 00:41:59,120
Speaker 3: that number has made me rethink, just like I rethought

869
00:41:59,120 --> 00:41:59,680
Speaker 3: a whole lot of things.

870
00:41:59,719 --> 00:42:02,920
Speaker 2: In mind, what happens in this game because data, you

871
00:42:02,960 --> 00:42:04,080
Speaker 2: only respond to the data.

872
00:42:04,680 --> 00:42:07,560
Speaker 3: Correct. You have your view, your form, your views, your craft,

873
00:42:07,560 --> 00:42:10,399
Speaker 3: an argument about rates up, rates down, GDP up, GDP down,

874
00:42:10,400 --> 00:42:12,960
Speaker 3: all that stuff, and then a number comes out Occasionally

875
00:42:13,040 --> 00:42:16,759
Speaker 3: you think, shiver, is that was a big difference. I've

876
00:42:16,760 --> 00:42:20,279
Speaker 3: got to change my view or that reinforces my view,

877
00:42:20,320 --> 00:42:22,600
Speaker 3: you know, one or the other. And that CPI mark

878
00:42:22,880 --> 00:42:25,520
Speaker 3: was so big that the interest rate hawks, you know,

879
00:42:25,560 --> 00:42:27,719
Speaker 3: the ones we've got to hike, you know. You know again,

880
00:42:27,760 --> 00:42:29,600
Speaker 3: I'm not having a gun them. But they came out

881
00:42:29,640 --> 00:42:31,800
Speaker 3: and said, gee, that's that's amazing.

882
00:42:31,960 --> 00:42:34,360
Speaker 2: You know, I changed my view. I said something on

883
00:42:34,400 --> 00:42:37,600
Speaker 2: TV the other day. I said, good on Australians because

884
00:42:37,640 --> 00:42:41,360
Speaker 2: they have behaved in the way the Reserve Bank governor

885
00:42:41,400 --> 00:42:43,760
Speaker 2: would like to see them behave relative to what's happened

886
00:42:43,800 --> 00:42:48,000
Speaker 2: with the interest rates. Correct, we've done it in way business.

887
00:42:48,680 --> 00:42:51,319
Speaker 2: I just want to be clear it's no politician has

888
00:42:51,320 --> 00:42:53,640
Speaker 2: done this. It's Australians.

889
00:42:54,520 --> 00:42:55,120
Speaker 1: We've done it.

890
00:42:55,360 --> 00:42:58,040
Speaker 3: And as I've said a million times, I say it

891
00:42:58,120 --> 00:43:01,080
Speaker 3: till the day I give up economics, which still hopefully

892
00:43:01,120 --> 00:43:07,240
Speaker 3: twenty years away. Australian Australians are smart when it comes

893
00:43:07,280 --> 00:43:10,799
Speaker 3: to their money. I'm not just saying that because we are.

894
00:43:11,040 --> 00:43:13,280
Speaker 3: And that's why interest rates are such a topical issue.

895
00:43:13,400 --> 00:43:15,600
Speaker 3: You know, mates in the US, what are you? Australiths

896
00:43:15,640 --> 00:43:17,759
Speaker 3: talks so much about interest rates. It's because we love it.

897
00:43:17,800 --> 00:43:19,560
Speaker 3: We've got mortgages, we want to buy a house, we've

898
00:43:19,560 --> 00:43:23,239
Speaker 3: got our superannuation. You know, we're worried about Oh the

899
00:43:23,239 --> 00:43:25,680
Speaker 3: market went down and even though you have you're thirty

900
00:43:25,719 --> 00:43:27,560
Speaker 3: five years old, you can't get your sleep for another

901
00:43:27,840 --> 00:43:30,160
Speaker 3: thirty years. Or you've got a motgage you don't paid

902
00:43:30,160 --> 00:43:32,880
Speaker 3: off for another twenty years. We love this sort of

903
00:43:32,880 --> 00:43:36,279
Speaker 3: stuff and so that means that the discussion of interest

904
00:43:36,360 --> 00:43:38,040
Speaker 3: rates and twenty five basis points. If you've got a

905
00:43:38,040 --> 00:43:40,720
Speaker 3: twenty five year mortgage, twenty five base points is nothing

906
00:43:40,760 --> 00:43:42,680
Speaker 3: in the scheme of your mortgage, but for.

907
00:43:42,719 --> 00:43:44,520
Speaker 1: Today next month, when.

908
00:43:44,400 --> 00:43:48,400
Speaker 3: You're forking out bloody thousands of dollars on your repayments,

909
00:43:48,840 --> 00:43:51,439
Speaker 3: and you get one rate cut, maybe another rate cut,

910
00:43:51,480 --> 00:43:54,440
Speaker 3: and you listen to this debate and hopefully this podcast

911
00:43:54,880 --> 00:43:56,880
Speaker 3: and whatever you think. Gee w well, yeah, by this

912
00:43:56,920 --> 00:43:59,399
Speaker 3: time next year, it is a long time, we might

913
00:43:59,400 --> 00:44:02,799
Speaker 3: get rates seventy five, one hundred points lower. Put that

914
00:44:02,880 --> 00:44:05,759
Speaker 3: in your calculator. Fantastic. I'm going to save a couple

915
00:44:05,880 --> 00:44:09,439
Speaker 3: hundred bucks a month. Who I'll be breathing a sigh

916
00:44:09,480 --> 00:44:11,319
Speaker 3: of relief, and I might actually go out and spend

917
00:44:11,320 --> 00:44:14,680
Speaker 3: a bit more money. You know. That's why our Australian

918
00:44:14,680 --> 00:44:17,400
Speaker 3: consumers when they saw the raid hikes turning it on.

919
00:44:17,480 --> 00:44:20,160
Speaker 3: Then when oh my god, consumer sentiment went through the floor,

920
00:44:20,719 --> 00:44:24,600
Speaker 3: consumers spending went through the floor. Retailers under a huge pressure,

921
00:44:24,640 --> 00:44:26,640
Speaker 3: a lot of construction companies, oh my god, you know

922
00:44:26,680 --> 00:44:31,600
Speaker 3: they got hit. And that was the well I call

923
00:44:31,640 --> 00:44:35,799
Speaker 3: it tough love that happened. And now we've suffered the

924
00:44:35,840 --> 00:44:38,040
Speaker 3: tough love. We're about to get some real love.

925
00:44:38,719 --> 00:44:41,400
Speaker 1: So let's have a look at your table.

926
00:44:41,719 --> 00:44:42,600
Speaker 3: Fantastic minutes.

927
00:44:42,719 --> 00:44:45,800
Speaker 2: I think we nearly answered the question. But anyway, yeah,

928
00:44:45,840 --> 00:44:47,759
Speaker 2: here we go. Okay, cool, let's we'll get it mate.

929
00:44:47,840 --> 00:44:51,000
Speaker 3: I'm mate. Look, we'll start with and again just before

930
00:44:51,000 --> 00:44:55,160
Speaker 3: we kick off. It's these top few indicators on our whiteboard,

931
00:44:55,160 --> 00:44:58,080
Speaker 3: our monetary policy checklists that are more important. So GDP again,

932
00:44:58,120 --> 00:45:01,480
Speaker 3: how's the economy going rate to the easing side? And

933
00:45:01,520 --> 00:45:03,680
Speaker 3: while we said that there's a little bit better news

934
00:45:03,719 --> 00:45:06,440
Speaker 3: coming for the December quarter, it's coming from a base

935
00:45:06,560 --> 00:45:09,640
Speaker 3: of zero point eight annual GDP weak as water. We

936
00:45:09,680 --> 00:45:13,479
Speaker 3: need that growth rate to come through inflation. I've moved

937
00:45:13,480 --> 00:45:15,920
Speaker 3: from neutral to easy. I haven't quite got it in

938
00:45:15,960 --> 00:45:19,279
Speaker 3: the complete easing cycle, but we're almost there. You just

939
00:45:19,320 --> 00:45:23,880
Speaker 3: put it on the line though, feel better because the

940
00:45:23,920 --> 00:45:26,520
Speaker 3: headline rate's under control. But again that's been distorted by

941
00:45:26,520 --> 00:45:30,120
Speaker 3: these government subsidies and whatnot. But the point five trinny, Yes,

942
00:45:30,160 --> 00:45:31,759
Speaker 3: we are hoping that we get another point five or

943
00:45:31,760 --> 00:45:35,120
Speaker 3: a point six next quarter. Yeah. As I said, we're leading.

944
00:45:35,160 --> 00:45:37,480
Speaker 3: We're leading ten after ten minutes in the Grand Final.

945
00:45:38,000 --> 00:45:40,080
Speaker 3: We look good. I want to be leading by ten

946
00:45:40,120 --> 00:45:41,600
Speaker 3: points with one minute to go. On the ground.

947
00:45:41,640 --> 00:45:44,120
Speaker 1: We're leading after the first ten minutes and no injuries.

948
00:45:45,120 --> 00:45:47,760
Speaker 3: Time's been sent off all to the sin Bin labor market.

949
00:45:47,920 --> 00:45:49,120
Speaker 3: We've spent a bit of time on that. I'm just

950
00:45:49,120 --> 00:45:50,799
Speaker 3: going to leave that in neutral because I don't think

951
00:45:50,880 --> 00:45:53,240
Speaker 3: you'd high rates because of the lab market. And remember

952
00:45:53,280 --> 00:45:57,960
Speaker 3: this is tightening, neutral and easing. It's a really good

953
00:45:58,000 --> 00:45:59,959
Speaker 3: result and it's something that again we should be pleased.

954
00:46:00,000 --> 00:46:02,280
Speaker 3: We've got full employment or near enough to full employment.

955
00:46:02,320 --> 00:46:05,759
Speaker 3: That's a mighty good thing. Wage is neutral, not in

956
00:46:05,800 --> 00:46:07,840
Speaker 3: the easing side, because wages grow three and a half

957
00:46:07,880 --> 00:46:11,200
Speaker 3: and to use the Goldilocks analogy, not too hot, not

958
00:46:11,280 --> 00:46:14,160
Speaker 3: too cold, just right. Three and a half percent annual

959
00:46:14,200 --> 00:46:17,879
Speaker 3: wages growth is something that workers are happy to get,

960
00:46:19,320 --> 00:46:21,720
Speaker 3: businesses are happy to pay it to retain their talent

961
00:46:21,760 --> 00:46:24,200
Speaker 3: and good staff, and the RBA is happy because it's

962
00:46:24,239 --> 00:46:29,040
Speaker 3: consistent with the inflation target. So right on neutral international,

963
00:46:29,120 --> 00:46:32,480
Speaker 3: I'm putting straight onto the easing side. We mentioned that

964
00:46:32,920 --> 00:46:35,280
Speaker 3: even though the FED paused on it's the US federals

965
00:46:35,320 --> 00:46:41,680
Speaker 3: a pause on its interstrate cutting cycle. England, New Zealand, UK, Canada,

966
00:46:42,440 --> 00:46:44,960
Speaker 3: Europe are all cutting interstrates still and they're not doing

967
00:46:44,960 --> 00:46:48,200
Speaker 3: it for far. China's cutting the economy is a week,

968
00:46:48,280 --> 00:46:51,640
Speaker 3: so that's in the easing side. House prices are neutral

969
00:46:51,640 --> 00:46:53,440
Speaker 3: because again just in the last couple of months, if

970
00:46:53,440 --> 00:46:56,600
Speaker 3: we look at the Core Logic monthly data, they've been

971
00:46:56,680 --> 00:47:00,640
Speaker 3: flat to slightly down. Melbourne's down, Sydney's down a little bit,

972
00:47:01,480 --> 00:47:04,680
Speaker 3: and even the growth in what we call the boom

973
00:47:04,680 --> 00:47:08,520
Speaker 3: city so Perth, Adelaide and Brisbane, which we're booming, the

974
00:47:08,640 --> 00:47:10,160
Speaker 3: rate of increase is slowing down.

975
00:47:10,600 --> 00:47:14,000
Speaker 2: And I've sawn some ages one of my podcasts yesterday

976
00:47:14,360 --> 00:47:17,239
Speaker 2: and they are saying there's a lot more stock around.

977
00:47:17,560 --> 00:47:20,560
Speaker 3: Yes, I've heard the same that people, and that'll be

978
00:47:20,640 --> 00:47:23,279
Speaker 3: really interesting to see the auction clearance rates coming up

979
00:47:23,320 --> 00:47:26,160
Speaker 3: now that we're back into the normal post Christmas New

980
00:47:26,200 --> 00:47:30,239
Speaker 3: Year real estate market. Those auction clearance rates numbs that

981
00:47:30,280 --> 00:47:32,319
Speaker 3: we get on a Saturday night will start to be

982
00:47:32,360 --> 00:47:36,440
Speaker 3: really interesting. Retail sales, I'm putting that in the ease inside,

983
00:47:36,480 --> 00:47:39,680
Speaker 3: but on the line with inflation, because there's a slightly

984
00:47:39,719 --> 00:47:43,720
Speaker 3: better vibe on retail. Yes, it's coming from a shocking based.

985
00:47:43,760 --> 00:47:47,120
Speaker 3: Retailers have got hammered the last couple of years. But

986
00:47:48,320 --> 00:47:52,160
Speaker 3: with the tax cuts, with inflation low and wages up

987
00:47:52,160 --> 00:47:56,960
Speaker 3: that real wages equation, it's still on the basis of

988
00:47:57,440 --> 00:48:00,160
Speaker 3: on retail sales, but it's not as catastrophic and with

989
00:48:00,200 --> 00:48:02,759
Speaker 3: consumer sentiment. We didn't talk on the consumers sentiment, it's

990
00:48:02,800 --> 00:48:06,000
Speaker 3: picked up. We consumers are less gloomy than we were

991
00:48:06,320 --> 00:48:10,680
Speaker 3: six months ago. And again, gosh, we're not silly. We're

992
00:48:10,719 --> 00:48:12,200
Speaker 3: alert to all the things that are going on in

993
00:48:12,239 --> 00:48:14,880
Speaker 3: the economy. Maybe that's link to the fact that everyone's

994
00:48:14,880 --> 00:48:16,960
Speaker 3: got a job, which is good news, and there is

995
00:48:17,000 --> 00:48:18,640
Speaker 3: a bit of a relief that inflations come.

996
00:48:18,520 --> 00:48:20,719
Speaker 1: Down and people think that they're going to get right.

997
00:48:20,760 --> 00:48:23,319
Speaker 3: And then they're going to get a rake cup. Building approvals, Look,

998
00:48:23,360 --> 00:48:25,880
Speaker 3: they've crept up, but that's easy. We need to build

999
00:48:26,120 --> 00:48:28,720
Speaker 3: one point two million houses and five years Markov's across

1000
00:48:28,760 --> 00:48:32,799
Speaker 3: bloody Sydney, Harbord's they build one point five Again. No, no,

1001
00:48:33,360 --> 00:48:36,080
Speaker 3: I'm not that crazy. I'll keep them. God, I wouldn't

1002
00:48:36,080 --> 00:48:38,080
Speaker 3: scare people with that. But you know, if they get

1003
00:48:38,080 --> 00:48:40,440
Speaker 3: one point two million houses in five years, I'll swim

1004
00:48:40,480 --> 00:48:44,160
Speaker 3: across the happened if they get if they look, if

1005
00:48:44,160 --> 00:48:45,640
Speaker 3: they get to a million, that would actually be not

1006
00:48:45,680 --> 00:48:48,319
Speaker 3: a bad result because we need houses, you know, we

1007
00:48:48,360 --> 00:48:50,200
Speaker 3: need them. We need them. That supply is she's still

1008
00:48:50,200 --> 00:48:52,520
Speaker 3: there and we're not building up. A rate cut would

1009
00:48:52,520 --> 00:48:56,040
Speaker 3: actually help the construction sector totally, help them to build stuff,

1010
00:48:56,080 --> 00:48:58,960
Speaker 3: to build apartments and townhouse complexes and the high rise.

1011
00:48:59,000 --> 00:49:01,800
Speaker 3: You know, we need that rate cut to stimulate borrowers

1012
00:49:01,840 --> 00:49:05,680
Speaker 3: to build that house. Business investments okay.

1013
00:49:05,600 --> 00:49:06,680
Speaker 1: And it has been for a long time.

1014
00:49:06,719 --> 00:49:09,400
Speaker 3: Businessvestments fine. So people are spending money on AI and

1015
00:49:09,480 --> 00:49:14,239
Speaker 3: technology and machinery warehouses as we get stuff delivered rather

1016
00:49:14,239 --> 00:49:16,160
Speaker 3: than going to the bricks and mortar retail shop. You know,

1017
00:49:16,200 --> 00:49:18,719
Speaker 3: we get all the trucks and things that deliver the

1018
00:49:18,760 --> 00:49:22,439
Speaker 3: box from all these people to your front door. People

1019
00:49:22,480 --> 00:49:25,680
Speaker 3: are spending money a business, are spending money on Capex.

1020
00:49:25,840 --> 00:49:29,479
Speaker 3: Business confidence it's taken a little bit of a tick

1021
00:49:29,600 --> 00:49:33,719
Speaker 3: down as the economy slowed down the last six months.

1022
00:49:33,760 --> 00:49:36,960
Speaker 3: In particular, business confidence was really quite resilient until then.

1023
00:49:37,080 --> 00:49:40,160
Speaker 3: But I think the combination of what's happening globally too,

1024
00:49:40,400 --> 00:49:42,960
Speaker 3: I think businesses have got an international focus of sort

1025
00:49:43,000 --> 00:49:45,239
Speaker 3: of looking overseas and thinking, oh, jee, you know, I

1026
00:49:45,400 --> 00:49:48,680
Speaker 3: just better be a little bit cautious about tariffs. In fact,

1027
00:49:48,840 --> 00:49:52,080
Speaker 3: just earlier this week, I was talking to a number

1028
00:49:52,080 --> 00:49:56,480
Speaker 3: of companies that had manufacturing plants in Mexico. The Australian

1029
00:49:56,480 --> 00:49:59,000
Speaker 3: companies with a manufacturing plant because it's cheap labor and

1030
00:49:59,120 --> 00:50:01,600
Speaker 3: all the rest of it. They're saying that the tariff

1031
00:50:01,600 --> 00:50:04,760
Speaker 3: stuff is causing them to lose sleep at night. Wow,

1032
00:50:04,920 --> 00:50:06,759
Speaker 3: tariffs on tarasof what do we do? What do we do?

1033
00:50:07,000 --> 00:50:09,520
Speaker 3: And so they're actually having a really serious rethink about

1034
00:50:09,520 --> 00:50:11,840
Speaker 3: what they do. So the business confidence has taken a

1035
00:50:11,840 --> 00:50:14,120
Speaker 3: bit of a hit from that tariff war. Without getting

1036
00:50:14,120 --> 00:50:17,720
Speaker 3: into the politics of that thing. Commodity prices this is one, okay,

1037
00:50:18,400 --> 00:50:22,040
Speaker 3: the only one in the tightening cycle. Commodity prices petrols down,

1038
00:50:22,080 --> 00:50:25,719
Speaker 3: So paying a well dollar eighty odd whatever it is

1039
00:50:25,960 --> 00:50:32,640
Speaker 3: not bad. But if you look at coffee, orange juice, eggs, Yeah,

1040
00:50:33,320 --> 00:50:36,960
Speaker 3: it's basically food. Food prices globally and a lot of

1041
00:50:36,960 --> 00:50:39,520
Speaker 3: these things are traded. Wheat and things are internationally traded.

1042
00:50:39,920 --> 00:50:44,359
Speaker 3: Commodity prices are really high, and so if you're a

1043
00:50:44,400 --> 00:50:47,800
Speaker 3: farmer in Australia, you can supply the local market or

1044
00:50:47,840 --> 00:50:50,160
Speaker 3: you can export. At these high export prices, you'll sell

1045
00:50:50,200 --> 00:50:52,400
Speaker 3: them overseas. So we've just got to be very I'm

1046
00:50:52,440 --> 00:50:54,840
Speaker 3: watching commodity price. It's one of my favorite indicators on

1047
00:50:55,280 --> 00:50:58,160
Speaker 3: and it's not just oil and nickel and copper and

1048
00:50:58,200 --> 00:51:02,759
Speaker 3: you know all that other stuff. It's actually includes an

1049
00:51:02,760 --> 00:51:05,760
Speaker 3: oil vegetable like canola, and that's the Ukraine War again

1050
00:51:05,880 --> 00:51:06,680
Speaker 3: causing how.

1051
00:51:06,560 --> 00:51:08,680
Speaker 1: Does this stuff feed back into our local inflation?

1052
00:51:08,880 --> 00:51:12,799
Speaker 3: Correct manufactured foods, so you know the stuff that hash

1053
00:51:12,800 --> 00:51:16,000
Speaker 3: brown or something whatever, which has oil and potatoes, whatever

1054
00:51:16,040 --> 00:51:17,920
Speaker 3: else goes into these things. I've got no idea, but

1055
00:51:18,000 --> 00:51:20,600
Speaker 3: you know the fact the price of those stuff, that

1056
00:51:20,640 --> 00:51:23,760
Speaker 3: stuff's gone up a lot for global reasons. Stock market

1057
00:51:24,040 --> 00:51:26,719
Speaker 3: really strong. I'll put that in neutral because it's going

1058
00:51:26,760 --> 00:51:27,960
Speaker 3: up for good reason, I think, but.

1059
00:51:28,280 --> 00:51:30,840
Speaker 1: It has an effect on poovers feeling wealth wealth effect.

1060
00:51:30,920 --> 00:51:33,719
Speaker 3: Yes, you look at everybody. By the time you read this,

1061
00:51:33,760 --> 00:51:36,120
Speaker 3: hopefully the stock market's still nice and strong. Have looked

1062
00:51:36,120 --> 00:51:38,520
Speaker 3: at you, bloody superannuation statement. You might get a present

1063
00:51:38,680 --> 00:51:41,400
Speaker 3: pleasant surprise. You know, if you're well, if you're not

1064
00:51:41,520 --> 00:51:43,080
Speaker 3: like me and you don't look at your super account

1065
00:51:43,120 --> 00:51:44,960
Speaker 3: you know once a week or once a fortnight, and

1066
00:51:44,960 --> 00:51:47,000
Speaker 3: you ain't look at it every six months, go away

1067
00:51:47,000 --> 00:51:49,240
Speaker 3: and have a look at you know, what's my super done?

1068
00:51:49,360 --> 00:51:51,320
Speaker 3: You might just get a pleasant surprise. How much is

1069
00:51:51,360 --> 00:51:54,439
Speaker 3: in there? If you've been contributing for ten, fifteen, twenty

1070
00:51:54,520 --> 00:51:57,120
Speaker 3: years to penny? How old you are? Watching this? And

1071
00:51:57,239 --> 00:52:00,839
Speaker 3: current registrates they're high, they're restrictive and again remembering what

1072
00:52:00,920 --> 00:52:04,200
Speaker 3: Michelle Bullock, RBA governor has said about the current level

1073
00:52:04,200 --> 00:52:09,560
Speaker 3: of interest rates. They are restrictive, so they know that that,

1074
00:52:10,160 --> 00:52:13,520
Speaker 3: you know, the Torner key of interest rates is squeezing

1075
00:52:13,520 --> 00:52:18,120
Speaker 3: the economy. They're not going to hike. We know that now.

1076
00:52:18,600 --> 00:52:20,719
Speaker 3: It's just a matter of when they start easing. So

1077
00:52:21,160 --> 00:52:23,839
Speaker 3: you look at the overall board, and as I said,

1078
00:52:23,840 --> 00:52:26,279
Speaker 3: the things at the top end, the top quarter of

1079
00:52:26,320 --> 00:52:28,800
Speaker 3: this board are the things that are really you convinced

1080
00:52:29,920 --> 00:52:33,279
Speaker 3: cut probably a cut. These aren't standing in the way

1081
00:52:33,280 --> 00:52:36,160
Speaker 3: of a cuts. How I describe the labor market, Well,

1082
00:52:36,440 --> 00:52:37,400
Speaker 3: I'm not in the way.

1083
00:52:37,200 --> 00:52:39,560
Speaker 1: So I'm I'm not convinced for that.

1084
00:52:40,480 --> 00:52:42,440
Speaker 3: I'm gonna put my neck on the chopping box and

1085
00:52:42,440 --> 00:52:44,560
Speaker 3: say they're going to deliver a twenty five point cut,

1086
00:52:44,719 --> 00:52:49,439
Speaker 3: but the words that are spoken afterwards will be very cautious.

1087
00:52:49,760 --> 00:52:50,440
Speaker 1: Okay, I.

1088
00:52:51,960 --> 00:52:54,080
Speaker 2: Want a cut, and I want numerous cuts, because I

1089
00:52:54,080 --> 00:52:56,600
Speaker 2: want our customers to be and everybody for that matter,

1090
00:52:56,760 --> 00:52:58,840
Speaker 2: to be paying less interest on their mortgage. And I

1091
00:52:58,840 --> 00:53:01,239
Speaker 2: want properly developers to be more encouraged to build more

1092
00:53:01,280 --> 00:53:05,960
Speaker 2: houses as a result of things being cheaper. But I'm

1093
00:53:06,000 --> 00:53:09,879
Speaker 2: not convinced that the time is going to be right

1094
00:53:09,880 --> 00:53:13,640
Speaker 2: for February. I'm not sure what is and what isn't

1095
00:53:13,680 --> 00:53:15,880
Speaker 2: sustainable in terms of inflation.

1096
00:53:16,160 --> 00:53:17,000
Speaker 1: I'm not sure.

1097
00:53:16,880 --> 00:53:18,600
Speaker 2: Because I think some of these other things that you've

1098
00:53:18,600 --> 00:53:24,080
Speaker 2: pointed out could kick inflation up at a heartbeat.

1099
00:53:24,120 --> 00:53:27,680
Speaker 3: Things like the prices and I've got the international economy

1100
00:53:27,680 --> 00:53:30,760
Speaker 3: here on the week side. But you know it doesn't

1101
00:53:30,760 --> 00:53:32,759
Speaker 3: take much as we saw during the pandemic and that

1102
00:53:33,080 --> 00:53:35,920
Speaker 3: lifting inflation in late twenty one early twenty two, it

1103
00:53:35,960 --> 00:53:39,640
Speaker 3: went from one percent to five percent in six months,

1104
00:53:39,680 --> 00:53:42,880
Speaker 3: and it went to eight percent shortly thereafter because of

1105
00:53:42,960 --> 00:53:44,560
Speaker 3: those constraints.

1106
00:53:44,040 --> 00:53:46,040
Speaker 2: And no Douban Michelle book does exactly the same as

1107
00:53:46,080 --> 00:53:48,720
Speaker 2: which you've done now, but they go through.

1108
00:53:48,520 --> 00:53:49,920
Speaker 3: The board effectively, they do.

1109
00:53:50,040 --> 00:53:51,879
Speaker 2: And be interesting to know what the old board who's

1110
00:53:51,880 --> 00:53:54,239
Speaker 2: going to be at this meeting, I mean, you know,

1111
00:53:54,360 --> 00:53:56,319
Speaker 2: be because and how do they want to go out?

1112
00:53:58,000 --> 00:54:01,400
Speaker 3: Look that that that's one other thing too, because the

1113
00:54:01,480 --> 00:54:05,000
Speaker 3: new Monetary Policy Board, which takes effect for the April

1114
00:54:05,080 --> 00:54:08,759
Speaker 3: the first meeting, has more monetary policy experts. If that's

1115
00:54:09,560 --> 00:54:12,680
Speaker 3: if that's the reason for the reform, should we leave

1116
00:54:12,680 --> 00:54:15,359
Speaker 3: it to the existing board, which this is, who don't

1117
00:54:15,360 --> 00:54:18,520
Speaker 3: have the monetary policy experts, experts on board should they

1118
00:54:18,520 --> 00:54:20,200
Speaker 3: cut rates? And then the new board comes and think,

1119
00:54:20,280 --> 00:54:21,839
Speaker 3: what the hell did you cut rates? What sort of thing?

1120
00:54:22,120 --> 00:54:24,880
Speaker 3: But I still think that there's enough common sense from the.

1121
00:54:24,960 --> 00:54:26,120
Speaker 1: Do you think they'd been joining to each other?

1122
00:54:29,080 --> 00:54:32,759
Speaker 3: Well, the common denominator in the old board on the

1123
00:54:32,760 --> 00:54:36,080
Speaker 3: new board is the RBA governor, the Deputy governor, the

1124
00:54:36,200 --> 00:54:39,600
Speaker 3: Treasury secretary. And I think that that's an okay appointment

1125
00:54:39,640 --> 00:54:42,520
Speaker 3: on the RBA board because he's Stephen Kennedy, good fellow.

1126
00:54:43,360 --> 00:54:45,759
Speaker 3: He knows what's happening to fiscal policy, he knows what's

1127
00:54:45,760 --> 00:54:48,160
Speaker 3: happening to budget revenue and things like that. To sort

1128
00:54:48,160 --> 00:54:51,040
Speaker 3: of say, oh, we're seeing a bit of a surge

1129
00:54:51,040 --> 00:54:55,560
Speaker 3: in GST payments. Why why geez tiger, because people spending money.

1130
00:54:55,800 --> 00:54:58,400
Speaker 3: GC's going down. So here has that insight to just

1131
00:54:58,480 --> 00:55:00,280
Speaker 3: sort of give a bit of a leading in the

1132
00:55:00,320 --> 00:55:03,520
Speaker 3: ahead of the official retail sales numbers coming out, because

1133
00:55:03,880 --> 00:55:06,440
Speaker 3: they see this revenue every day of the week in Treasury.

1134
00:55:06,600 --> 00:55:09,120
Speaker 3: You know, so when you buy, I don't know, a

1135
00:55:09,160 --> 00:55:11,480
Speaker 3: bag of groceries, and you know ten dollars of that

1136
00:55:11,640 --> 00:55:14,680
Speaker 3: is GST, they know the GST numbers pretty quickly.

1137
00:55:14,840 --> 00:55:18,600
Speaker 1: So I'm still not convinced, could you. I just know that.

1138
00:55:18,680 --> 00:55:23,160
Speaker 2: Look, I know the momentum is there, the market momentum,

1139
00:55:23,280 --> 00:55:26,200
Speaker 2: because it is definitely baking in a rate reduction on

1140
00:55:26,239 --> 00:55:29,200
Speaker 2: the eighteenth of February this year.

1141
00:55:29,600 --> 00:55:30,200
Speaker 1: I get.

1142
00:55:30,200 --> 00:55:34,080
Speaker 2: I see that, And I don't like pushing against monetary

1143
00:55:34,080 --> 00:55:37,080
Speaker 2: market money markets because it's usually a mistake. But we

1144
00:55:37,120 --> 00:55:38,960
Speaker 2: also know the money markets this time last year said

1145
00:55:38,960 --> 00:55:40,759
Speaker 2: there's going to be seven rate reductions in twenty twenty

1146
00:55:40,840 --> 00:55:43,720
Speaker 2: four starting in July or something one.

1147
00:55:43,600 --> 00:55:46,160
Speaker 3: Wrong, wrong, wrong, And indeed there are. And I just

1148
00:55:46,239 --> 00:55:49,120
Speaker 3: noticed from the Thin Review Financial Review newspaper today they

1149
00:55:49,120 --> 00:55:53,319
Speaker 3: did an economous survey and if I'm not mistaken, there

1150
00:55:53,400 --> 00:55:56,960
Speaker 3: were four or five of the thirty people they survey,

1151
00:55:57,880 --> 00:56:01,000
Speaker 3: four or five people who I respect, who said no,

1152
00:56:01,000 --> 00:56:04,680
Speaker 3: no rate cut in February. So they're erring on your side.

1153
00:56:05,200 --> 00:56:07,399
Speaker 2: And I'm not saying no raking I cut this year,

1154
00:56:08,000 --> 00:56:10,640
Speaker 2: but I'm saying, maybe maybe they know nothing.

1155
00:56:10,680 --> 00:56:11,600
Speaker 1: If everyone will.

1156
00:56:11,360 --> 00:56:14,399
Speaker 2: Wait and just let's and I think we should clear

1157
00:56:14,440 --> 00:56:17,160
Speaker 2: this really quickly. I do not think this will be

1158
00:56:17,200 --> 00:56:18,160
Speaker 2: a political decision.

1159
00:56:18,600 --> 00:56:19,319
Speaker 1: I don't know.

1160
00:56:19,360 --> 00:56:22,719
Speaker 2: I do not think there's RBA, particularly this board, the

1161
00:56:22,800 --> 00:56:26,640
Speaker 2: old board, and along with the governor and deputy would

1162
00:56:26,680 --> 00:56:30,800
Speaker 2: make a decision that would be happily in the camp

1163
00:56:30,840 --> 00:56:32,200
Speaker 2: of helping out.

1164
00:56:32,320 --> 00:56:34,440
Speaker 1: The government or not helping out the government.

1165
00:56:34,600 --> 00:56:37,160
Speaker 3: Agree completely, and I think and I've known the RBA

1166
00:56:37,320 --> 00:56:40,480
Speaker 3: people for many a long day, and I think back

1167
00:56:40,520 --> 00:56:44,799
Speaker 3: to Glenn Stevens when he was governor, oh gosh, fifteen

1168
00:56:45,040 --> 00:56:47,560
Speaker 3: or more years ago, he was asked this question in

1169
00:56:47,560 --> 00:56:50,480
Speaker 3: the lead into an election campaign and he said, look,

1170
00:56:51,040 --> 00:56:53,719
Speaker 3: you know, our defense forces still operate under You know,

1171
00:56:53,719 --> 00:56:57,000
Speaker 3: when there's an election campaign, our public servants who administer

1172
00:56:57,040 --> 00:57:01,160
Speaker 3: the age pension, the public sector hospitals work. The RBA

1173
00:57:01,239 --> 00:57:02,600
Speaker 3: is still going to work, and if we need to

1174
00:57:02,600 --> 00:57:05,120
Speaker 3: put them up down or keep them stable, we'll do

1175
00:57:05,200 --> 00:57:06,800
Speaker 3: it because we still.

1176
00:57:06,600 --> 00:57:08,560
Speaker 1: Have our job to do with our fear or favor.

1177
00:57:08,600 --> 00:57:10,040
Speaker 1: I think I think that's right.

1178
00:57:10,120 --> 00:57:14,279
Speaker 3: So but again, they know there's an election coming, but

1179
00:57:14,360 --> 00:57:16,200
Speaker 3: it will not influence if they think that we've got

1180
00:57:16,200 --> 00:57:19,720
Speaker 3: a cut or keep them steady. They'll do what they

1181
00:57:19,880 --> 00:57:24,840
Speaker 3: see to be appropriate based on their analysis of things.

1182
00:57:24,880 --> 00:57:27,280
Speaker 3: Like we've just covered this afternoon.

1183
00:57:26,840 --> 00:57:30,280
Speaker 2: And just one final thing, I think the listener should

1184
00:57:30,320 --> 00:57:35,080
Speaker 2: get this. The RBA doesn't just sit around acting on

1185
00:57:35,080 --> 00:57:39,320
Speaker 2: their own. They have five hundred economists and there's a

1186
00:57:39,440 --> 00:57:42,360
Speaker 2: number of recommend they get recommendations.

1187
00:57:43,320 --> 00:57:46,200
Speaker 3: And the other thing that is really important to remember

1188
00:57:47,200 --> 00:57:50,280
Speaker 3: is that over recent years they've ramped up and ramped

1189
00:57:50,280 --> 00:57:53,480
Speaker 3: it up big time. They're business liaison program. Yeah, yeah,

1190
00:57:53,920 --> 00:57:55,760
Speaker 3: so I do know for a fact that the very

1191
00:57:55,800 --> 00:58:00,360
Speaker 3: senior RBA officials have a schedule where they they go

1192
00:58:00,400 --> 00:58:03,120
Speaker 3: around the country and they talk to a retailer in Perth,

1193
00:58:03,200 --> 00:58:07,320
Speaker 3: a mining company in Queensland, a builder in Sydney, and

1194
00:58:08,120 --> 00:58:11,160
Speaker 3: I don't know, a tech company in Melbourne. You know,

1195
00:58:11,160 --> 00:58:13,240
Speaker 3: they go around, What are you finding, What do you

1196
00:58:13,280 --> 00:58:15,600
Speaker 3: find about wages, what do you find about activity? Ohm A,

1197
00:58:15,640 --> 00:58:18,280
Speaker 3: sales are down, they're going up or where. And while

1198
00:58:18,680 --> 00:58:23,440
Speaker 3: each anecdote can be you know, specific to that company

1199
00:58:23,680 --> 00:58:25,840
Speaker 3: or that industry, they try to put them into a

1200
00:58:25,840 --> 00:58:27,560
Speaker 3: great big melting pot and say, well, gee, we've had

1201
00:58:27,800 --> 00:58:30,880
Speaker 3: three quarters of people saying, gee, the economy is really bad,

1202
00:58:32,200 --> 00:58:35,160
Speaker 3: or they've auder book's gone down or gone up, and

1203
00:58:35,200 --> 00:58:37,720
Speaker 3: they sort of and they sort of blend that what

1204
00:58:37,720 --> 00:58:41,480
Speaker 3: do we call it, that anecdotal evidence into their hard forecast.

1205
00:58:41,560 --> 00:58:43,560
Speaker 3: So they back in the day they used to ignore

1206
00:58:43,600 --> 00:58:45,080
Speaker 3: that and say, oh, that's just here, So that's a

1207
00:58:45,120 --> 00:58:48,440
Speaker 3: load of old old tosh. Now they actually listen and

1208
00:58:48,480 --> 00:58:52,240
Speaker 3: they deliberately go out and liaise with the business sector,

1209
00:58:52,560 --> 00:58:56,320
Speaker 3: the exporterers, the locals around the whole country, every city,

1210
00:58:56,360 --> 00:58:59,200
Speaker 3: every region. And I think that's a good thing.

1211
00:58:59,400 --> 00:59:01,600
Speaker 2: Ye And I think they call it field office or

1212
00:59:01,600 --> 00:59:04,720
Speaker 2: something along that long. And so they're sort of grabbing

1213
00:59:04,760 --> 00:59:07,200
Speaker 2: qualitative stuff as well as the quantitati, the consery, the

1214
00:59:07,200 --> 00:59:09,520
Speaker 2: hard GDP and data numbers.

1215
00:59:09,560 --> 00:59:11,920
Speaker 3: They also ask you know, how you're finding it. And

1216
00:59:11,920 --> 00:59:13,480
Speaker 3: of course they know what the banks are doing too,

1217
00:59:13,480 --> 00:59:17,040
Speaker 3: because they sort of they don't oversee the banks exactly,

1218
00:59:17,080 --> 00:59:20,280
Speaker 3: but they liais with the other bank regulars to say, well,

1219
00:59:20,360 --> 00:59:22,360
Speaker 3: the loan's going up or down, the how's your bad

1220
00:59:22,840 --> 00:59:25,600
Speaker 3: book going? And yeah, that sort of stuff feeds into.

1221
00:59:25,480 --> 00:59:27,320
Speaker 2: Well, they also know what people's bankcounts are doing. They

1222
00:59:27,360 --> 00:59:30,360
Speaker 2: can say, but they do identify, but that they do

1223
00:59:30,480 --> 00:59:35,720
Speaker 2: off the individual can say, but in general, people are

1224
00:59:35,720 --> 00:59:37,960
Speaker 2: saving more money than they ever have before, or they're not,

1225
00:59:38,080 --> 00:59:38,920
Speaker 2: they're going backwards.

1226
00:59:39,120 --> 00:59:39,960
Speaker 1: One of the two greats.

1227
00:59:40,080 --> 00:59:42,800
Speaker 2: So it's a good it's a good day. It's going

1228
00:59:42,880 --> 00:59:45,360
Speaker 2: to be quite exciting, kind of very interesting. Made It's

1229
00:59:45,400 --> 00:59:49,600
Speaker 2: never as ease as it looks you and I have

1230
00:59:49,640 --> 00:59:51,880
Speaker 2: a slightly different view on this one, but I last,

1231
00:59:52,040 --> 00:59:53,760
Speaker 2: but I do know that I don't know, but I'm

1232
00:59:53,760 --> 00:59:56,080
Speaker 2: pretty sure they'll be RAT productions this year at some stage,

1233
00:59:56,440 --> 00:59:59,440
Speaker 2: maybe maybe a delay, maybe on the adenth February for

1234
00:59:59,480 --> 01:00:04,480
Speaker 2: everybody some relief. But I just can't wait to listen

1235
01:00:04,520 --> 01:00:07,440
Speaker 2: to her conference call that she does after the announcement.

1236
01:00:07,440 --> 01:00:10,200
Speaker 3: I'm just dying rate cut or rate hole on the

1237
01:00:10,240 --> 01:00:15,120
Speaker 3: eighteenth of February. It'll be that conference afterwards. She talks

1238
01:00:15,120 --> 01:00:17,120
Speaker 3: for close to an hour. Yeah, and she gets And

1239
01:00:17,680 --> 01:00:19,840
Speaker 3: I think the journals who ask the questions are much

1240
01:00:19,880 --> 01:00:21,120
Speaker 3: better than they were the first one. I think they

1241
01:00:21,160 --> 01:00:24,120
Speaker 3: gore a bit sort of oh like the bright lights

1242
01:00:24,120 --> 01:00:26,360
Speaker 3: that rabbit in the spotlights. I think now they actually

1243
01:00:26,360 --> 01:00:29,720
Speaker 3: ask really good questions, and they ask, you know, probing questions.

1244
01:00:30,040 --> 01:00:33,440
Speaker 3: So just assuming they don't cut, well, why didn't you

1245
01:00:33,440 --> 01:00:36,240
Speaker 3: cut when transing inflations so low? And you know, so

1246
01:00:36,480 --> 01:00:39,640
Speaker 3: she'll be, you know, raked over the coals for her

1247
01:00:39,720 --> 01:00:42,400
Speaker 3: view cut or no cut or hike or whatever, not

1248
01:00:42,400 --> 01:00:45,680
Speaker 3: a hike, but rates on hold. She'll be she'll be grilled,

1249
01:00:45,760 --> 01:00:47,720
Speaker 3: as she should be because she's making.

1250
01:00:47,560 --> 01:00:50,000
Speaker 1: A really important decision, she does a good job. She's good,

1251
01:00:50,000 --> 01:00:52,040
Speaker 1: she's a good governor. Yeah, very good. Thanks, could you