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Speaker 1: Welcome to the Fear and Greed Summer Series. I'm Michael

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Speaker 1: Thompson and good morning, Sean Aylmer.

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Speaker 2: Good morning, Michael, morning, Adam, Good morning, Adam Lange.

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Speaker 3: Good morning, Michael. Good morning Sean.

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Speaker 1: Today and I know you are both very excited about

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Speaker 1: this one because you were both You both studied economics,

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Speaker 1: so you were both economists, and you both love the economy.

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Speaker 1: We all love the economy.

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Speaker 3: Still, fans.

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Speaker 1: We are looking today at the best economic story of

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Speaker 1: twenty twenty five.

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Speaker 2: I'm not happy about this, though, Michael, because Adam got

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Speaker 2: in first and so I won his story.

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Speaker 3: Yeah.

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Speaker 2: Yeah.

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Speaker 1: It's a bit of a race with these, isn't it

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Speaker 1: to see who can nab the best one ahead. I

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Speaker 1: do think Adam might have done it. Adam, go for it,

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Speaker 1: take it away. Well, let's see as we start. I

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Speaker 1: may be looking good, but we'll see who wins the

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Speaker 1: story at the end of this show. Twenty twenty five

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Speaker 1: was the year borrowers finally got some interest rate relief,

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Speaker 1: only to realize it came with big condition. The Reserve

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Speaker 1: Bank delivered its first rate cut way back on eighteen February,

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Speaker 1: trimmed the cash rate from four point three five to

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Speaker 1: four point one, as inflation cooled and growth sload. Second

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Speaker 1: cut followed on twenty May, taking the rate to three

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Speaker 1: point eight five, and then a third on twelve August,

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Speaker 1: down to three point six secnt the detail.

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Speaker 3: Like Kathy Freeman running the four hundred Yes. Borrowers felt

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Speaker 3: the relief almost immediately. Spending lifted and markets surged on

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Speaker 3: the premise of cheaper money, but by December hadn't that

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Speaker 3: tone shifted. At the RBA's final meeting on nine December,

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Speaker 3: Governor Michelle Bullock warned that the risk had flipped back

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Speaker 3: to rising inflation. She said there were no rate cuts

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Speaker 3: on the horizon and the Board was now actively considering

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Speaker 3: the conditions under which it might raise rates in twenty

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Speaker 3: twenty six. Markets responded immediately, bond yields our favorite lift

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Speaker 3: did and pricing a real chance of a rate hike

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Speaker 3: as early as February three. Rate cuts delivered relief in

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Speaker 3: twenty twenty five, then, at the end one RBA press

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Speaker 3: meeting and conference delivered a big reality check.

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Speaker 1: Yeah, good, good story, big story, very detailed. Sorry that

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Speaker 1: the contrast is going to be quite extreme, going from

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Speaker 1: Captain detail to captain all sizzle, no sausage.

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Speaker 3: That a strong start, okay, right.

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Speaker 1: A question for the two of you. Without government spending,

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Speaker 1: where would we be back? You know what, don't answer that.

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Speaker 1: I will tell you we would be in the economic toilet,

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Speaker 1: That's where we would be. Government spending has been propping

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Speaker 1: up the economy over the past year, with actually longer

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Speaker 1: than that, with state and federal spends surging, especially social services.

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Speaker 1: At the ndis fifty two billion dollars Australia's public sector

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Speaker 1: wages bill, which has jumped seven point six percent to

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Speaker 1: two hundred and fifty ffty billion dollars a year extraordinary.

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Speaker 1: At its peak, government activity made up nearly twenty eight

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Speaker 1: point five percent of nominal GDP, helping offset that weaker

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Speaker 1: household spending and soft business investment. But Treasurer Jim Chalmers

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Speaker 1: has been very very clear it is time for business

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Speaker 1: to take over as the driver of the economy. Late

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Speaker 1: in the year we saw that starting to pick up,

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Speaker 1: particularly with a new business investment surge in data centers.

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Speaker 1: That kind of thing long way ago, heavily focused on

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Speaker 1: one sector, but a very exciting start, I would say, Sean.

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Speaker 2: So, I think the biggest story of twenty twenty five

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Speaker 2: has been productivity. It's really the great missing piece of

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Speaker 2: the Australian economy. It is the holy grail, like it

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Speaker 2: drives improvements in living standards because it means the economy

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Speaker 2: conduced more from the same amount of inputs. That allows

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Speaker 2: people to consume more, enjoy more leisure time. It's all

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Speaker 2: about the quality of life. It has slowed in Australia

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Speaker 2: and overseas now this year Treasure Jim Chalmers the Productivity Review,

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Speaker 2: we talked a lot about it. There's a bunch of

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Speaker 2: reasons for it. Australia just hasn't innovated as fast as

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Speaker 2: the US and parts of Europe. We have many low

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Speaker 2: productivity sectors, so a lot of the service sectors you

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Speaker 2: think of aged care, hospitality, admin. It's just you know,

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Speaker 2: when you're an aged care worker and you're helping someone elderly,

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Speaker 2: is you can't say can you walk faster because I

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Speaker 2: want to become more productive?

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Speaker 3: Measure?

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Speaker 2: Yeah, Like it's they're incredible jobs, incredible people. But because

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Speaker 2: we are so heavy into that and we've invested into

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Speaker 2: so much into that area so much, our productivity levels

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Speaker 2: are quite low. Lots of government lending red tape here

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Speaker 2: as well through the banks skilled there's still gills mismatched

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Speaker 2: for higher proactive jobs. There's a weaker business investment. We

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Speaker 2: sort of saw that turning around towards the end. Our

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Speaker 2: population is getting older, lots of reasons for it, but

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Speaker 2: it really does remain the big dilemma in the Australian economy.

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Speaker 2: How do we improve productivity?

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Speaker 1: I think Adam Wins, well, do you know?

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Speaker 2: I Well, it's funny, I thought, Michael Wins. We've all gone,

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Speaker 2: we've all gone different ways. I just think that this

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Speaker 2: last twelve months, I mean the last five years since

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Speaker 2: COVID really, but the last felve months government spending has

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Speaker 2: actually kept this economy going, and we would have had

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Speaker 2: a lot more rate cuts except for government spending. And

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Speaker 2: as much as Jim Chalmers wants to argue otherwise, yeah,

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Speaker 2: I just think that's I think Captain Sizzle has been

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Speaker 2: Captain detail.

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Speaker 1: And I think actually someone wise once said that if

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Speaker 1: we if it wasn't for that, we'd be in the

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Speaker 1: economic toilet. Yeah yeah, if I someone once said that. Anyway,

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Speaker 1: all right, you know what, next year, when we do

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Speaker 1: this next year, we're going to get an independent judge

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Speaker 1: in because this is not working this idea.

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Speaker 3: Okay.

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Speaker 1: Thank you Sean, thanks Michael, thank you Adam, thank you Michael,

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Speaker 1: thank you Sean, and don't forget to hit follow on

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Speaker 1: the podcast. New episodes every day during our summer series

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Speaker 1: and regular shows are back from January twelveth are Michael

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Speaker 1: Thompson and this is Fear and Gray