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Speaker 1: Hey, coogie, how your mate?

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Speaker 2: I'm really good, Mark busy. Couple of months and here

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Speaker 2: we are a few days before the next RBA meeting,

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Speaker 2: and the economy is a little bit better, but we're

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Speaker 2: not good yet. Well well better than it was, but

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Speaker 2: not perfect and a long way from perfect.

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Speaker 3: And better doesn't necessarily all go well for borrowers, because

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Speaker 3: you know, the perverse sort of thing about all this

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Speaker 3: is that the worst economy is, the more likely is

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Speaker 3: that they're going to get a rate cut. The better

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Speaker 3: of the economy is, the less likely it isn't going

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Speaker 3: to get a rate cut.

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Speaker 1: So it's a bit of a it's sort of like.

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Speaker 3: Inversely related to race cuts or what a borrow wants,

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Speaker 3: because borrowers, probably a lot of them.

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Speaker 1: Don't really care about the economy.

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Speaker 3: They're more interested in the economy being at such that

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Speaker 3: they will get a rate cut.

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Speaker 2: Yes. And in fact, it's really interesting because you're quite

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Speaker 2: right because over the past month or so, roughly one

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Speaker 2: of the rate cuts that was there has been now

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Speaker 2: taken out. That say, a month month and a half ago,

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Speaker 2: there were three more rate cuts priced into the market.

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Speaker 2: Now there's only roughly two. And that's because if you

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Speaker 2: look at a range of data, compare with where it

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Speaker 2: was a year ago. So not in absolute terms, but

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Speaker 2: GDP one point eight percent now was zero point eight

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Speaker 2: percent a year ago. Building approvals running at about seventeen

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Speaker 2: thousand a month, we're running at twelve thousand a month

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Speaker 2: a year ago, Household spending five percent. Annual growth was

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Speaker 2: three percent. So as we like in economics, and you

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Speaker 2: look at the charts when there's a turning point, it's

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Speaker 2: good news, as in the economy is a little bit better,

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Speaker 2: but we're not back where we can sort of put

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Speaker 2: our hand in our hearts say the economy is good.

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Speaker 2: We're not good yet, but the rate cuts are starting

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Speaker 2: to work. The fact that the world economy has been

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Speaker 2: really resilient to the tariff wars, if we can even

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Speaker 2: call them that nowadays just.

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Speaker 1: Helping us strut It's taraff posturing, posturing.

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Speaker 2: I like it. I like it.

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Speaker 1: Yet there's posturing, I mean, and it's worked.

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Speaker 2: Well, we've yea and the fallout has not been as

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Speaker 2: bad as you remember. Liberation Day. Back in early April,

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Speaker 2: stock market tank bonds were going crazy that you know,

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Speaker 2: the UK was all in all sorts of troubles and

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Speaker 2: sort of the implications around the world were huge. There

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Speaker 2: was a bit of a deep breath taken. And I

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Speaker 2: think the central banks have help because we've had rate

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Speaker 2: cuts in many many countries since then, so they obviously

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Speaker 2: helping the economy. And here we are, you know, US

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Speaker 2: stocks the record high, the ASX is just below a

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Speaker 2: record high. A bit of volatility there, but you know,

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Speaker 2: and as I said, the economy is picking up, so

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Speaker 2: a bit a bit. I don't overstate it, but we're

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Speaker 2: picking up a bit.

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Speaker 1: Well, let's just have a look at it for a second.

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Speaker 3: Like the way the IBA always likes to look at

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Speaker 3: these things, and they tend to do it in a

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Speaker 3: structured ways. They look at the international markets. That's really

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Speaker 3: be part of their thinking or their and their ultimate deliberations.

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Speaker 3: So internationally, what's going on. Let's let's pick up our

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Speaker 3: biggest trading partners. So let's look at China for a start,

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Speaker 3: look at Asia in China, but China being our most

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Speaker 3: dominant trading partner.

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Speaker 1: So how are things we're going to because the.

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Speaker 3: Better they are there, the more we're going to explore,

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Speaker 3: the more likely it is going to increase. How economy

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Speaker 3: and our GDP, which is going to therefore less likely

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Speaker 3: to have a rate reduction.

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Speaker 2: Correct. China, which was in a bit of trouble at

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Speaker 2: the start of the year, like most other central banks,

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Speaker 2: the people's makeup China, the central bank there, they've cut

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Speaker 2: interest rates. They have a thing called reserve requirement ratio,

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Speaker 2: which is the amount of money that banks are allowed

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Speaker 2: to lend. So it's sort of like the old fashioned days,

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Speaker 2: well reverse deposit, you can lend x billion yuan or

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Speaker 2: hy billion. You aren't. They're East policy. So there it's

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Speaker 2: more credit.

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Speaker 1: Available, so more money supply.

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Speaker 2: More money supplying the economy. The economy has found a

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Speaker 2: bit of a base. There's still basically zero percent inflation,

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Speaker 2: so they've got this problem with inflation being too low.

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Speaker 2: But bottom line, GDP's picking up, and from what you

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Speaker 2: quite rightly said about our real dependence on China for

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Speaker 2: our exports, so that's why we look at things like

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Speaker 2: iron ore price two months ago ninety five US dollars

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Speaker 2: a ton. It's one hundred and five US dollars a ton,

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Speaker 2: So that better news in China means that the iron

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Speaker 2: ore price, some of these commodity prices have picked up.

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Speaker 2: We've actually had much better export data in the last

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Speaker 2: two or three months, so that's money for the Australian economy.

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Speaker 2: So again it feeds into this narrative that I think

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Speaker 2: we've sort of already alluded to in the first few

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Speaker 2: minutes that there is a turning point in the economy.

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Speaker 2: Long may it last, and it still needs to be

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Speaker 2: built on before we can sort of say, yep, we've

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Speaker 2: got the economy back where we want it. We're not

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Speaker 2: quite there, but we're moving in that direction.

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Speaker 1: And where do you think I mean, we're just on that.

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Speaker 3: I mean in terms of markers, in terms of measurement,

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Speaker 3: where does the game need to go? After which the

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Speaker 3: reserve means get worried, So I mean it used to

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Speaker 3: be in the threes, but it is about where from

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Speaker 3: one point do they want to see like two point

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Speaker 3: seven three.

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Speaker 2: Even that was that funny thing, remember in the last

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Speaker 2: statement on monetary policy when they revised their productivity numbers

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Speaker 2: down quite dramatically, and that was sort of like the

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Speaker 2: highlight of the statement, not necessarily what they're saying about

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Speaker 2: interest rates or inflation. They're saying that productivity is crap.

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Speaker 2: And yes, the data confirmed that we've had basically a

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Speaker 2: decade of really poor productivity. Why that matters is that

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Speaker 2: lower productivity lowers that speed limit for GDP growth. And

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Speaker 2: you know, you and I have spoken about this for

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Speaker 2: many a long day, those old in the old days,

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Speaker 2: that three percent GDP growth that we grew to love

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Speaker 2: and enjoy and that was a good economy was based

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Speaker 2: on productivity, you know, one and a half percent annual growth,

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Speaker 2: one and a half percent sort of other bits and

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Speaker 2: bobs going on the economy. So you can go three

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Speaker 2: percent in real terms. The IRB I reckon that's in

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Speaker 2: the low twos. Now they've trimmed off at least half

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Speaker 2: a percentage point, maybe three quarters of percent. So they're

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Speaker 2: going to be saying, for the here and now, if

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Speaker 2: we get GDP growth that maybe not two and a quarter,

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Speaker 2: but if we get two and a half, they'll say,

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Speaker 2: you know, mission accomplished. We're growing.

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Speaker 1: So no more rate reduction.

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Speaker 2: If we get that GDP momentum over the next two

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Speaker 2: or three quarters back to two point five from the

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Speaker 2: slightly below two percent that we're getting now.

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Speaker 3: So maybe you could explain why that's important, because you know,

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Speaker 3: when you look at if we can get GDP, let's say,

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Speaker 3: fragument set to two and a half half, which may

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Speaker 3: be the sweet spot for the IRBA.

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Speaker 1: And if productivity those stays, you know.

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Speaker 3: In the very low point one point two point three,

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Speaker 3: maybe explain what flag that puts up for the RBA

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Speaker 3: relative to interest rates because and how that sort of

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Speaker 3: bleeds into inflation potentially.

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Speaker 2: Really good point. It's all about the thing in economics,

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Speaker 2: the speed limit of which the economy can grow. Some

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Speaker 2: people ask, why don't we just have the government or

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Speaker 2: the reserve bank print fifty doller notes droppen from a helicopter.

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Speaker 2: Everybody's will put you know, ten grand in everybody's bank account.

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Speaker 2: We're all going to be better off. Well. Sounds good,

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Speaker 2: but the reality of that is that we would all

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Speaker 2: go out and spend it, most of it. I know

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Speaker 2: I would. That would fuel economic growth for a very

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Speaker 2: very short period. Every shop would sell everything they've got.

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Speaker 2: But it means higher inflation, and it means the economy

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Speaker 2: grows too strongly, too much of a good thing. It's

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Speaker 2: sort of like Easter Sunday when you've had three or

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Speaker 2: four chocolate eggs, have a fifth and six too many,

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Speaker 2: too many, and you get it. You feel crooked. That's

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Speaker 2: what happened in an economy too. You can have too

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Speaker 2: much of a good thing. So that's why the RBA

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Speaker 2: looks at this GDP, looks at the productivity, and so

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Speaker 2: it says, well, if we're growing it above two and

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Speaker 2: a half percent, and your GDP growth, it's probably too strong.

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Speaker 2: So put it this way. Certainly above three percent, they

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Speaker 2: would sort of say, look, we are growing too strongly.

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Speaker 2: We need to put on the brakes, put on the

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Speaker 2: policy brakes, just to cool that spending down a little bit,

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Speaker 2: to cool back that pace of expansion of the economy

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Speaker 2: because it's too strong. And indeed, if we look back

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Speaker 2: to twenty twenty two, when we came out of the pandemic,

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Speaker 2: everybody had saved some money. We yep, b we're out.

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Speaker 2: We can go and spend and you know, we're out

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Speaker 2: of this bloody lockdown and all this other stuff. The

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Speaker 2: economy went wosh, and that's when we had that inflation problem.

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Speaker 2: So that was part of that, and it wasn't necessarily

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Speaker 2: a mistake that the government did or the Reserve Bank

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Speaker 2: did necessarily because we were coming out of a pretty

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Speaker 2: bad pandemic. But then the reality check is that you

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Speaker 2: and I and everybody listening. So I said, well, oh,

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Speaker 2: thank god, we're out of this pandemic. I'm going to

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Speaker 2: go on a holiday. I'm going to buy that new

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Speaker 2: car that i'd put off been buying. I'm going to

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Speaker 2: buy some new bits and piece the restaurant, go to

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Speaker 2: the restaurant again at last, and go and go and

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Speaker 2: have a few beers at the pub and bush. The

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Speaker 2: economy went really strong, inflation kicked up, and therefore that's

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Speaker 2: why we saw the RBA hiking four hundred and twenty

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Speaker 2: five basis points.

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Speaker 3: So if productivity was higher, yes, and let's say, in

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Speaker 3: a word, two and a half percent GDP growth, And

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Speaker 3: if productivity that was higher, is it fair to say

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Speaker 3: that the Reserve Bank doesn't mind that because they're going

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Speaker 3: to say, the manufacturers or the merchants.

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Speaker 1: Are getting more of the product.

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Speaker 3: Therefore they won't be putting prices up because they can

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Speaker 3: make the same they can make the same margin just

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Speaker 3: by selling more product.

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Speaker 2: Correct.

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Speaker 3: But if so, therefore it is so low productivity is

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Speaker 3: a bit of constraint on GDP in terms of what's

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Speaker 3: acceptable GDP.

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Speaker 2: And productivity is about your ability to grow the economy

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Speaker 2: without adding to inflation. So one little example. I'll use

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Speaker 2: this because it's sort of makes the point in terms

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Speaker 2: of labor productivity. Just so you've got ten people, you

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Speaker 2: give them a pick of shovel and a wheelbarrow and

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Speaker 2: say in the pilbro start mining iron or you're not

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Speaker 2: going to dig a lot of iron or out aa

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Speaker 2: same ten people, But the company buys a couple of diggers,

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Speaker 2: a couple of trucks, and a couple of crushes, and

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Speaker 2: all this upflight, and they how you get iron or

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Speaker 2: out of the ground, you get it to the port.

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Speaker 2: Imagine the productivity growth. Certainly, got ten workers, your tonnages

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Speaker 2: per week or per month would be massively high. With

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Speaker 2: the machinery and equipment, your productivity just because you've invested

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Speaker 2: a couple of million bucks in machinery. Is that inflationary, No,

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Speaker 2: it's actually growing the business more quickly because you've got

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Speaker 2: better productivity enhancing tools. So you know, the worker's officers

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Speaker 2: got to have the skills and knowledge to run the machines.

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Speaker 2: You know, how do you work the digger? How do

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Speaker 2: you get all these things working? But it's the machineries

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Speaker 2: or which comes back to this point that I think

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Speaker 2: we discussed last time at that productivity roundtable that Treasurer

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Speaker 2: Jim Chalmers had is that part of this issue of

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Speaker 2: productivity is the getting the private sector and the government

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Speaker 2: investing in machinery, equipment, AI technology to make sure that

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Speaker 2: we as business people were as consumers, can do more

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Speaker 2: in the same amount of ours because we're using pressing

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Speaker 2: a button or we're using machines to do some of

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Speaker 2: the work for us.

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Speaker 3: So we therefore probably have given our current productivity demise yep,

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Speaker 3: have to probably be prepared to accept the lower GDP

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Speaker 3: growth number, and therefore that's where the Reserve Bank is.

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Speaker 3: And the closer the our actual GDP gets to that,

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Speaker 3: you know, the sweet spot, the less likely there will

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Speaker 3: be a rate reduction.

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Speaker 2: Correct that. I think that's in a nutshell in fifty

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Speaker 2: words or less, however many you said that is, and

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Speaker 2: that is the lemma right now for the RBA, they

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Speaker 2: would sort of like to cut into straits, I think,

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Speaker 2: because they're pretty confident that inflation, aside from the monthly volatility,

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Speaker 2: is sort of tracking in the middle of the range approximately.

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Speaker 2: You know, we had Sarah Hunt of the chief economist

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Speaker 2: at the RBA talking a few days ago. We had

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Speaker 2: the Governor herself. Speaking at the House of Reps Parliamentary

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Speaker 2: Committee on Monday, she was saying a similar sort of thing.

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Speaker 2: They'd like to, but they're just a bit cautious about

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Speaker 2: overstimulating the economy before they're confident that one inflation's locked in,

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Speaker 2: two that we're getting some sort of productivity response, which

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Speaker 2: isn't yet happening.

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Speaker 3: Yeah, the inflation sort of looks like is locked in,

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Speaker 3: but we don't know because that can change you quickly.

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Speaker 3: But yes, but the productivity thing is one thing is

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Speaker 3: for sure is not locked in.

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Speaker 2: No, and productivity is one of these things it takes

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Speaker 2: a long time to change.

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Speaker 1: It's a big turn around to It's one of these.

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Speaker 2: Things that if you so. I think one example of

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Speaker 2: productivity is the skills of your workforce. You know, it's

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Speaker 2: all very well and I've heard a number of businesses,

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Speaker 2: particularly a year or two ago, saying I've got this

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Speaker 2: great business plan, I've got all the cap X, I've

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Speaker 2: got my finance approved, I'm ready to rock and roll,

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Speaker 2: but I can't find the workers with the skills that

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Speaker 2: I need to get it off the ground. And that

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Speaker 2: was with six hundred and seven hundred thousand people unemployed.

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Speaker 2: So that goes to show that we've got to ensure

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Speaker 2: that our kids from KINDI you can read and write matter,

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Speaker 2: through the school, through the university, through TAFE training, through

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Speaker 2: all the skills and knowledge. Because the economy gosh, I'm

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Speaker 2: blown away by artificial intelligence and technology and all these

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Speaker 2: sort of things. I love them. I think they're fantastic.

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Speaker 2: But we've got to ensure that our workforce has the knowledge,

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Speaker 2: the agility. It's Malcolm terribly is to talk about the

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Speaker 2: agility to adapt to a changing economy. So you know,

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Speaker 2: I used to be a brick layer. I'd lay bricks

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Speaker 2: like this. Well, if there's a machine that can come

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Speaker 2: along lays and double the speed, and great, if there's

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Speaker 2: a way of doing business banking and finance, you know

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Speaker 2: remember checks and eighty m's pulling cash out. Now it's

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Speaker 2: tap tap tap tap. How efficient is that? So that's

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Speaker 2: what we need to embrace and make sure that people

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Speaker 2: can understand how it works. And I think that's part

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Speaker 2: of this you know, bigger picture productivity thing. But again,

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Speaker 2: think about getting the workforce educated. It takes a long time,

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Speaker 2: and immigration to train them, yes, and the immigration, and

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Speaker 2: we're getting the right the right people in terms of

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Speaker 2: our skill set. Just put it, if we focus on

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Speaker 2: the skills of the immigrants, are we getting the skills

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Speaker 2: that we need in the three hundred thousand people that

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Speaker 2: are coming in each year?

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Speaker 1: So that's stuff.

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Speaker 3: If given that we've got we've still got record levels

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Speaker 3: of immigration.

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Speaker 2: Still very high.

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Speaker 3: Yes, correct, What would you say instead of saying, you know,

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Speaker 3: maybe it's just a narrative change, but we're going to

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Speaker 3: keep the immigration levels as is, but we're going to

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Speaker 3: make sure that the people who are coming in three

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Speaker 3: hundred thousand people for example, who have skills into the

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Speaker 3: ten categories we need them.

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Speaker 2: In building and building in construction, so Sparky's and carpenters,

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Speaker 2: and you know that we need it to build all

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Speaker 2: these houses that we need to build, for example, and

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Speaker 2: then all the infrastructure that we need more. The government

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Speaker 2: would say, the government say they're doing that to a point.

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Speaker 2: The reality is that it's not quite as clear cut

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Speaker 2: as that. So again I don't know quite what the

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Speaker 2: criteria is that if you apply to come to live

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Speaker 2: in Australia. So yes, I'm a trade or I'm a

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Speaker 2: doctor or a nurse or a teacher or whatever. I

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Speaker 2: don't know how they check that and they say, oh yeah,

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Speaker 2: your teacher, come on in, and then they realize that

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Speaker 2: the certificate that that person might have had from country

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Speaker 2: X y Z isn't compatible with our education system. So

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Speaker 2: there's that matching the skills. So we think that they've

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Speaker 2: got the skills. But the harsh reality is that when

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Speaker 2: the new immigrants get here, some of them And this

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Speaker 2: is the discussion that's going on with the business counsel

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Speaker 2: and others who are sort of there at the coal

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Speaker 2: face of I need skilled work because I can't find

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Speaker 2: them at the coal face of this immigration discussion.

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Speaker 3: So what's interesting You start off talking about the markets

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Speaker 3: priced in they were pricing in three reductions, they're now

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Speaker 3: pricing or three or four.

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Speaker 1: Actually they're now pricing in two two.

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Speaker 3: I think what our audience needs to understand, or maybe

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Speaker 3: we could just touch on this, but maybe already understand.

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Speaker 3: But you know how many times you and I have

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Speaker 3: talked about the markets saying he's going to be re

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Speaker 3: rate reduction or a series of rate reductions. I mean,

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Speaker 3: I remember two years ago we're talking about seven rate

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Speaker 3: reductions at one stage, and we've got none that in

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Speaker 3: that period that they talk about and I don't really

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Speaker 3: think the RBA cares too much about what the market says.

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Speaker 3: And to some extent, given what we just talked about,

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Speaker 3: do you reckon that we really need to consider what

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Speaker 3: the market says anymore or should we just look at

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Speaker 3: it because the rb A position is they're not pre

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Speaker 3: emptive anymore.

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Speaker 1: They are data response. You give me the data. The

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Speaker 1: data says, we're here, we'll make it.

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Speaker 3: We'll make a move one way the other off the

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Speaker 3: back of that.

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Speaker 2: That is spot on. By the way, that is exactly

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Speaker 2: ten years ago. It might have been a little bit different.

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Speaker 1: It definitely was different from now.

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Speaker 2: They need to see the data before they pulled the trigger.

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Speaker 3: And when they were premative, they were looking at money markets,

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Speaker 3: and it was rare that. It was rare that the

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Speaker 3: RBA went against the money market, Like if the money

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Speaker 3: mark was intensely saying there's a ninety nine percent chances

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Speaker 3: we need to tax it a a rate reduction, it

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Speaker 3: was rare that the RBO would go against it.

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Speaker 1: Now, the RB it couldn't get two meetings ago.

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Speaker 2: It was that was a dry meeting gily meaning yes,

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Speaker 2: I was tracking the dates. Yes, that was one of

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Speaker 2: those ones. Where I think the new operational standards, if

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Speaker 2: we call that. Of the Monetary Policy Board of the

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Speaker 2: RBA says, well, yeah, we glanced at the markets. They

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Speaker 2: look at the marks, they look at the Aussie dollar,

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Speaker 2: they look at everything. But because just because the market's

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Speaker 2: got a ninety something percent probability of a rate cut,

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Speaker 2: and they look at that and say, well, hang up, no,

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Speaker 2: we don't think it's justified. So I'll say no. And

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Speaker 2: then of course the governor does her press conference so

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Speaker 2: she can articulate why. And I do recall that she

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Speaker 2: got grilled on that and fair enough to and she

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Speaker 2: she justified the case pretty well. She said, well, look,

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Speaker 2: we it's.

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Speaker 1: Not we're not ready yet.

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Speaker 2: We're not ready yet. It's not the direction of the

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Speaker 2: timing I think said it was still that we need

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Speaker 2: to cut.

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Speaker 3: Yeah, she wanted to wait for the July numbers to

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Speaker 3: come out, correct, you got it. So it was I

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Speaker 3: think the meeting was on the eighth of July or

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Speaker 3: something like that. But the July numbers for the June

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Speaker 3: period and for the previous years been coming out to

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Speaker 3: the twenty eighth of July July something, and she and

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Speaker 3: when she did meet the next month on the whatever

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Speaker 3: it was. She did reduce because she got the right numbers,

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Speaker 3: But she pushed against this process of understanding or knowing

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Speaker 3: what money markers are saying. So money markers are saying,

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Speaker 3: So we might just go back to the money marks

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Speaker 3: for a second. Maybe we can sort of sort of

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Speaker 3: sem me explain, because I don't think I know, and

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Speaker 3: I don't know if you have that knowledge of the

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Speaker 3: money markets sort of feed a whole out of data

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Speaker 3: in daily not hourly, you know, and they're you know,

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Speaker 3: there's the data sets are being fed into some sort

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Speaker 3: of probably AI these days, but some sort of machine

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Speaker 3: that is learning and making deductions as to what it

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Speaker 3: thinks the market is going to do with that particular

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Speaker 3: day in terms of pricing their own money. Yes, so

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Speaker 3: the money markets pricing their own money relative to transactions

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Speaker 3: are being made between parties in the money market. It's

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Speaker 3: not necessarily saying you the audience who have a mortgage

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Speaker 3: with you know, Westpac, your interstrate's going to get reduced

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Speaker 3: in three months.

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Speaker 1: Maybe you could explain that a bit.

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Speaker 2: There are a couple of that is spot on the banks,

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Speaker 2: let's get back to the function of banking. They receive deposits.

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Speaker 2: They're the intermediary between money and money out You know,

403
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Speaker 2: we all use a bank. Here we are talking about tapping.

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Speaker 2: You know that that tap is money being transferred from

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Speaker 2: my inn a B account to Woolworth's when I buy

406
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Speaker 2: my groceries, or to Shell when I fill up my

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Speaker 2: car with petrol or whatever. It is my automatic debit

408
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Speaker 2: for my electricity bill, whatever. That is still money. It's

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Speaker 2: still even though it's not notes and coins like back

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Speaker 2: in the day, it is still a transfer. And what

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Speaker 2: the banks do when they have a surplus of cash,

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Speaker 2: for example, to say, in this particular day, there was

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Speaker 2: more cash going in. More money. By cash, I mean transactions,

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Speaker 2: not the cold hard stuff. If they've got a surplus

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Speaker 2: of money, they don't want to hold it earning no interest,

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Speaker 2: check account, earning no money overnight, so they'll probably go

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Speaker 2: to the counterpart X y Z Bank and ABC Bank.

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Speaker 1: Who might need something.

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Speaker 2: Oh gee, we're a bit short today because we had

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Speaker 2: more outflows. People sort of took more out of our

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Speaker 2: accounts and we wrote, you know, a whole lot of

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Speaker 2: mortgage today. So the money went out of our accounts.

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Speaker 2: We need to borrow the money. And this is where

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Speaker 2: the official cash eight works to an extent, So that's

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Speaker 2: how the market clears when the banks settle their daily

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Speaker 2: accounts at the end of the day with normal, regular,

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Speaker 2: plain vanilla transactions. Now there's also this issue that the

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Speaker 2: banks when they because they can forecast some of their

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Speaker 2: they can they do forecast some of their ins and outs.

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Speaker 2: They know when we've got all these mortgagey payments during

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Speaker 2: the tenth and the twentieth of the month, and they've

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Speaker 2: got a whole lot coming through, and there's a three

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Speaker 2: year fixed deposit that's coming to an end, or a

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Speaker 2: three year loan that's coming to an end. They look

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Speaker 2: at this stuff that all the time. The treasuries in

436
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Speaker 2: the banks do that every day of the week, in

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Speaker 2: fact more than that, and they can sort of see

438
00:21:40,520 --> 00:21:43,480
Speaker 2: what's going on. And then plus the what do we

439
00:21:43,520 --> 00:21:46,600
Speaker 2: call it, that data flow in, so it's a combination

440
00:21:46,720 --> 00:21:50,680
Speaker 2: of their own internal balance sheet functioning cash in, cash out,

441
00:21:50,760 --> 00:21:54,240
Speaker 2: future cash in, future cash out. Plus you know, they

442
00:21:54,320 --> 00:21:56,680
Speaker 2: might talk to their economics team and say, the economy

443
00:21:56,760 --> 00:22:00,840
Speaker 2: is our data is showing the economy is really So,

444
00:22:00,920 --> 00:22:03,720
Speaker 2: for example, they monitor their credit card data, there's been

445
00:22:03,760 --> 00:22:06,639
Speaker 2: a pick up in our foss transactions over the last

446
00:22:06,680 --> 00:22:09,440
Speaker 2: two weeks or something. There's something going on here. They'll

447
00:22:09,480 --> 00:22:14,639
Speaker 2: feed that all into their positioning of managing their multi

448
00:22:14,640 --> 00:22:17,919
Speaker 2: billion dollar balance sheet, and that can cause these future

449
00:22:18,000 --> 00:22:21,560
Speaker 2: prices to go up or down to price in as

450
00:22:21,560 --> 00:22:25,240
Speaker 2: you alluded to, two more rate cuts by March next year,

451
00:22:25,640 --> 00:22:28,200
Speaker 2: or we're taking them out because you know, we've got

452
00:22:28,200 --> 00:22:30,840
Speaker 2: to change in our cash flows. So it's a combination

453
00:22:31,000 --> 00:22:33,600
Speaker 2: of it's not just you and me or you know,

454
00:22:33,680 --> 00:22:36,080
Speaker 2: good old Chris Joy speculating its going to be a

455
00:22:36,160 --> 00:22:38,840
Speaker 2: rate cut or not. That's fine, and that's part of it,

456
00:22:39,119 --> 00:22:42,040
Speaker 2: but it's also real money flows. It's actually the this

457
00:22:42,080 --> 00:22:45,760
Speaker 2: is actually the economy sort of telling the central bank

458
00:22:46,160 --> 00:22:48,639
Speaker 2: and being priced into the market what's happening in the

459
00:22:48,680 --> 00:22:51,320
Speaker 2: economy as well. So that's a really really important point

460
00:22:51,320 --> 00:22:52,040
Speaker 2: to think about too.

461
00:22:52,200 --> 00:22:54,800
Speaker 1: Yeah, but therefore, but it doesn't necessarily follow that they

462
00:22:54,800 --> 00:22:58,360
Speaker 1: get it right, because this can change. Yes, it's an

463
00:22:58,400 --> 00:23:01,320
Speaker 1: our eating it's changes by the moment.

464
00:23:01,920 --> 00:23:04,520
Speaker 2: And this is the beauty of the unpredictability of a

465
00:23:04,560 --> 00:23:06,639
Speaker 2: lot of these cash flows. So I mentioned before that

466
00:23:06,680 --> 00:23:09,239
Speaker 2: the price of a ton of iron all went from

467
00:23:09,280 --> 00:23:11,439
Speaker 2: ninety five years dollars to one hundred and five years dollars.

468
00:23:11,960 --> 00:23:15,080
Speaker 2: If you're one of the banks that is the banker

469
00:23:15,119 --> 00:23:17,840
Speaker 2: for the big iron ore companies, you know they buy

470
00:23:17,840 --> 00:23:20,560
Speaker 2: and sell currencies and put deposits, you know, the big

471
00:23:20,680 --> 00:23:24,320
Speaker 2: bhps and Rios and Fortescu and all these others. Know

472
00:23:24,640 --> 00:23:27,600
Speaker 2: their businesses have cash flowing in and out. When they

473
00:23:27,680 --> 00:23:32,520
Speaker 2: sell million tons of this stuff, that has big implications

474
00:23:32,520 --> 00:23:35,399
Speaker 2: for the for the bank's balance sheets as well. Oh

475
00:23:35,400 --> 00:23:37,000
Speaker 2: we didn't. We thought it was only going to be

476
00:23:37,040 --> 00:23:39,040
Speaker 2: ninety five. Now it's one hundred and five dollars a ton.

477
00:23:39,240 --> 00:23:43,080
Speaker 2: That's a ten percent increase. So on many billions of

478
00:23:43,119 --> 00:23:46,239
Speaker 2: dollars of exports, that's many billions of dollars extra that

479
00:23:46,280 --> 00:23:48,840
Speaker 2: can be coming into the economy, into the system. So

480
00:23:48,840 --> 00:23:51,240
Speaker 2: it's not only the banks that are trying to you know,

481
00:23:51,560 --> 00:23:55,479
Speaker 2: massage and manage these expectations. It's US economists looking at

482
00:23:55,480 --> 00:23:58,719
Speaker 2: the economy. But this is where the bank treasury departments

483
00:23:58,720 --> 00:24:02,000
Speaker 2: within each of the big and the small banks monitor

484
00:24:02,760 --> 00:24:06,399
Speaker 2: cash flows to work out what their funding requirement's going

485
00:24:06,440 --> 00:24:06,600
Speaker 2: to be.

486
00:24:07,160 --> 00:24:13,240
Speaker 3: But it doesn't necessarily follow that because it might be

487
00:24:13,280 --> 00:24:15,840
Speaker 3: a we might have a month of a lot of inflows.

488
00:24:15,920 --> 00:24:19,720
Speaker 3: For argument's sake cash, you know, whether it's coming from

489
00:24:19,760 --> 00:24:22,159
Speaker 3: overseas or it's coming for people spending morning in the

490
00:24:22,160 --> 00:24:24,840
Speaker 3: credit cards, whatever the case, may be running down their

491
00:24:24,880 --> 00:24:27,400
Speaker 3: savings because they want to spend, spend, spend.

492
00:24:27,560 --> 00:24:29,320
Speaker 1: It doesn't necessarily follow.

493
00:24:29,560 --> 00:24:32,480
Speaker 3: That the Reserve Bank's going to say, because the Reserve Bank,

494
00:24:32,480 --> 00:24:34,919
Speaker 3: by the way, has access to the same data. But

495
00:24:34,960 --> 00:24:37,200
Speaker 3: it doesn't necessarily follow the Reserving's going to say, well,

496
00:24:37,240 --> 00:24:38,960
Speaker 3: wait a minute.

497
00:24:38,440 --> 00:24:41,159
Speaker 1: Where flush and there's an inflation.

498
00:24:40,840 --> 00:24:43,720
Speaker 3: Problem potential because the Reserve Bank has made it pretty

499
00:24:43,720 --> 00:24:48,320
Speaker 3: clear we're actually going to measure inflation, and we're only

500
00:24:48,359 --> 00:24:50,280
Speaker 3: we don't necessarily want to measure it monthly either, we

501
00:24:50,920 --> 00:24:52,720
Speaker 3: rather have it looks like they want to have the

502
00:24:52,840 --> 00:24:56,720
Speaker 3: quarterly information correct, and the quarterly information doesn't come until

503
00:24:57,000 --> 00:24:59,000
Speaker 3: the end of the month after the quarter finishes, so

504
00:25:00,160 --> 00:25:04,040
Speaker 3: September quarter, it's July or September comes out for the

505
00:25:04,080 --> 00:25:06,639
Speaker 3: September quarter comes out at the end of October correct

506
00:25:07,280 --> 00:25:10,800
Speaker 3: the next month, so they like to see that data.

507
00:25:11,119 --> 00:25:14,040
Speaker 3: The Resilient's made pretty clear that these days she wants

508
00:25:14,080 --> 00:25:16,879
Speaker 3: to see the whole board. I guess they want to

509
00:25:16,880 --> 00:25:20,600
Speaker 3: see the actual effect on inflation, not what the money

510
00:25:20,600 --> 00:25:22,080
Speaker 3: market is predicting.

511
00:25:21,680 --> 00:25:25,200
Speaker 2: Correct, and it's fun not funny. It's interesting you mention

512
00:25:25,320 --> 00:25:28,040
Speaker 2: that too, because we and for fifty years we've had

513
00:25:28,040 --> 00:25:33,120
Speaker 2: monthly employment data. This is just me sort of learning

514
00:25:33,119 --> 00:25:36,080
Speaker 2: how the new operation of the board is working as well.

515
00:25:36,840 --> 00:25:38,600
Speaker 2: A lot of us can get very excited about one

516
00:25:38,640 --> 00:25:41,000
Speaker 2: monthly employment number or went up to four point three.

517
00:25:41,040 --> 00:25:43,240
Speaker 2: Oh g. Employment was down six thousand in the month.

518
00:25:43,840 --> 00:25:48,520
Speaker 2: The RBA wouldn't give two I'll be general, they wouldn't

519
00:25:48,520 --> 00:25:50,960
Speaker 2: give two hoots about that. They and it's not that

520
00:25:51,160 --> 00:25:52,879
Speaker 2: you know, we don't get quarterly labor force numbers, but

521
00:25:52,880 --> 00:25:54,639
Speaker 2: you can turn monthly numbers into quarterly numbers, and you

522
00:25:54,800 --> 00:25:57,520
Speaker 2: put rolling averages through. You can analyze these numbers one

523
00:25:57,560 --> 00:26:00,240
Speaker 2: hundred different ways. And so when you listen to the

524
00:26:00,359 --> 00:26:03,760
Speaker 2: RBA governor and the senior RBA officials talk about the

525
00:26:03,840 --> 00:26:07,600
Speaker 2: labor force numbers, very rarely do they say, oh, the

526
00:26:07,600 --> 00:26:10,800
Speaker 2: month of August, the unemployment rate was this, and therefore

527
00:26:10,840 --> 00:26:13,760
Speaker 2: that forces to hold rates, cut rates, whatever the case

528
00:26:13,800 --> 00:26:16,359
Speaker 2: may be. They will say that over the course of

529
00:26:16,400 --> 00:26:19,600
Speaker 2: the last twelve months, employment growth has slowed, the unemployment

530
00:26:19,680 --> 00:26:24,600
Speaker 2: rates trended. So putting a moving average type measure through

531
00:26:24,640 --> 00:26:28,320
Speaker 2: these seasonally adjusted monthly numbers has trended from three point

532
00:26:28,440 --> 00:26:31,120
Speaker 2: nine to four point two. Therefore, that's why we cut

533
00:26:31,160 --> 00:26:35,760
Speaker 2: interest rates last time. So the one So your point,

534
00:26:35,800 --> 00:26:38,920
Speaker 2: which is spot on about the quarterly inflation numbers, can

535
00:26:39,000 --> 00:26:42,159
Speaker 2: apply to the noise, if we can call it that,

536
00:26:42,280 --> 00:26:47,560
Speaker 2: in the monthly employment numbers inflation numbers. You know, they

537
00:26:47,600 --> 00:26:51,040
Speaker 2: want to get the trend, not get excited about all

538
00:26:51,080 --> 00:26:52,880
Speaker 2: one month's up and then oh lo and behold next month,

539
00:26:52,880 --> 00:26:55,760
Speaker 2: I went back down. So the trend is flat, and

540
00:26:55,800 --> 00:26:57,879
Speaker 2: so they don't get they tend not to get carried

541
00:26:57,880 --> 00:26:58,399
Speaker 2: away on that.

542
00:26:58,560 --> 00:26:59,840
Speaker 3: And as seems like they want to look at the

543
00:26:59,840 --> 00:27:02,159
Speaker 3: tree and for your top three, So they're looking at

544
00:27:02,160 --> 00:27:04,760
Speaker 3: the trends for both for all of dutyp inflation and

545
00:27:05,560 --> 00:27:07,800
Speaker 3: labor market or unemployment, which we'll.

546
00:27:07,640 --> 00:27:08,359
Speaker 1: Look at at the moment.

547
00:27:09,359 --> 00:27:12,560
Speaker 3: Now, just before we go to the board, though, I

548
00:27:12,720 --> 00:27:14,960
Speaker 3: just want to raise this two things. They want to

549
00:27:14,960 --> 00:27:17,199
Speaker 3: park property prices just we'll come back to that.

550
00:27:17,240 --> 00:27:19,840
Speaker 1: We'll park it from the moment. But in terms of.

551
00:27:21,720 --> 00:27:25,760
Speaker 3: Monthly numbers, maybe you just can remind us what do

552
00:27:25,840 --> 00:27:27,560
Speaker 3: we get monthly numbers on and what do we what

553
00:27:27,600 --> 00:27:30,400
Speaker 3: do we get quarterly numbers on? And what do we

554
00:27:30,400 --> 00:27:33,199
Speaker 3: where which which are the which do you think the

555
00:27:33,240 --> 00:27:35,480
Speaker 3: reserve means taken the most notice of in relation to

556
00:27:35,680 --> 00:27:38,840
Speaker 3: let's say the top three categories g top inflation, and unemployment.

557
00:27:39,400 --> 00:27:42,040
Speaker 3: Bearing in mind, I just want to remind everybody that

558
00:27:42,200 --> 00:27:45,800
Speaker 3: unemployment is now a measure of full employment or you know,

559
00:27:46,119 --> 00:27:46,600
Speaker 3: start again.

560
00:27:46,680 --> 00:27:47,400
Speaker 1: Yeah, well that's right.

561
00:27:47,440 --> 00:27:50,520
Speaker 3: I mean they use unemployment as a measure of their

562
00:27:50,560 --> 00:27:55,600
Speaker 3: success that their new mandate about full employment whatever that means.

563
00:27:56,760 --> 00:28:00,320
Speaker 3: And so that's a much more overriding thing than it

564
00:28:00,359 --> 00:28:00,800
Speaker 3: has been.

565
00:28:00,680 --> 00:28:03,720
Speaker 1: In the past, since this time last year, I think, right.

566
00:28:04,119 --> 00:28:08,560
Speaker 3: So maybe, so just with that background, what are they

567
00:28:08,680 --> 00:28:10,840
Speaker 3: looking at it? Because we're going to get some monthly

568
00:28:10,920 --> 00:28:13,240
Speaker 3: numbers today on inflation, we're you know, we're going to we're.

569
00:28:13,119 --> 00:28:15,359
Speaker 2: Going to LaForce numbers in a couple of weeks time.

570
00:28:15,400 --> 00:28:17,760
Speaker 2: And then the quarterly GDP figures came out two or

571
00:28:17,800 --> 00:28:23,320
Speaker 2: three weeks ago, and I think how I would categorize it.

572
00:28:23,359 --> 00:28:24,600
Speaker 2: And again when we get to the board in a

573
00:28:24,600 --> 00:28:27,440
Speaker 2: minute or two, there are basically, if you were to

574
00:28:27,480 --> 00:28:30,760
Speaker 2: say to the RBA, there are only three indicators that

575
00:28:30,800 --> 00:28:33,400
Speaker 2: you could have to make your monetary policy decisions. Of course,

576
00:28:33,400 --> 00:28:36,320
Speaker 2: there are well all three though, but you need all three.

577
00:28:36,480 --> 00:28:41,280
Speaker 2: GDP doesn't tell you everything, yep. Unemployment doesn't tell you everything.

578
00:28:41,400 --> 00:28:46,120
Speaker 2: Inflation doesn't tell you everything. Particularly again, as you touched

579
00:28:46,160 --> 00:28:49,320
Speaker 2: on that, the Reserve Bank mandate with that revision to

580
00:28:49,400 --> 00:28:52,840
Speaker 2: what the Reserve Bank Board does nowadays is both inflation

581
00:28:53,040 --> 00:28:54,880
Speaker 2: two and three percent. That's something that we've grown up

582
00:28:54,920 --> 00:28:58,080
Speaker 2: with over the last thirty something years. Whatever it is,

583
00:28:59,000 --> 00:29:03,160
Speaker 2: it's now also full in So I think that up

584
00:29:03,240 --> 00:29:05,400
Speaker 2: until a year or two or two or three ago,

585
00:29:05,920 --> 00:29:09,680
Speaker 2: inflation probably had a waiting of seventy five percent. That

586
00:29:09,800 --> 00:29:12,120
Speaker 2: was the thing that drove them, and twenty five percent

587
00:29:12,160 --> 00:29:13,840
Speaker 2: was a bit on the economy, a bit on GDP,

588
00:29:13,920 --> 00:29:15,920
Speaker 2: a bit on global, a bit on other bits and

589
00:29:15,960 --> 00:29:18,760
Speaker 2: pieces in the economy to sway them or convince them

590
00:29:18,760 --> 00:29:21,840
Speaker 2: to move rates up down or keep them steady. Nowadays,

591
00:29:21,880 --> 00:29:26,440
Speaker 2: I reckon it's gone. Probably inflation still still a critical one.

592
00:29:26,440 --> 00:29:30,160
Speaker 2: So it's probably dropped to forty percent, labor markets up

593
00:29:30,200 --> 00:29:32,760
Speaker 2: to thirty five percent, and it's still twenty five percent.

594
00:29:32,840 --> 00:29:35,120
Speaker 2: Other bits and pieces, you know, retail sales and building

595
00:29:35,120 --> 00:29:39,320
Speaker 2: approvals and global. So I think the importance of those

596
00:29:39,880 --> 00:29:44,239
Speaker 2: labor force numbers is much much greater today than it

597
00:29:44,400 --> 00:29:48,320
Speaker 2: was a couple of years ago. But this is this

598
00:29:48,480 --> 00:29:53,360
Speaker 2: is the dilemma. Anybody who's tried to juggle three sometimes

599
00:29:53,360 --> 00:29:58,040
Speaker 2: conflicting things realizes it's bloody hard to do. And this

600
00:29:58,120 --> 00:29:59,760
Speaker 2: is what's happening in the US just by the way,

601
00:29:59,760 --> 00:30:04,239
Speaker 2: because they've got higher inflation and higher unemployment. Do your

602
00:30:04,240 --> 00:30:05,920
Speaker 2: cut rates because of unemployment or do you hold them

603
00:30:05,920 --> 00:30:08,360
Speaker 2: steady because inflation is picking up? And that's what the

604
00:30:08,360 --> 00:30:09,720
Speaker 2: problem of the Jerome.

605
00:30:09,480 --> 00:30:11,480
Speaker 1: Power that the change they deal with trump.

606
00:30:11,920 --> 00:30:15,000
Speaker 2: Yes, indeed, and that's a dilemma that the US has

607
00:30:15,000 --> 00:30:18,440
Speaker 2: at the moment that's filtering into Australia a little bit

608
00:30:18,600 --> 00:30:19,120
Speaker 2: like I say.

609
00:30:18,960 --> 00:30:22,000
Speaker 3: It's a dilemma here too, for the other reasons, because

610
00:30:22,040 --> 00:30:25,880
Speaker 3: I think what we shouldn't explain to our audience is

611
00:30:26,680 --> 00:30:30,880
Speaker 3: where GDP, inflation and labor market why they matter from

612
00:30:30,880 --> 00:30:33,280
Speaker 3: a policy point of view, And I might just have

613
00:30:33,680 --> 00:30:34,680
Speaker 3: a little crack at it.

614
00:30:34,680 --> 00:30:37,080
Speaker 1: And then you at least please correct me if I'm wrong.

615
00:30:37,600 --> 00:30:42,840
Speaker 3: So the mandate, the actual mandate for the r b A,

616
00:30:43,800 --> 00:30:46,640
Speaker 3: is the prosperity and welfare.

617
00:30:46,240 --> 00:30:48,080
Speaker 1: Of all Australians. That's that's it.

618
00:30:48,200 --> 00:30:51,920
Speaker 3: They're they're the words prosperity, and welfare. So if I am,

619
00:30:52,320 --> 00:30:55,840
Speaker 3: you know, looking at how well I do as the

620
00:30:55,960 --> 00:30:58,000
Speaker 3: chairman of the board of the r b A in

621
00:30:58,080 --> 00:31:02,720
Speaker 3: relation to my mandate, our mandate as an RBA, how

622
00:31:02,720 --> 00:31:07,320
Speaker 3: do I measure, for argument's sake, welfare. Well, one way

623
00:31:07,360 --> 00:31:10,400
Speaker 3: I can measure welfare of all Australians. In other words,

624
00:31:10,400 --> 00:31:13,960
Speaker 3: that tends to indicate looking after people who have a problem.

625
00:31:14,680 --> 00:31:15,520
Speaker 1: We're not looking after the rich.

626
00:31:15,560 --> 00:31:17,640
Speaker 3: People are going to look after after the welfare of

627
00:31:17,840 --> 00:31:19,640
Speaker 3: Australians to make sure they're okay, okay.

628
00:31:20,120 --> 00:31:21,960
Speaker 1: So one way I might be able to.

629
00:31:21,960 --> 00:31:26,160
Speaker 3: Measure that objectively, let's call it is inflation, because inflation

630
00:31:26,360 --> 00:31:30,160
Speaker 3: really affects the welfare of some socioeconomic bands in this economy.

631
00:31:30,520 --> 00:31:32,760
Speaker 3: So one way I can measure the welfare of all

632
00:31:32,760 --> 00:31:36,160
Speaker 3: Australians is inflation. In other words, if it's too I

633
00:31:36,360 --> 00:31:37,920
Speaker 3: there's a lot of people who I just can't keep

634
00:31:38,000 --> 00:31:39,440
Speaker 3: up with the cost of living and they're going to

635
00:31:39,480 --> 00:31:42,200
Speaker 3: go backwards the stain living and go backwards. The other

636
00:31:42,240 --> 00:31:45,840
Speaker 3: one for welfare is also labor market. Unemployment is a

637
00:31:45,840 --> 00:31:51,080
Speaker 3: great measure of welfare, and I feel as though they've

638
00:31:51,120 --> 00:31:54,080
Speaker 3: been given a lot of weight, probably.

639
00:31:53,720 --> 00:31:55,160
Speaker 1: Under the labor Party in Australia.

640
00:31:55,920 --> 00:32:02,160
Speaker 3: Now GDP, though tends to when you dps strong and

641
00:32:02,280 --> 00:32:04,440
Speaker 3: depends what strong means, but let's call it two and

642
00:32:04,440 --> 00:32:09,520
Speaker 3: a half. That tends to be a measure of prosperity,

643
00:32:10,920 --> 00:32:15,160
Speaker 3: of national prosper national prosperity, not individual prosperity, but national prosperity.

644
00:32:15,400 --> 00:32:17,360
Speaker 1: Now, this is the game that they're playing. They're playing

645
00:32:17,360 --> 00:32:17,840
Speaker 1: this game.

646
00:32:17,880 --> 00:32:20,600
Speaker 3: They're trying to saying, well, one hound, we want all

647
00:32:20,600 --> 00:32:23,600
Speaker 3: the strains to be prosperous. But on the other hand,

648
00:32:23,720 --> 00:32:30,720
Speaker 3: we don't want anyone category not being prosperous through you know,

649
00:32:31,200 --> 00:32:34,640
Speaker 3: and therefore we need to try to look after their welfare.

650
00:32:35,040 --> 00:32:40,560
Speaker 3: And then government comes and overlays their own let's call

651
00:32:40,600 --> 00:32:44,480
Speaker 3: it their own ideology in relationship, whichever the government laybor liberal, whatever,

652
00:32:44,760 --> 00:32:49,040
Speaker 3: their only ideology. Which is sort of my explainer for

653
00:32:49,120 --> 00:32:53,120
Speaker 3: why Trump is building the hell out of Jerome Powell,

654
00:32:53,400 --> 00:32:56,800
Speaker 3: because Jerome Powell is more like our current reserve bank

655
00:32:57,240 --> 00:33:03,040
Speaker 3: looking at unemployment and inflation, whereas whereas Trump's sort of saying, well,

656
00:33:03,080 --> 00:33:04,880
Speaker 3: I'm interested in prosperity.

657
00:33:05,760 --> 00:33:07,880
Speaker 1: To grow, and that's my measure.

658
00:33:08,200 --> 00:33:12,480
Speaker 3: I'm more interested in the prosperity of America, of America

659
00:33:12,560 --> 00:33:14,600
Speaker 3: the nation as opposed to market.

660
00:33:14,920 --> 00:33:17,200
Speaker 2: I want I want everything to go up, and I

661
00:33:17,240 --> 00:33:20,160
Speaker 2: want us to go everything lift most what is the

662
00:33:20,240 --> 00:33:23,240
Speaker 2: rising time? That's full ships? Most ships anyway, whatever, most

663
00:33:23,240 --> 00:33:23,440
Speaker 2: of them.

664
00:33:24,160 --> 00:33:26,800
Speaker 3: And so we now have a sort of like an

665
00:33:26,920 --> 00:33:32,280
Speaker 3: ideological issue between let's say Australia and let's say America

666
00:33:32,840 --> 00:33:35,840
Speaker 3: in relation to the role because you know, there is

667
00:33:35,880 --> 00:33:38,760
Speaker 3: a Reserve Bank and the Federal Reserve. They're independent bodies,

668
00:33:39,120 --> 00:33:42,040
Speaker 3: but at the same time it's individuals made the decisions

669
00:33:42,040 --> 00:33:46,320
Speaker 3: in relation that are on those bodies, and governments influence that.

670
00:33:47,040 --> 00:33:50,240
Speaker 3: You know, whoever's in government can influence that league. In America,

671
00:33:50,280 --> 00:33:52,960
Speaker 3: Trump will just fire league doesn't really matter. It's probably

672
00:33:53,000 --> 00:33:56,400
Speaker 3: not gonna happen here. But but nonetheless it's maybe.

673
00:33:56,240 --> 00:33:57,440
Speaker 1: You could just sort of give us a bit of.

674
00:33:57,360 --> 00:34:02,760
Speaker 2: Cultor Look, I think that's a great summary. And when

675
00:34:02,800 --> 00:34:04,720
Speaker 2: as you were talking through that, you made me think

676
00:34:04,720 --> 00:34:08,280
Speaker 2: of a couple of different things. Your high inflation is bad,

677
00:34:08,920 --> 00:34:11,120
Speaker 2: and we saw that a couple of For everybody, it's

678
00:34:11,160 --> 00:34:13,319
Speaker 2: a cost of living problem. I can't afford to buy

679
00:34:13,360 --> 00:34:16,319
Speaker 2: my grocery is my insurance most people, but yes, for

680
00:34:16,440 --> 00:34:19,359
Speaker 2: many people, rich person doesn't give a damn, but the

681
00:34:19,400 --> 00:34:22,239
Speaker 2: most people. And that's where that welfare of all Australians

682
00:34:22,280 --> 00:34:24,279
Speaker 2: comes into play. So the RBA is not going to

683
00:34:24,320 --> 00:34:28,560
Speaker 2: adjust interest rates for the call the BRW rich list

684
00:34:28,600 --> 00:34:31,560
Speaker 2: or whatever. You know what I mean, Afi, Yes, yeah,

685
00:34:31,719 --> 00:34:34,640
Speaker 2: they'll be fine. They want to adjust interest rates and

686
00:34:34,719 --> 00:34:37,200
Speaker 2: economic policy for the masses who are fitting.

687
00:34:37,760 --> 00:34:40,920
Speaker 3: Is it an Adam Smith? Are we talking about an

688
00:34:40,920 --> 00:34:44,239
Speaker 3: Adam Smith style? Who is fitting into the category? How

689
00:34:44,280 --> 00:34:46,480
Speaker 3: big the category of all those Australians and we need

690
00:34:46,520 --> 00:34:47,160
Speaker 3: to look after.

691
00:34:47,080 --> 00:34:49,239
Speaker 2: And it comes back to this other commentary. We need

692
00:34:49,280 --> 00:34:53,640
Speaker 2: to grow the pie the size of GDP and make

693
00:34:53,680 --> 00:34:58,520
Speaker 2: sure that the extra growth is reasonably well distributed so

694
00:34:58,640 --> 00:35:00,279
Speaker 2: that some of the poor people get a few of

695
00:35:00,280 --> 00:35:02,600
Speaker 2: the bucks. Good. You know, that's good for the society.

696
00:35:02,920 --> 00:35:05,280
Speaker 1: A given in prosperity everybody.

697
00:35:05,320 --> 00:35:07,880
Speaker 2: Good luck to the rich people getting richly far absolutely fine,

698
00:35:08,520 --> 00:35:10,480
Speaker 2: as long as they're not getting rich at the expense

699
00:35:10,520 --> 00:35:12,160
Speaker 2: of the poor. And I think that's yeah, gosh, that

700
00:35:12,239 --> 00:35:15,640
Speaker 2: self sounded like bloody motherhood statement, but it's true. You know,

701
00:35:15,800 --> 00:35:18,480
Speaker 2: I must confess I get very upset when I see

702
00:35:18,480 --> 00:35:21,120
Speaker 2: homeless people, and you hear the stories occasionally in the

703
00:35:21,120 --> 00:35:24,560
Speaker 2: media some poor buggers they have sleeping in cars and geez,

704
00:35:24,600 --> 00:35:26,560
Speaker 2: that's that's not good for a country like Australia. I

705
00:35:26,560 --> 00:35:29,239
Speaker 2: think we need to look after people like that, and

706
00:35:30,000 --> 00:35:31,839
Speaker 2: generally we do. You know, we've got a pretty good

707
00:35:31,840 --> 00:35:34,359
Speaker 2: system in Australia, not perfect, but pretty good.

708
00:35:34,280 --> 00:35:35,520
Speaker 1: When you can't pass it anyway.

709
00:35:35,760 --> 00:35:38,120
Speaker 2: And so therefore the other thing that you know you're

710
00:35:38,320 --> 00:35:40,799
Speaker 2: you're touching on. If you want to get inflation really

711
00:35:40,920 --> 00:35:44,080
Speaker 2: really low, you hike interst rates. If you want to

712
00:35:44,120 --> 00:35:47,080
Speaker 2: get unemployment really low, so give everybody your job so

713
00:35:47,080 --> 00:35:50,880
Speaker 2: they're earning money. You cut into strains. That's as you

714
00:35:50,880 --> 00:35:53,120
Speaker 2: were talking. That's that's a simple thing that I thought about.

715
00:35:53,640 --> 00:35:55,920
Speaker 2: So do you cut interstrates to create full employment or

716
00:35:55,920 --> 00:35:57,879
Speaker 2: do you hike them to keep inflation low? Because both

717
00:35:57,880 --> 00:36:00,359
Speaker 2: of them are good things. Low inflation is good, Low

718
00:36:00,480 --> 00:36:03,719
Speaker 2: unemployment's good. But there and this is the old Philip geez,

719
00:36:03,719 --> 00:36:05,440
Speaker 2: I'm going to talk about the Phillips curve, which is

720
00:36:06,000 --> 00:36:08,239
Speaker 2: trade off between inflation and unemployed.

721
00:36:08,280 --> 00:36:10,120
Speaker 3: We're going to be careful about Phillips curve and economic

722
00:36:10,760 --> 00:36:12,240
Speaker 3: it's not that genuinely accepted.

723
00:36:12,400 --> 00:36:13,080
Speaker 2: It's not anymore.

724
00:36:14,040 --> 00:36:14,759
Speaker 3: I did.

725
00:36:17,880 --> 00:36:22,440
Speaker 2: Maybe more. I can't remember. She's not kidding, but there

726
00:36:22,480 --> 00:36:26,719
Speaker 2: is still something. Maybe the traditional Phillips curve is obsolete,

727
00:36:26,920 --> 00:36:30,040
Speaker 2: but there is still a trade off between some trade

728
00:36:30,040 --> 00:36:34,160
Speaker 2: off between full employment and inflation. And if you want

729
00:36:34,239 --> 00:36:37,600
Speaker 2: full employment, you want everybody who wants a job to

730
00:36:37,600 --> 00:36:41,120
Speaker 2: have a job, which is sort of a decent definition

731
00:36:41,160 --> 00:36:43,600
Speaker 2: of full employment. Well, your cu't rate, you can't rates

732
00:36:43,600 --> 00:36:45,239
Speaker 2: your cat rates. But then, as we're saying before, it's

733
00:36:45,280 --> 00:36:47,360
Speaker 2: like pumping money into the economy. Inflation goes up and

734
00:36:47,400 --> 00:36:49,879
Speaker 2: up and up, and that hurts everybody else. So this

735
00:36:49,920 --> 00:36:52,560
Speaker 2: is what the Reserve Bank Board do every We've got

736
00:36:52,600 --> 00:36:55,399
Speaker 2: to wrestle with this stuff, correct And that's why we've

737
00:36:55,400 --> 00:36:57,560
Speaker 2: got this checklist. And that's why we talk about GDP,

738
00:36:57,800 --> 00:37:04,000
Speaker 2: labor market issues, inflation, because sometimes they are conflicting, and

739
00:37:04,520 --> 00:37:10,120
Speaker 2: you get high inflation with high unemployment. That's stagflation. That's

740
00:37:10,160 --> 00:37:12,480
Speaker 2: the worst of all worlds because what do you do

741
00:37:12,480 --> 00:37:14,920
Speaker 2: do your high interest rates to make unemployment even worse. Well,

742
00:37:15,040 --> 00:37:17,840
Speaker 2: that's pretty bad, but you get inflation down or the

743
00:37:17,880 --> 00:37:20,240
Speaker 2: cut rates to get unemployment down, and inflation gets even.

744
00:37:20,120 --> 00:37:22,120
Speaker 1: Higher, which is why stay flation is such a problem.

745
00:37:21,920 --> 00:37:23,400
Speaker 2: Which is such a problem, why it should be avoided

746
00:37:23,440 --> 00:37:24,000
Speaker 2: at all. Costs.

747
00:37:24,520 --> 00:37:26,360
Speaker 1: It cuts right across the world for issue, and it

748
00:37:26,400 --> 00:37:27,160
Speaker 1: smashes everybody.

749
00:37:27,200 --> 00:37:29,560
Speaker 2: It's a horrible thing. So so yeah, and this is

750
00:37:29,600 --> 00:37:31,560
Speaker 2: where you can come back, and if I can just

751
00:37:31,560 --> 00:37:35,200
Speaker 2: take a step back, because the RBA will not update

752
00:37:35,239 --> 00:37:38,000
Speaker 2: their forecasts next week. It's the meeting after that on

753
00:37:38,160 --> 00:37:42,200
Speaker 2: Melbourne Cup Day early November that they update their forecast.

754
00:37:42,239 --> 00:37:45,239
Speaker 2: But the most recent conversation about forecasts, and again, all

755
00:37:45,239 --> 00:37:46,960
Speaker 2: my mates and the money markets, you know, all the

756
00:37:46,960 --> 00:37:51,640
Speaker 2: bank economists, whatever. If I glance through their forecasts, they're similar.

757
00:37:51,920 --> 00:37:53,680
Speaker 2: And if I can take a step back, because this

758
00:37:53,719 --> 00:37:57,000
Speaker 2: is something that occasionally we should be happy about. Based

759
00:37:57,040 --> 00:38:00,480
Speaker 2: on the assumption of two more rate cuts this time

760
00:38:00,520 --> 00:38:03,520
Speaker 2: next year, second half of twenty twenty six, without pinpointing

761
00:38:03,920 --> 00:38:06,480
Speaker 2: a quarter or a month or anything, GDP growth will

762
00:38:06,480 --> 00:38:08,919
Speaker 2: be two and a half percent, the unemployment rate will

763
00:38:08,920 --> 00:38:12,600
Speaker 2: be a little above four, and inflation will be two

764
00:38:12,680 --> 00:38:14,920
Speaker 2: and a half. So got GDP two and a half, inflation,

765
00:38:14,920 --> 00:38:16,920
Speaker 2: two and a half, unemployment, you know, four and a bit.

766
00:38:17,640 --> 00:38:20,800
Speaker 2: That's actually pretty good with two more rate cuts. So

767
00:38:20,880 --> 00:38:22,400
Speaker 2: if we can achieve that, and again this is this

768
00:38:22,480 --> 00:38:25,520
Speaker 2: magic wand of economics that we occasionally talk about. So

769
00:38:25,560 --> 00:38:29,560
Speaker 2: if you're the economic dictator of Australia and you said, well,

770
00:38:30,200 --> 00:38:32,839
Speaker 2: not necessarily how you would achieve it? But what would

771
00:38:32,880 --> 00:38:35,440
Speaker 2: you You're right on the board here, what's your target?

772
00:38:35,520 --> 00:38:37,800
Speaker 2: I'd say, yeah, well what I'd say two and a

773
00:38:37,840 --> 00:38:40,880
Speaker 2: half GDP? Maybe two and three quarters yep, but you know,

774
00:38:40,960 --> 00:38:45,040
Speaker 2: so decent GDP growth. I'd want unemployment below four percent.

775
00:38:45,040 --> 00:38:47,160
Speaker 2: I'd want inflation to be two and a half. If

776
00:38:47,160 --> 00:38:50,920
Speaker 2: I could achieve that, I think you'd get the thumbs up.

777
00:38:50,960 --> 00:38:53,319
Speaker 2: And this is the discussion to just by the way, well,

778
00:38:53,360 --> 00:38:57,160
Speaker 2: the RBA, despite my criticisms of them in the recent past,

779
00:38:57,600 --> 00:39:00,799
Speaker 2: might have actually got it right. I might be the

780
00:39:00,800 --> 00:39:02,640
Speaker 2: one that's sort of going to be wiping the egg

781
00:39:02,680 --> 00:39:06,319
Speaker 2: off my face. And the RBA can sort of say

782
00:39:06,360 --> 00:39:09,320
Speaker 2: that if we do get two and a half GDP,

783
00:39:09,400 --> 00:39:14,160
Speaker 2: two and a half inflation, four percent unemployment, you know

784
00:39:14,360 --> 00:39:15,600
Speaker 2: that's pretty.

785
00:39:15,320 --> 00:39:18,440
Speaker 3: Good and a bit as you know as well as

786
00:39:18,480 --> 00:39:22,319
Speaker 3: I do, it won't last last years because.

787
00:39:22,040 --> 00:39:25,520
Speaker 2: And sustaining it. Mark your spot on it's how how

788
00:39:25,560 --> 00:39:27,680
Speaker 2: do you get it for one quarter? Fine?

789
00:39:27,800 --> 00:39:31,000
Speaker 3: We want it for five The question becomes you correct,

790
00:39:31,000 --> 00:39:33,600
Speaker 3: I mean once we're there, then it's just started that

791
00:39:33,600 --> 00:39:34,720
Speaker 3: that's the game that started.

792
00:39:34,800 --> 00:39:36,880
Speaker 1: I mean, like if we get there, but like and I,

793
00:39:37,520 --> 00:39:39,800
Speaker 1: you know, you and I talked at one stage about.

794
00:39:41,239 --> 00:39:42,480
Speaker 3: Three and a half three enough, three and a half

795
00:39:42,520 --> 00:39:45,000
Speaker 3: I think, and three and a half wage growth too,

796
00:39:45,040 --> 00:39:47,800
Speaker 3: So like you know, it was all sort of because

797
00:39:47,800 --> 00:39:52,360
Speaker 3: that that wage growth percent wage growth percentage keeping up

798
00:39:52,400 --> 00:39:54,600
Speaker 3: with inflation or maybe just say a little bit ahead

799
00:39:54,600 --> 00:39:58,200
Speaker 3: of it's very important relative to the welfare question and

800
00:39:58,239 --> 00:40:01,520
Speaker 3: also the prosperity question, because people more prosperous if they

801
00:40:01,560 --> 00:40:02,440
Speaker 3: can stay ahead.

802
00:40:02,200 --> 00:40:05,200
Speaker 2: Of wages is a bit above inflation, even by a

803
00:40:05,200 --> 00:40:08,200
Speaker 2: little bit, even by one percent a year, that's good.

804
00:40:08,239 --> 00:40:10,680
Speaker 2: And in fact, prior to just by the way, prior

805
00:40:10,719 --> 00:40:16,439
Speaker 2: to that inflation COVID pandemic disaster that we had from

806
00:40:16,440 --> 00:40:21,240
Speaker 2: the period from the early nineties recession through to twenty twenty,

807
00:40:21,320 --> 00:40:24,840
Speaker 2: so just prior to the pandemic. I think of those

808
00:40:25,480 --> 00:40:28,480
Speaker 2: you know, twenty six years approximately. I did check this

809
00:40:28,480 --> 00:40:30,920
Speaker 2: the other day because I thought, I like celebrating the

810
00:40:30,960 --> 00:40:34,960
Speaker 2: Australian economy sometimes I think of those twenty six yearly observations.

811
00:40:35,719 --> 00:40:39,560
Speaker 2: Wages growth exceeded the inflation rate in twenty three of

812
00:40:39,600 --> 00:40:43,880
Speaker 2: those twenty six years, and that the total cumulative increase

813
00:40:44,040 --> 00:40:46,719
Speaker 2: in real wages over that twenty six year period from

814
00:40:47,040 --> 00:40:49,680
Speaker 2: ninety three to twenty nineteen. I think it was I've

815
00:40:49,719 --> 00:40:52,600
Speaker 2: just double checked my numbers, was an increase of about

816
00:40:52,640 --> 00:40:59,200
Speaker 2: twenty five percent. So that's real wages just standardly correct.

817
00:40:59,239 --> 00:41:02,000
Speaker 2: And that's why you know, in some years it was

818
00:41:02,040 --> 00:41:04,120
Speaker 2: a bit down, some years it went really strong, and

819
00:41:04,160 --> 00:41:06,680
Speaker 2: you know, and again there's swings and roundabouts that happened

820
00:41:06,960 --> 00:41:10,080
Speaker 2: in a cyclical sense. But if on balance you're getting

821
00:41:10,080 --> 00:41:13,040
Speaker 2: more pluses, you're getting twenty three out of twenty six

822
00:41:13,480 --> 00:41:16,840
Speaker 2: with a plus sign real wages increasing. That's how you

823
00:41:16,920 --> 00:41:20,040
Speaker 2: build wealth, get rich slowly. This sort of thing is

824
00:41:20,080 --> 00:41:23,960
Speaker 2: what the sort of mantra is and that's why that

825
00:41:24,000 --> 00:41:28,040
Speaker 2: inflation target's important. That's why you know, full employment's important.

826
00:41:28,520 --> 00:41:29,600
Speaker 1: So let's have a look at the board.

827
00:41:29,640 --> 00:41:33,120
Speaker 3: I mean, I do say, though, could you like, I

828
00:41:33,120 --> 00:41:34,640
Speaker 3: think it's important, But that's why I wanted to just

829
00:41:34,719 --> 00:41:36,680
Speaker 3: quit with touch on stuff. I think it's important for

830
00:41:36,719 --> 00:41:40,680
Speaker 3: people to get a sense of why the Reserve Bank

831
00:41:41,040 --> 00:41:43,839
Speaker 3: is doing what it's doing. And I could probably even

832
00:41:43,920 --> 00:41:47,880
Speaker 3: go one step further. When they drafted the legislation around

833
00:41:48,320 --> 00:41:53,600
Speaker 3: prosperity and welfare. I think probably what was going through

834
00:41:53,719 --> 00:41:57,960
Speaker 3: the politician's minds of the time was what is the

835
00:41:58,000 --> 00:42:03,440
Speaker 3: best way we can establish a standard of living that

836
00:42:03,560 --> 00:42:04,640
Speaker 3: doesn't go backwards.

837
00:42:05,160 --> 00:42:07,320
Speaker 1: And in order to do that, we want.

838
00:42:07,120 --> 00:42:09,040
Speaker 3: It the standard to increase, but at the same time,

839
00:42:09,040 --> 00:42:10,520
Speaker 3: we don't want it to increase at the expense of

840
00:42:10,560 --> 00:42:13,319
Speaker 3: other people, some part of society, So we'll have this

841
00:42:13,440 --> 00:42:18,560
Speaker 3: prosperity welfare checks and balancing always there.

842
00:42:19,080 --> 00:42:21,719
Speaker 2: That's really important, and you might recall that Jim Chalmers

843
00:42:21,719 --> 00:42:24,640
Speaker 2: did talk about it. Must confess I haven't followed up

844
00:42:24,640 --> 00:42:27,840
Speaker 2: on where the progress is on measuring the economy not

845
00:42:27,880 --> 00:42:31,839
Speaker 2: by GDP but by well being, and that includes things

846
00:42:31,880 --> 00:42:37,920
Speaker 2: like life expectancy, our health, our educational tainment, these sorts

847
00:42:37,960 --> 00:42:43,000
Speaker 2: of things. And again it sounds a bit pie in

848
00:42:43,040 --> 00:42:46,120
Speaker 2: the sky, but in a way, what's the point of

849
00:42:46,160 --> 00:42:48,800
Speaker 2: having a really rich economy if it's one not sustainable.

850
00:42:48,840 --> 00:42:51,160
Speaker 2: I'll go back to another example from my economics one

851
00:42:51,160 --> 00:42:53,600
Speaker 2: O one day, as many years ago. An economy can

852
00:42:53,640 --> 00:42:55,600
Speaker 2: become really rich if we chop down all our forests

853
00:42:55,600 --> 00:42:58,440
Speaker 2: and export them. When you chop down the last tree,

854
00:42:59,040 --> 00:43:02,160
Speaker 2: you've got nothing left. So again I'm not a radical

855
00:43:02,160 --> 00:43:04,520
Speaker 2: greeny or anything like it. But again, it just goes

856
00:43:04,560 --> 00:43:08,279
Speaker 2: to show that economic growth's got to be sustainable, it's

857
00:43:08,320 --> 00:43:10,560
Speaker 2: got to be able to be continued, not just for

858
00:43:10,640 --> 00:43:12,839
Speaker 2: one year or two years where we're all making truck

859
00:43:13,680 --> 00:43:16,160
Speaker 2: generation and intergeneration, because what are we left for our kids?

860
00:43:16,200 --> 00:43:19,680
Speaker 2: And Mark, thank you for raising that, because that is

861
00:43:19,719 --> 00:43:23,279
Speaker 2: the other sixty four trillion dollar question. I don't know

862
00:43:23,360 --> 00:43:27,399
Speaker 2: billion dollar question that at the moment, I'll put us

863
00:43:27,400 --> 00:43:31,960
Speaker 2: in the slightly older category. We've been I've been lucky.

864
00:43:32,719 --> 00:43:34,400
Speaker 2: I've been really lucky. I bought a house for sixty

865
00:43:34,440 --> 00:43:36,880
Speaker 2: thousand dollars all those years ago, and kids say, what

866
00:43:36,920 --> 00:43:38,040
Speaker 2: did you buy ten of them? Dad?

867
00:43:38,360 --> 00:43:43,600
Speaker 1: It's all like, but I've still got one. Yeah, that's important.

868
00:43:43,719 --> 00:43:46,239
Speaker 2: Indeed, I've still got one. And you been lucky with

869
00:43:46,560 --> 00:43:48,400
Speaker 2: life and the kids now sort of saying, oh, I

870
00:43:48,440 --> 00:43:51,400
Speaker 2: can't even afford to buy a little shoe box for

871
00:43:51,480 --> 00:43:53,200
Speaker 2: you know, more than half a million bucks, you know,

872
00:43:53,440 --> 00:43:57,400
Speaker 2: and and that intergenerational things very very important that we

873
00:43:57,440 --> 00:44:00,799
Speaker 2: look after our young folk again, and that's not for

874
00:44:00,840 --> 00:44:02,839
Speaker 2: the RBA to just by the way because they only

875
00:44:02,840 --> 00:44:05,239
Speaker 2: got interest rates. That's actually for the government of the

876
00:44:05,280 --> 00:44:07,080
Speaker 2: day again, labor liberal, I were not even going to

877
00:44:07,080 --> 00:44:08,959
Speaker 2: get there. But how do we make sure that there's

878
00:44:08,960 --> 00:44:12,440
Speaker 2: a bit of fairness for young folk and not too

879
00:44:12,600 --> 00:44:16,399
Speaker 2: much benefit I suppose to old folk. And that's sort

880
00:44:16,400 --> 00:44:18,200
Speaker 2: of a really thorny question.

881
00:44:18,440 --> 00:44:22,880
Speaker 3: Well, I'm going to interview John Howard, and it's interesting

882
00:44:23,360 --> 00:44:25,960
Speaker 3: I will be asking him about that sort of stuff

883
00:44:26,000 --> 00:44:31,000
Speaker 3: because his government was quite instrumental in a lot of

884
00:44:31,120 --> 00:44:34,960
Speaker 3: superannuation concessions. In fact, it was his last term that

885
00:44:35,080 --> 00:44:39,440
Speaker 3: where I think they agreed to a million dollar traditions or.

886
00:44:40,920 --> 00:44:42,279
Speaker 1: Right at the end of his term.

887
00:44:42,600 --> 00:44:45,799
Speaker 3: But and it's interesting, you know, to something except that

888
00:44:45,840 --> 00:44:50,360
Speaker 3: has contributed to the mismatch between let's call it the

889
00:44:50,400 --> 00:44:53,239
Speaker 3: bank of mom and dad and kids today. I mean,

890
00:44:53,280 --> 00:44:55,799
Speaker 3: to some extent, maybe has gone too far, maybe went

891
00:44:55,840 --> 00:44:56,320
Speaker 3: too far.

892
00:44:56,480 --> 00:44:59,080
Speaker 2: Maybe did go too far. And again I'm a massive

893
00:44:59,080 --> 00:45:01,480
Speaker 2: fan of superannuation, by the way, and to get people

894
00:45:01,600 --> 00:45:03,120
Speaker 2: to put money into super you do need a few

895
00:45:03,120 --> 00:45:04,279
Speaker 2: little tax breaks, you.

896
00:45:04,239 --> 00:45:06,440
Speaker 1: Do, and you know you've got to encourage you.

897
00:45:06,520 --> 00:45:10,600
Speaker 2: Tax policy theory disclose that every single time. So if

898
00:45:10,640 --> 00:45:11,880
Speaker 2: I get a little bit of a tax break by

899
00:45:11,920 --> 00:45:14,840
Speaker 2: pumping in an extra few bucks every year into my super, great,

900
00:45:14,920 --> 00:45:18,120
Speaker 2: that's that's a price worth paying. For the government. However,

901
00:45:18,520 --> 00:45:21,160
Speaker 2: like all policies, you can overshoot and you can make

902
00:45:21,160 --> 00:45:25,160
Speaker 2: it a little too generous, and I think, yeah, in hindsight,

903
00:45:25,200 --> 00:45:27,239
Speaker 2: maybe it is a little too generous, and that sort

904
00:45:27,239 --> 00:45:29,400
Speaker 2: of souper annuation that people have got now is at

905
00:45:29,400 --> 00:45:30,520
Speaker 2: the expense of young folks.

906
00:45:30,640 --> 00:45:31,880
Speaker 1: And that's one of the things I'm going to be

907
00:45:31,920 --> 00:45:32,840
Speaker 1: talking to him about.

908
00:45:32,680 --> 00:45:35,160
Speaker 2: Tomorrow, looking forward to hearing that when it comes on.

909
00:45:35,280 --> 00:45:38,400
Speaker 1: Yeah, it'll probably come in about it three weeks, but yeah, fantastic.

910
00:45:38,440 --> 00:45:39,040
Speaker 1: It's telling us a.

911
00:45:39,040 --> 00:45:40,640
Speaker 3: While to get John, but it's going to be great

912
00:45:40,640 --> 00:45:42,120
Speaker 3: to have a chat to him about it.

913
00:45:42,360 --> 00:45:42,640
Speaker 2: Right.

914
00:45:42,920 --> 00:45:45,800
Speaker 1: Let's you're board, mate, board the Monetary policy checklist.

915
00:45:46,000 --> 00:45:50,680
Speaker 2: Yeah, okay, let's have a look now the inch. I

916
00:45:50,719 --> 00:45:53,359
Speaker 2: was actually thinking about this yesterday when I was sort

917
00:45:53,360 --> 00:45:56,040
Speaker 2: of preparing for today, and I think a couple of

918
00:45:56,040 --> 00:45:58,320
Speaker 2: things have just sort of come back more towards neutral

919
00:45:58,440 --> 00:46:00,080
Speaker 2: rather than the easing side, because, as I said at

920
00:46:00,120 --> 00:46:02,920
Speaker 2: the very beginning, some of the economic news is a

921
00:46:03,000 --> 00:46:06,600
Speaker 2: little bit better today than it was three months ago.

922
00:46:06,680 --> 00:46:10,520
Speaker 1: Economic news better not for borrowers, though it means less

923
00:46:10,680 --> 00:46:13,400
Speaker 1: or fewer rate cuts, better for the economy.

924
00:46:13,560 --> 00:46:16,359
Speaker 2: So I'm talking about the economy. We want a good economy. Yeah,

925
00:46:16,440 --> 00:46:19,120
Speaker 2: but it means fewer rate cuts. So GDP, I'm putting

926
00:46:19,120 --> 00:46:21,520
Speaker 2: that into the neutral category. I think last time we

927
00:46:21,520 --> 00:46:24,200
Speaker 2: were here, I had it erring towards easing. But as

928
00:46:24,200 --> 00:46:28,480
Speaker 2: I said, GDP's picking up good news inflation. I'm putting

929
00:46:28,520 --> 00:46:31,880
Speaker 2: that towards easing. We do have inflation pretty much in

930
00:46:31,920 --> 00:46:34,120
Speaker 2: the two to three percent. Again, the monthly volatility, the

931
00:46:34,200 --> 00:46:37,440
Speaker 2: quarterly numbers. Look, I'm pretty confident that inflation is in

932
00:46:37,480 --> 00:46:40,640
Speaker 2: the band. And that is a reason why the RBA

933
00:46:41,160 --> 00:46:44,400
Speaker 2: still and again this is Michelle Bullock and Sarah A

934
00:46:44,440 --> 00:46:46,480
Speaker 2: hundred and others from the RBA have been saying, yeah,

935
00:46:46,480 --> 00:46:47,839
Speaker 2: we're going to cut, but not just.

936
00:46:47,840 --> 00:46:52,120
Speaker 3: Yet, because they're saying right now the interest rate is

937
00:46:52,360 --> 00:46:54,200
Speaker 3: not neutral, it's.

938
00:46:54,120 --> 00:46:55,880
Speaker 2: A little above neutral. So they want to get it

939
00:46:55,880 --> 00:46:57,920
Speaker 2: towards neutral so that the economy can be in this

940
00:46:58,400 --> 00:47:01,800
Speaker 2: what do we call it GOLDMA or gold locks scene

941
00:47:02,400 --> 00:47:05,480
Speaker 2: labor market. I'm putting that slightly towards easing. You know,

942
00:47:06,239 --> 00:47:08,640
Speaker 2: our unemployment rate's gone from three point four percent a

943
00:47:08,640 --> 00:47:11,520
Speaker 2: couple of years ago to four point two percent. Employments

944
00:47:11,560 --> 00:47:14,759
Speaker 2: slowing down, job vacancy's, job ads are slowing down, so

945
00:47:15,120 --> 00:47:19,960
Speaker 2: again not bad, but just for what the RBA is

946
00:47:20,040 --> 00:47:23,200
Speaker 2: thinking about to maintain that we need to sort of

947
00:47:23,200 --> 00:47:25,160
Speaker 2: give a bit more monetary policy stimulus.

948
00:47:25,200 --> 00:47:28,839
Speaker 3: And just on that, I think somewhere I've read the

949
00:47:28,880 --> 00:47:33,040
Speaker 3: neighbor has been revised down.

950
00:47:33,920 --> 00:47:35,960
Speaker 2: I don't know if it's official, but that I think

951
00:47:36,040 --> 00:47:39,200
Speaker 2: when in the House of Reps helps US Representatives testimony

952
00:47:39,239 --> 00:47:44,000
Speaker 2: on last Monday, the governor and her senior people who

953
00:47:44,000 --> 00:47:48,560
Speaker 2: are at that meeting, at that quizzing from the politicians,

954
00:47:48,640 --> 00:47:50,719
Speaker 2: alluded to that. Yes, I don't think she actually sort

955
00:47:50,719 --> 00:47:53,560
Speaker 2: of said a numbers specifically, it's getting they're saying, we

956
00:47:53,600 --> 00:47:56,279
Speaker 2: think it's lower than we were assuming or estimating.

957
00:47:56,600 --> 00:47:58,680
Speaker 1: Previous was I think four and a half. It was

958
00:47:58,719 --> 00:48:00,680
Speaker 1: four and a half, and it's probably are coming back

959
00:48:00,760 --> 00:48:01,560
Speaker 1: for a quarter.

960
00:48:01,800 --> 00:48:04,879
Speaker 2: Yeah, well there, well, and we're there now, which again

961
00:48:05,000 --> 00:48:08,480
Speaker 2: goes towards the rate cutting and proof of that beautiful

962
00:48:08,480 --> 00:48:11,640
Speaker 2: segue into wages, which I'm putting in neutral wages growth

963
00:48:11,719 --> 00:48:15,640
Speaker 2: three point four. That is the Goldilock's number. It's that number,

964
00:48:15,840 --> 00:48:20,879
Speaker 2: and that employers are happy to pay their staff if

965
00:48:20,880 --> 00:48:22,960
Speaker 2: profits are good, the economy is doing okay, I'll pay

966
00:48:23,000 --> 00:48:25,600
Speaker 2: three and a half workers with inflations two and a half,

967
00:48:25,640 --> 00:48:27,400
Speaker 2: I'll get three and a half. It's sort of that number.

968
00:48:27,440 --> 00:48:32,239
Speaker 2: That's not thumping employers wages costs are too high, or

969
00:48:32,280 --> 00:48:34,240
Speaker 2: workers saying, oh, wages are too low. I can't afford

970
00:48:34,280 --> 00:48:37,040
Speaker 2: to buy anything. So I think wages are sort of goldilocks.

971
00:48:37,040 --> 00:48:40,640
Speaker 2: So that's a good news story. International economy, I'm putting

972
00:48:40,680 --> 00:48:44,279
Speaker 2: in neutral, maybe slightly towards easy, because we have had

973
00:48:44,280 --> 00:48:46,839
Speaker 2: the FED cut and they did signal there are more

974
00:48:46,920 --> 00:48:49,960
Speaker 2: rate cuts to come back of Canabi's.

975
00:48:49,520 --> 00:48:51,920
Speaker 1: Cut, but they're much higher than us anyway, they are higher.

976
00:48:51,680 --> 00:48:56,120
Speaker 2: Correct Canada cut. Bank of England's got to do. The

977
00:48:56,160 --> 00:48:59,760
Speaker 2: poor UK economy that's for another day. They're they're probably

978
00:48:59,760 --> 00:49:02,520
Speaker 2: going to cut New Zealand economy is week. So comparable

979
00:49:02,560 --> 00:49:04,799
Speaker 2: economies to US are still cutting. Some of them are

980
00:49:04,800 --> 00:49:06,400
Speaker 2: a bit below us, some are a little bit higher

981
00:49:06,400 --> 00:49:09,319
Speaker 2: than US. China we mentioned, doing a little bit better,

982
00:49:09,360 --> 00:49:12,320
Speaker 2: but still got very low inflation. So that's you wouldn't

983
00:49:12,360 --> 00:49:14,640
Speaker 2: you certainly wouldn't hike. Because of the world economy, it's

984
00:49:14,719 --> 00:49:19,360
Speaker 2: earring towards easing house prices, going to put that slightly

985
00:49:19,400 --> 00:49:22,200
Speaker 2: towards tightening. You know, we didn't really talk about house prices.

986
00:49:22,200 --> 00:49:25,919
Speaker 2: But there's no doubt that in the last what three

987
00:49:25,960 --> 00:49:28,680
Speaker 2: four five months, there's been an acceleration in house prices,

988
00:49:28,719 --> 00:49:32,600
Speaker 2: even in Melbourne which had been really poor for several years.

989
00:49:33,520 --> 00:49:37,239
Speaker 2: And the boom cities are Perth, Adelaide and Brisbane which

990
00:49:37,239 --> 00:49:39,480
Speaker 2: had a bit of a cooling off late last year

991
00:49:39,480 --> 00:49:41,839
Speaker 2: earlier this year, are now on the way up again.

992
00:49:42,040 --> 00:49:45,080
Speaker 2: Prices there going gang buses.

993
00:49:45,120 --> 00:49:46,560
Speaker 3: But I think one of the things we probably should

994
00:49:46,600 --> 00:49:49,719
Speaker 3: just point out to our listeners is that house prices

995
00:49:50,080 --> 00:49:51,840
Speaker 3: are more functional definitely a function.

996
00:49:51,719 --> 00:49:53,879
Speaker 1: Of supplying demand correct indeed.

997
00:49:53,640 --> 00:49:56,760
Speaker 3: And it's less a function of how good the economy

998
00:49:56,800 --> 00:50:00,759
Speaker 3: is going or inflation and dudyplaid markets because and the

999
00:50:00,800 --> 00:50:02,239
Speaker 3: other thing everyone's got to bear in mind is that

1000
00:50:02,480 --> 00:50:04,200
Speaker 3: is much more affordable now because we've had.

1001
00:50:04,080 --> 00:50:08,400
Speaker 4: To rate reduction, free rate cuts, three rate and just

1002
00:50:08,400 --> 00:50:10,920
Speaker 4: just by the bye on that the house price story

1003
00:50:11,160 --> 00:50:14,400
Speaker 4: that you know, it is a the does.

1004
00:50:14,280 --> 00:50:16,960
Speaker 2: Not target house prices. They only look at them from

1005
00:50:16,960 --> 00:50:19,200
Speaker 2: a well, they only they tend to look at them

1006
00:50:19,239 --> 00:50:21,840
Speaker 2: from a wealth effect that I'm feeling wealthy, so there

1007
00:50:21,920 --> 00:50:23,719
Speaker 2: I'm going to spend more and I'm not gonna say

1008
00:50:23,719 --> 00:50:25,719
Speaker 2: that kind of high rates because of house prices, not

1009
00:50:25,719 --> 00:50:28,000
Speaker 2: not at all, but in their function of you know,

1010
00:50:28,040 --> 00:50:30,520
Speaker 2: their their well checklist of things that they look at,

1011
00:50:30,719 --> 00:50:33,200
Speaker 2: they'll be saying, oh, they don't want house prices to

1012
00:50:33,200 --> 00:50:34,799
Speaker 2: go up by ten percent. Put it that way, they'd

1013
00:50:34,800 --> 00:50:37,200
Speaker 2: prefurther to be five percent, yea, rather than ten.

1014
00:50:37,320 --> 00:50:40,360
Speaker 1: So house prices are going by the more modest number.

1015
00:50:40,239 --> 00:50:42,200
Speaker 2: They are at the moment. But yeah, so maybe I've

1016
00:50:42,200 --> 00:50:44,040
Speaker 2: been a bit hawkish on that one.

1017
00:50:44,080 --> 00:50:47,440
Speaker 1: But but if house prices will be right though, but aloth.

1018
00:50:46,920 --> 00:50:50,319
Speaker 2: Going up twenty percent. Yeah, we don't want that. Yeah,

1019
00:50:50,560 --> 00:50:56,200
Speaker 2: no one wants that. Yeah. We It's like getting shots

1020
00:50:56,200 --> 00:50:57,719
Speaker 2: at two o'clock in the morning at the bar. You

1021
00:50:57,719 --> 00:50:59,040
Speaker 2: know you don't need it. You know you've already had

1022
00:50:59,040 --> 00:50:59,560
Speaker 2: a fun night.

1023
00:50:59,600 --> 00:51:03,040
Speaker 3: You need on that one of koogie. I probably put

1024
00:51:03,080 --> 00:51:05,120
Speaker 3: house prices in neutral because I think, yeah, look, because

1025
00:51:05,160 --> 00:51:08,719
Speaker 3: I think they're going out a model up much not

1026
00:51:08,800 --> 00:51:10,719
Speaker 3: as fast, but a faster rate.

1027
00:51:11,320 --> 00:51:13,200
Speaker 2: And they were weak at the start of the year. Yeah,

1028
00:51:13,360 --> 00:51:15,320
Speaker 2: we had a few months where prices actually fell according

1029
00:51:15,360 --> 00:51:20,120
Speaker 2: to the Totality price series, which call logic numbers cap

1030
00:51:20,480 --> 00:51:24,080
Speaker 2: retail sales. I'm putting that towards neutral because we have

1031
00:51:24,200 --> 00:51:25,960
Speaker 2: had to pick up in consumers better than it was,

1032
00:51:26,400 --> 00:51:28,680
Speaker 2: not great, better than it was. Certainly again, you certainly

1033
00:51:28,680 --> 00:51:31,840
Speaker 2: wouldn't hike. They might even be earring towards easing. It's

1034
00:51:32,040 --> 00:51:34,360
Speaker 2: this is where this dilemma and the judgment comes in

1035
00:51:34,400 --> 00:51:38,040
Speaker 2: from the Reserve Bank Board consumer sentiment putting that towards

1036
00:51:38,160 --> 00:51:41,440
Speaker 2: similar to retail sales was down lifted and just started

1037
00:51:41,480 --> 00:51:43,560
Speaker 2: dipping the last couple of months, a couple of weeks.

1038
00:51:43,560 --> 00:51:47,080
Speaker 2: That A and Z measure is just a bit weaker

1039
00:51:47,800 --> 00:51:51,359
Speaker 2: building approvals. I'm going to keep that at neutral. Our

1040
00:51:51,480 --> 00:51:54,399
Speaker 2: longer way to pick up in house and construction has

1041
00:51:54,480 --> 00:52:00,280
Speaker 2: had its green shoots. Heaven knows, we need to build

1042
00:52:00,719 --> 00:52:03,840
Speaker 2: a heat more buildings over the next five years, you know.

1043
00:52:03,840 --> 00:52:06,120
Speaker 2: And recall the government has a target of one point

1044
00:52:06,120 --> 00:52:08,800
Speaker 2: two million dwellings for the next five years.

1045
00:52:09,600 --> 00:52:13,719
Speaker 3: I think they should revise it to be it's too high. Yeah,

1046
00:52:14,080 --> 00:52:15,879
Speaker 3: it's too ambitious.

1047
00:52:15,480 --> 00:52:17,719
Speaker 2: It's too high. Yes, yes, well mate, I want to

1048
00:52:17,760 --> 00:52:20,080
Speaker 2: play I want to play second rate for South Sitting

1049
00:52:20,080 --> 00:52:24,439
Speaker 2: next year. But I don't think I am well maybe maybe,

1050
00:52:25,440 --> 00:52:26,719
Speaker 2: but I don't think they're going to build one point

1051
00:52:26,719 --> 00:52:30,000
Speaker 2: two million took one point two million houses either, they're not,

1052
00:52:30,400 --> 00:52:32,919
Speaker 2: so I've revised my expectations for South Sydney down I'll

1053
00:52:32,920 --> 00:52:35,080
Speaker 2: just watch it from the sideline. You're quite right that

1054
00:52:35,080 --> 00:52:37,839
Speaker 2: that one point two million ain't going to happen. Ain't

1055
00:52:37,880 --> 00:52:40,799
Speaker 2: going to happen. Business investment, I'm putting that in an

1056
00:52:40,800 --> 00:52:44,160
Speaker 2: easy and we mentioned this before. Business investment has been

1057
00:52:45,080 --> 00:52:49,040
Speaker 2: frankly disappointing, and it's not I'm not throwing stones at

1058
00:52:49,080 --> 00:52:51,000
Speaker 2: the business sector. They're not invested for a whole lot

1059
00:52:51,000 --> 00:52:53,719
Speaker 2: of reasons. One because interest rates were high recently, the

1060
00:52:53,760 --> 00:52:55,840
Speaker 2: economy was weak. Why I invest all this money in

1061
00:52:56,120 --> 00:52:58,360
Speaker 2: new machinery and equipment if the economy is really weak.

1062
00:52:59,520 --> 00:53:03,840
Speaker 2: But we that cap X to lift that productivity. Business

1063
00:53:03,840 --> 00:53:07,959
Speaker 2: confidence similar It's picked up a bit, but not too bad.

1064
00:53:08,160 --> 00:53:10,840
Speaker 2: Commodity prices edged up a bit, but they're only neutral.

1065
00:53:11,200 --> 00:53:13,960
Speaker 2: Stock markets burning. I'm scunny that a neutral the RBA

1066
00:53:14,040 --> 00:53:17,839
Speaker 2: doesn't target that. Current interstrates, as you said, are restrictive,

1067
00:53:18,120 --> 00:53:20,640
Speaker 2: not as restrictive as they were six or eight months ago.

1068
00:53:21,800 --> 00:53:25,240
Speaker 2: Erring fly across that far sort of towards an easing.

1069
00:53:25,320 --> 00:53:28,000
Speaker 2: So we need a one or two more rate cuts

1070
00:53:28,040 --> 00:53:29,240
Speaker 2: to get to a neutral setting.

1071
00:53:29,360 --> 00:53:34,560
Speaker 3: And the last conversation for the RBA was that interest

1072
00:53:34,600 --> 00:53:36,160
Speaker 3: rates are still restrictive.

1073
00:53:36,160 --> 00:53:38,360
Speaker 1: They're not. They haven't. They haven't gone any other directions.

1074
00:53:39,239 --> 00:53:42,640
Speaker 3: Still continue to use the word restrictive correct as opposed

1075
00:53:42,640 --> 00:53:44,240
Speaker 3: to stimulative.

1076
00:53:44,040 --> 00:53:45,640
Speaker 2: Yep, which would be sort of like a two and

1077
00:53:45,640 --> 00:53:48,320
Speaker 2: a half Yeah, official as opposed to neutral.

1078
00:53:48,600 --> 00:53:50,080
Speaker 1: They haven't said neutral or similar.

1079
00:53:50,120 --> 00:53:52,520
Speaker 2: No. No, No, they haven't said neutral yet.

1080
00:53:52,560 --> 00:53:52,759
Speaker 3: No.

1081
00:53:53,560 --> 00:53:56,600
Speaker 2: Three. The three point six official cashepe, which is where

1082
00:53:56,600 --> 00:53:59,719
Speaker 2: we are today, is still restrictive.

1083
00:53:59,320 --> 00:54:04,359
Speaker 3: Still restrictive out the final bit great, but the next

1084
00:54:04,440 --> 00:54:07,960
Speaker 3: Reserve Bank meeting is at the end of September, but

1085
00:54:08,800 --> 00:54:11,200
Speaker 3: it doesn't seem they're going to have much more data.

1086
00:54:12,360 --> 00:54:13,520
Speaker 1: And therefore.

1087
00:54:14,600 --> 00:54:16,400
Speaker 3: The next lot of data that's going to come out,

1088
00:54:16,400 --> 00:54:18,640
Speaker 3: as we said earlier, quarterly data comes out at the

1089
00:54:18,680 --> 00:54:22,520
Speaker 3: end of October, which sort of bleeds into the Melbourne

1090
00:54:22,520 --> 00:54:24,799
Speaker 3: Cup Day meeting that hold every year, which is the

1091
00:54:25,200 --> 00:54:27,000
Speaker 3: is still the second last or our last?

1092
00:54:27,480 --> 00:54:31,040
Speaker 2: It's the second last, it's fourth of November Cup Day,

1093
00:54:31,320 --> 00:54:33,160
Speaker 2: and then I think it's the night of December is

1094
00:54:33,160 --> 00:54:33,680
Speaker 2: the last.

1095
00:54:33,560 --> 00:54:34,879
Speaker 1: Last one year, so they still have it.

1096
00:54:37,040 --> 00:54:40,239
Speaker 3: Next year, so and I don't know what the hell

1097
00:54:40,280 --> 00:54:42,120
Speaker 3: it is, but it's always seems to be something coming

1098
00:54:42,200 --> 00:54:45,520
Speaker 3: comes our way in November. One way, the O they

1099
00:54:45,560 --> 00:54:47,239
Speaker 3: do something that it's got something to do with the

1100
00:54:47,320 --> 00:54:50,680
Speaker 3: end of the quarter data that comes out the September quarter.

1101
00:54:51,080 --> 00:54:54,600
Speaker 3: So you reckon that right now. You're respective of this.

1102
00:54:54,640 --> 00:54:56,480
Speaker 3: There will be enough no change and they'll wait until

1103
00:54:56,600 --> 00:54:57,560
Speaker 3: the November meeting.

1104
00:54:57,760 --> 00:55:03,239
Speaker 2: No change in September. The just as we alluded to,

1105
00:55:03,320 --> 00:55:06,080
Speaker 2: the numbers that have come out since the last cut

1106
00:55:06,200 --> 00:55:08,840
Speaker 2: what's six or seven weeks ago from the ABA have

1107
00:55:08,920 --> 00:55:12,279
Speaker 2: been okay, you know, there's not if the numbers had

1108
00:55:12,320 --> 00:55:15,640
Speaker 2: deteriorated and that inflation rate was really really low and

1109
00:55:15,680 --> 00:55:18,399
Speaker 2: the unimployment rate was really really high. Yep, you'd say

1110
00:55:18,400 --> 00:55:22,360
Speaker 2: September is a high probability of a cut. But I

1111
00:55:22,400 --> 00:55:25,319
Speaker 2: think when we wait till that Melbourne Cup day, and

1112
00:55:25,320 --> 00:55:27,120
Speaker 2: as you said that at the end of October just

1113
00:55:27,200 --> 00:55:29,799
Speaker 2: check my dates. End of October, we get the September

1114
00:55:29,880 --> 00:55:33,799
Speaker 2: quarter inflation numbers. If they're showing that the trimmed mean

1115
00:55:34,280 --> 00:55:37,120
Speaker 2: the underlying inflation rates at zero point six or point

1116
00:55:37,160 --> 00:55:40,879
Speaker 2: seven quarter on quarter, the annual will drop to two

1117
00:55:40,920 --> 00:55:44,120
Speaker 2: and a half, slap bang in the target range, and

1118
00:55:44,200 --> 00:55:47,400
Speaker 2: we do get another unemployment number. Of course, between now

1119
00:55:47,440 --> 00:55:49,200
Speaker 2: and then, if it shows a little bit of an

1120
00:55:49,239 --> 00:55:52,560
Speaker 2: uptick in the unemployment rate, they'll just go They'll be cautious.

1121
00:55:52,800 --> 00:55:55,279
Speaker 2: Just twenty five points. Again, we're not not talking more

1122
00:55:55,320 --> 00:55:58,279
Speaker 2: than that, and that'll make that for twenty twenty five.

1123
00:55:58,320 --> 00:55:59,279
Speaker 2: We've had one hundred points of.

1124
00:55:59,239 --> 00:56:01,720
Speaker 1: Brake cuts and that's, to me, sweet spot.

1125
00:56:01,960 --> 00:56:03,880
Speaker 2: I think that's I think then we'll be at the

1126
00:56:03,920 --> 00:56:07,279
Speaker 2: sweet spot that again. Fast forward into Decemberah gosh, let's

1127
00:56:07,840 --> 00:56:09,719
Speaker 2: see we get the next couple right. They'll probably be

1128
00:56:09,760 --> 00:56:12,920
Speaker 2: on hold and then revisit everything at the start of

1129
00:56:12,960 --> 00:56:14,800
Speaker 2: twenty twenty six because they know they've got one hundred

1130
00:56:14,800 --> 00:56:17,400
Speaker 2: points of cuts in the pipeline. They'll know that the

1131
00:56:17,480 --> 00:56:22,320
Speaker 2: economy is looking a little stronger, the rate cuts are working.

1132
00:56:22,360 --> 00:56:24,240
Speaker 2: Do we need to do them anymore? Well, let's revisit

1133
00:56:24,280 --> 00:56:26,399
Speaker 2: this in February twenty twenty six. I think that's how

1134
00:56:26,400 --> 00:56:29,320
Speaker 2: the board will approach this next couple of meetings.

1135
00:56:29,360 --> 00:56:32,719
Speaker 3: And if I'm if someone asked me the question, what

1136
00:56:32,800 --> 00:56:36,120
Speaker 3: would it because I think I'm hoping I should say,

1137
00:56:36,160 --> 00:56:37,799
Speaker 3: that's what happens when you just said we get another

1138
00:56:37,840 --> 00:56:41,520
Speaker 3: raycut in November off the back of good to mean inflation.

1139
00:56:41,600 --> 00:56:43,920
Speaker 3: Numbers that come out at the end of October, and

1140
00:56:44,040 --> 00:56:47,480
Speaker 3: I'm hoping GDP and I laid markets are in the

1141
00:56:47,520 --> 00:56:51,680
Speaker 3: right spot as well. My view is that the normal

1142
00:56:51,719 --> 00:56:56,480
Speaker 3: ratcuts and the reason after that one and one and one.

1143
00:56:56,680 --> 00:56:59,799
Speaker 3: That's it and the reason I'm saying that, or I'll

1144
00:56:59,800 --> 00:57:00,600
Speaker 3: put around the other way.

1145
00:57:00,640 --> 00:57:02,200
Speaker 1: The only way we're going to know the rate cut.

1146
00:57:02,200 --> 00:57:06,280
Speaker 3: If something happens internationally that's going to affect our position

1147
00:57:06,880 --> 00:57:08,400
Speaker 3: in Australia of exports and.

1148
00:57:08,360 --> 00:57:10,520
Speaker 1: Everything else we do in the world. Because we are

1149
00:57:10,520 --> 00:57:13,040
Speaker 1: doing very well relatively speaking.

1150
00:57:13,200 --> 00:57:16,240
Speaker 2: We've come through this period and as I alluded to there,

1151
00:57:16,680 --> 00:57:18,240
Speaker 2: I think I might have to have a bit of

1152
00:57:18,320 --> 00:57:20,400
Speaker 2: humble pie and say the Reserve Bank probably has managed

1153
00:57:20,400 --> 00:57:22,080
Speaker 2: it better than I gave them credit for.

1154
00:57:22,400 --> 00:57:25,520
Speaker 1: And that's my era in terms of speed. Yeah, well,

1155
00:57:25,560 --> 00:57:27,280
Speaker 1: you and I really reflected on speed.

1156
00:57:27,760 --> 00:57:30,280
Speaker 2: Yes, And that's even allowing for the fact that the

1157
00:57:30,320 --> 00:57:34,080
Speaker 2: unemployed rate has kicked up, the inflation is low and falling.

1158
00:57:34,520 --> 00:57:37,640
Speaker 2: But I think, well, we're getting really close to that point.

1159
00:57:37,960 --> 00:57:42,480
Speaker 2: I can't disagree with you because maybe we do need

1160
00:57:42,480 --> 00:57:45,320
Speaker 2: those two cats. Again, it's only maybe, Yeah, it's only maybe.

1161
00:57:45,440 --> 00:57:47,280
Speaker 2: I think we need to do definitely the one more

1162
00:57:47,320 --> 00:57:48,800
Speaker 2: to get us back to neutral. Yeah, I think so,

1163
00:57:49,240 --> 00:57:51,280
Speaker 2: and then the RBA might sit there. And this is

1164
00:57:51,280 --> 00:57:53,160
Speaker 2: the other thing that we've learned looking at the RBA

1165
00:57:53,280 --> 00:57:57,200
Speaker 2: over decades. Frankly, once they get rates where they want them,

1166
00:57:57,320 --> 00:57:59,960
Speaker 2: they hold them for a year. So twenty twenty six

1167
00:58:00,360 --> 00:58:03,120
Speaker 2: might be the year where we see no more changes.

1168
00:58:03,320 --> 00:58:05,240
Speaker 2: There might be one up, one down, whatever, but we

1169
00:58:05,320 --> 00:58:07,400
Speaker 2: might be in this period that there will be no

1170
00:58:07,560 --> 00:58:11,360
Speaker 2: change in rates. We're getting close to that point now.

1171
00:58:12,040 --> 00:58:15,320
Speaker 3: And to me that that's good, because that's good certainly. Well,

1172
00:58:15,360 --> 00:58:17,200
Speaker 3: that puts us back to the old system that you

1173
00:58:17,240 --> 00:58:21,800
Speaker 3: and I were used to. Five rates up, this flat

1174
00:58:21,840 --> 00:58:26,280
Speaker 3: period five six rates down, but more gentle.

1175
00:58:26,040 --> 00:58:26,720
Speaker 2: So it's more.

1176
00:58:26,800 --> 00:58:31,360
Speaker 3: Yeah, it might be a change, but that's where everybody

1177
00:58:31,400 --> 00:58:32,160
Speaker 3: wants to see us.

1178
00:58:32,400 --> 00:58:34,520
Speaker 2: I like that. And again the other thing that again

1179
00:58:34,640 --> 00:58:37,760
Speaker 2: we've learned and learning during the pandemic and the inflation

1180
00:58:38,160 --> 00:58:43,400
Speaker 2: surge a couple of years ago, aggressive and frequent rate adjustments,

1181
00:58:43,440 --> 00:58:45,920
Speaker 2: either up or down, are not good news. You know,

1182
00:58:47,280 --> 00:58:49,360
Speaker 2: just a couple up, a couple downs, that's fine, we

1183
00:58:49,400 --> 00:58:52,160
Speaker 2: can all live with that. It's when we saw those

1184
00:58:52,280 --> 00:58:56,520
Speaker 2: rates cut to next to nothing, effectively zero, that created

1185
00:58:56,560 --> 00:58:59,560
Speaker 2: a problem. You know, again, we needed rates because of

1186
00:58:59,560 --> 00:59:02,000
Speaker 2: the pandemic. Then they hiked them four hundred points in

1187
00:59:02,400 --> 00:59:06,000
Speaker 2: barely eighteen months. That created a problem. And now we're

1188
00:59:06,000 --> 00:59:08,880
Speaker 2: getting back into this even keel where you know, every

1189
00:59:08,920 --> 00:59:11,280
Speaker 2: three months we'll do tweak it down. Twenty five to

1190
00:59:11,320 --> 00:59:14,920
Speaker 2: twenty five might hold. And so the discussion of interistrates

1191
00:59:15,040 --> 00:59:19,760
Speaker 2: is really more about another twenty five or fifty or nothing.

1192
00:59:19,840 --> 00:59:22,320
Speaker 2: You know, so we're not talking hundreds of points of rates.

1193
00:59:22,760 --> 00:59:24,040
Speaker 1: We'll have nothing to talk about.

1194
00:59:24,960 --> 00:59:27,240
Speaker 2: Oh we'll have to talk about because you know what

1195
00:59:27,240 --> 00:59:27,800
Speaker 2: we didn't.

1196
00:59:27,560 --> 00:59:29,640
Speaker 1: Talk about out of business because we love the.

1197
00:59:29,600 --> 00:59:32,400
Speaker 2: Budget and well how they are, how the government can

1198
00:59:32,400 --> 00:59:34,760
Speaker 2: influence there was a bank not not in terms of

1199
00:59:35,480 --> 00:59:38,720
Speaker 2: political pressure, but in terms of economic policy. Now we've

1200
00:59:38,720 --> 00:59:41,919
Speaker 2: heard and you know, we've got the we've got the

1201
00:59:42,160 --> 00:59:44,320
Speaker 2: mid year budget update coming in.

1202
00:59:44,560 --> 00:59:50,920
Speaker 3: I think that's m y e F comes in December.

1203
00:59:51,280 --> 00:59:56,280
Speaker 2: And you know, with this productivity stuff, the Productivity round

1204
00:59:56,280 --> 00:59:58,640
Speaker 2: Table and a few other bits and pieces that are occurring,

1205
00:59:58,680 --> 01:00:01,480
Speaker 2: they have an impact on the economy. You know, then

1206
01:00:01,840 --> 01:00:05,840
Speaker 2: be done bloody eighth big time. And so this conversation

1207
01:00:06,000 --> 01:00:09,360
Speaker 2: going about whether the government and this relates to employment.

1208
01:00:09,360 --> 01:00:13,200
Speaker 2: By the way, I'll shut up shortly. But one of

1209
01:00:13,240 --> 01:00:15,000
Speaker 2: the reasons why the labor market was so strong in

1210
01:00:15,000 --> 01:00:16,720
Speaker 2: the last couple of years, and I think we touched

1211
01:00:16,720 --> 01:00:20,160
Speaker 2: on this last time, was that the Albow government, Albanezi

1212
01:00:20,160 --> 01:00:23,840
Speaker 2: government and some of the state governments hired heaps of

1213
01:00:24,000 --> 01:00:28,520
Speaker 2: people in the public sector or public sector related industries nursing,

1214
01:00:28,680 --> 01:00:31,640
Speaker 2: age care, teaching, ndis, all that sort of stuff, and

1215
01:00:31,680 --> 01:00:36,160
Speaker 2: there's nothing wrong with that, but it created a well,

1216
01:00:36,160 --> 01:00:40,880
Speaker 2: a superficially strong labor market. My observation, I think I've

1217
01:00:40,880 --> 01:00:43,000
Speaker 2: heard this from Treasury and a few other people, is

1218
01:00:43,040 --> 01:00:45,800
Speaker 2: that all of that hiring is done, that all the

1219
01:00:45,880 --> 01:00:47,760
Speaker 2: nurses that we needed for the age care facility has done.

1220
01:00:47,800 --> 01:00:49,960
Speaker 2: If anything, they're trimming back a bit on indis too

1221
01:00:50,120 --> 01:00:52,720
Speaker 2: or the growth in Indias, I should say. So, if

1222
01:00:52,720 --> 01:00:55,360
Speaker 2: we get to this position late this year early twenty

1223
01:00:55,400 --> 01:00:59,320
Speaker 2: twenty six and government employment reverts back to almost zero

1224
01:01:00,040 --> 01:01:03,160
Speaker 2: and the private sector hasn't picked up the slack in

1225
01:01:03,280 --> 01:01:06,200
Speaker 2: terms of hiring, you know, these labor market wages might

1226
01:01:06,200 --> 01:01:07,880
Speaker 2: be an issue that just sort of a merge again.

1227
01:01:08,040 --> 01:01:10,360
Speaker 2: So we can't talk about the budget and what they're

1228
01:01:10,400 --> 01:01:12,000
Speaker 2: going to do with employment, what they're going to do

1229
01:01:12,000 --> 01:01:13,960
Speaker 2: with that. Do we need a surplus? Do we need

1230
01:01:13,960 --> 01:01:16,520
Speaker 2: a deficit? A lot of things there, mate.

1231
01:01:16,520 --> 01:01:19,440
Speaker 3: Yeah, And by I should let you know that I've

1232
01:01:19,560 --> 01:01:26,760
Speaker 3: retained an actuary to revisit Paul Keating's structure of from

1233
01:01:26,840 --> 01:01:32,320
Speaker 3: nineteen ninety three when you introduced the super guarantee of

1234
01:01:32,880 --> 01:01:37,760
Speaker 3: the amount of super you need to put away from

1235
01:01:38,080 --> 01:01:39,920
Speaker 3: say the age of twenty to the age of say

1236
01:01:39,960 --> 01:01:44,560
Speaker 3: sixty assumptions and the subject enough assuming the average straight

1237
01:01:44,600 --> 01:01:47,840
Speaker 3: male le just in relation to the male obviously females well,

1238
01:01:47,840 --> 01:01:50,040
Speaker 3: but dies at eighty one point two years of age.

1239
01:01:51,360 --> 01:01:53,200
Speaker 3: What about what happens if they lifted ninety one?

1240
01:01:53,840 --> 01:01:54,240
Speaker 2: Ah?

1241
01:01:55,080 --> 01:01:57,320
Speaker 3: So, how much more super would we need to put

1242
01:01:57,360 --> 01:01:59,360
Speaker 3: away to maintain that last ten years?

1243
01:01:59,400 --> 01:02:00,440
Speaker 2: What are getting that?

1244
01:02:00,600 --> 01:02:02,640
Speaker 1: I know I've only just retained this week.

1245
01:02:02,680 --> 01:02:04,600
Speaker 3: I spoke to this week because and I'm actually going

1246
01:02:04,640 --> 01:02:06,400
Speaker 3: to share that with obviously you, but I'll share it

1247
01:02:06,400 --> 01:02:07,360
Speaker 3: in one of our episodes.

1248
01:02:07,520 --> 01:02:10,040
Speaker 1: But I want to share it with the government. I

1249
01:02:10,120 --> 01:02:12,000
Speaker 1: want to say, look, because they.

1250
01:02:12,520 --> 01:02:13,320
Speaker 2: We're living longer.

1251
01:02:13,440 --> 01:02:15,960
Speaker 1: Yeah, we're living longer. And I do get it.

1252
01:02:16,280 --> 01:02:19,360
Speaker 3: I sort of understand why someone today has gone more

1253
01:02:19,440 --> 01:02:21,360
Speaker 3: today today he's got more than three million dollars or the

1254
01:02:21,440 --> 01:02:25,200
Speaker 3: assets and they're seventy in their super.

1255
01:02:26,120 --> 01:02:27,760
Speaker 1: I get it that maybe you've got to pay tax.

1256
01:02:27,800 --> 01:02:29,520
Speaker 1: I get a bit of redistribution of wealth. I get

1257
01:02:29,560 --> 01:02:30,120
Speaker 1: I get it.

1258
01:02:30,480 --> 01:02:33,440
Speaker 3: But if you're twenty and you're saving now and you

1259
01:02:33,480 --> 01:02:37,000
Speaker 3: will have three million when you turn sixty five, you

1260
01:02:37,080 --> 01:02:39,240
Speaker 3: probably maybe need more than that because you're going to

1261
01:02:39,280 --> 01:02:43,240
Speaker 3: live another ten years. I'm saying, maybe we're going to

1262
01:02:43,280 --> 01:02:46,880
Speaker 3: be encouraging those young people to have five million before this.

1263
01:02:47,520 --> 01:02:50,480
Speaker 1: So this is an indexation question, so.

1264
01:02:51,920 --> 01:02:53,200
Speaker 2: I have to think about that. But I love the

1265
01:02:53,240 --> 01:02:57,200
Speaker 2: concept that you know, a seventy year old let's just

1266
01:02:57,200 --> 01:03:01,680
Speaker 2: say they've got three million today, a seventy year old

1267
01:03:01,720 --> 01:03:04,200
Speaker 2: in twenty seventy.

1268
01:03:03,840 --> 01:03:05,080
Speaker 1: Five, fifty years time.

1269
01:03:05,200 --> 01:03:10,560
Speaker 2: Yeah, three million, can't it? No? No, no, no, that's

1270
01:03:10,600 --> 01:03:13,160
Speaker 2: probably need. This where the actor is going to do

1271
01:03:13,200 --> 01:03:16,080
Speaker 2: some fantastic that probably need to have six million. I

1272
01:03:16,120 --> 01:03:17,320
Speaker 2: don't know whatever that number is.

1273
01:03:17,320 --> 01:03:19,920
Speaker 1: So therefore we should encourage more money in there.

1274
01:03:20,000 --> 01:03:22,560
Speaker 2: Have it stepped up? Yeah? Yeah, Because I said before,

1275
01:03:22,600 --> 01:03:24,120
Speaker 2: I'm a big fan of super I think it's a

1276
01:03:24,160 --> 01:03:27,960
Speaker 2: really important policy. Not as expensive, but it's generally a

1277
01:03:27,960 --> 01:03:31,640
Speaker 2: good idea. Super anuation the twelve percent contributions and all

1278
01:03:31,640 --> 01:03:32,280
Speaker 2: that sort of stuff.

1279
01:03:32,360 --> 01:03:35,040
Speaker 1: Great, And I'm not saying employers should have to pay more.

1280
01:03:35,080 --> 01:03:37,600
Speaker 3: I'm not suggesting that, but but what I am saying

1281
01:03:37,640 --> 01:03:39,720
Speaker 3: is that maybe there needs to be some other and seventy.

1282
01:03:39,480 --> 01:03:42,080
Speaker 1: Four employees to put more money away.

1283
01:03:42,520 --> 01:03:44,240
Speaker 3: Yeah, And I don't know what that looks like in

1284
01:03:44,360 --> 01:03:47,880
Speaker 3: terms of tax policy whatever. That's for them to work out,

1285
01:03:47,880 --> 01:03:50,720
Speaker 3: but I just thought about time something to do that,

1286
01:03:50,760 --> 01:03:55,600
Speaker 3: because I just think that you know, Keating's hypothesis was

1287
01:03:55,600 --> 01:03:58,000
Speaker 3: back then was based on the average age of an

1288
01:03:58,000 --> 01:04:01,600
Speaker 3: Australian male female.

1289
01:04:00,600 --> 01:04:01,360
Speaker 1: And that's changed.

1290
01:04:01,520 --> 01:04:02,960
Speaker 2: It's changed by a loss a lot.

1291
01:04:04,200 --> 01:04:10,720
Speaker 3: In fact, thirty years ago it was generous to assume

1292
01:04:10,760 --> 01:04:15,320
Speaker 3: someone's going to eighty one. Yes, today it's not generous,

1293
01:04:15,360 --> 01:04:19,280
Speaker 3: it's extraordinary. And if you take Keating's hypothesis, you might

1294
01:04:19,400 --> 01:04:21,520
Speaker 3: maybe we should be assuming the endlst of ninety one

1295
01:04:21,720 --> 01:04:24,160
Speaker 3: be generous again, because you might as well be that way,

1296
01:04:24,200 --> 01:04:25,240
Speaker 3: because otherwise, I can.

1297
01:04:25,080 --> 01:04:25,920
Speaker 1: Tell you what's gonna happen.

1298
01:04:26,000 --> 01:04:27,760
Speaker 3: They're going to turn anyone, they've got nothing left, They're

1299
01:04:27,760 --> 01:04:29,240
Speaker 3: going to lift to the ninety one and the government's

1300
01:04:29,240 --> 01:04:30,840
Speaker 3: gonna have to tip in again.

1301
01:04:30,960 --> 01:04:32,480
Speaker 1: Yeah, and we're gonna have a liability.

1302
01:04:32,560 --> 01:04:34,520
Speaker 2: One of the reasons for super anuation was to get

1303
01:04:35,040 --> 01:04:37,760
Speaker 2: people off the public attention, which.

1304
01:04:37,560 --> 01:04:43,120
Speaker 3: Is which is why our system is globally recognized. Talk well,

1305
01:04:43,520 --> 01:04:47,320
Speaker 3: I'm hoping that this actually what the outcome will be,

1306
01:04:47,360 --> 01:04:48,880
Speaker 3: and then I will ask Keating to.

1307
01:04:49,680 --> 01:04:56,120
Speaker 2: Well, because that's his baby, supernation more than anything.

1308
01:04:56,200 --> 01:04:59,880
Speaker 1: And what's interesting is if Paul Keating talks, the Treasury will.

1309
01:04:59,760 --> 01:05:02,240
Speaker 2: Listen, people will listen. We will mate.

1310
01:05:02,280 --> 01:05:05,120
Speaker 3: I'll tell you what, But you know, for the obvious reason,

1311
01:05:05,360 --> 01:05:09,000
Speaker 3: and because I like Austray's super innovation system to remain

1312
01:05:09,920 --> 01:05:13,520
Speaker 3: the golden standard for the rest of the world forever,

1313
01:05:14,120 --> 01:05:17,280
Speaker 3: not just today.

1314
01:05:16,680 --> 01:05:18,160
Speaker 2: Sea Mark