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Speaker 1: The antimous inner. Welcome to Property Insights. Hello, thank you.

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Speaker 1: Now you're the deputy chief economists at AMP Bank or

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Speaker 1: AMP it's just AMP, just a But is there an AMP?

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Speaker 1: So does the AMP bank the actual banking license that

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Speaker 1: fit within the AMP yes.

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Speaker 2: Group, Yes, that's right.

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Speaker 1: Yeah.

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Speaker 3: So AMP has a bank, a platforms business called North

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Speaker 3: and then Superinvestments, which is where I sit.

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Speaker 1: Yeah, okay, so are you doing the Super Investments part?

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Speaker 1: That's so you're you're giving them economic updates and advice

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Speaker 1: and guidance and whatever have have you.

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Speaker 3: In relations, We do support the whole business. We do

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Speaker 3: suffer bank, We just suffer platforms. I mean it is

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Speaker 3: quite integrated. But our main area is sitting within the

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Speaker 3: multi asset team, within the Super Investments business, to give

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Speaker 3: them our economic forecast, to talk about us allocation with

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Speaker 3: our portfolio management team.

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Speaker 1: So just to get a bit of a sense of that,

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Speaker 1: because most people think AMP is, you know, full of

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Speaker 1: financial planners. It's not anymore. But AMP is a not

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Speaker 1: only as a platform, but AMP shows products superproducts, which

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Speaker 1: are you know, the inventory of a planner, let's call it.

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Speaker 1: Can we get a bit of a sense of what

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Speaker 1: size we're talking about in terms of the products.

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Speaker 3: Yeah, so the funds under management are about eighty billion

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Speaker 3: dollars now. The types of super funds, so we would

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Speaker 3: have corporate super plans. So for example, if if you

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Speaker 3: go into a into a business and they have chosen

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Speaker 3: AMP as their as their fund manager, then your default

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Speaker 3: option would be to go with an AMP fund.

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Speaker 1: Unless you choose to do it somewhere, unless you.

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Speaker 2: Choose to go somewhere else. Yeah, but that would be

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Speaker 2: your default option.

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Speaker 3: That's so that's one part of a corporate super But

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Speaker 3: a lot of the other super options are ones that

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Speaker 3: are available on our platform NORTH, so the advisors can

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Speaker 3: choose to use AMP. Now, we don't have many AMP

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Speaker 3: financial planners anymore. And actually that business was sold off

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Speaker 3: at the end of last year, which is to entirety,

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Speaker 3: but that is also part of where people would be

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Speaker 3: investing their money through super via the platform.

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Speaker 1: But if you're an entirety planner and you're talking to

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Speaker 1: your customers or your clients, the AMP product suite is

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Speaker 1: available to those clients.

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Speaker 3: Yeah, and I mean it can be available to people

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Speaker 3: who are just using NORTH. You don't have to necessarily

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Speaker 3: be aligned to AMP. You could just choose a product

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Speaker 3: that's available or notth just like many other index providers

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Speaker 3: would also be on north. So it's just sort of

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Speaker 3: an offering that we have there as one of our funds.

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Speaker 1: As opposed to pushing it through a planning division because

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Speaker 1: you guys don't own the planet.

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Speaker 2: No, we don't know. We don't own that anymore.

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Speaker 3: And that's sort of that really changed after the Royal

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Speaker 3: Commission anyways, because the vertical integration issues.

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Speaker 1: Yeah, generally speaking, that affected quite a lot of organizations,

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Speaker 1: including the banks. So if where I'm interested in, where

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Speaker 1: our audience is interested in his interest rates of course,

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Speaker 1: and the economy. So if I just turned to the

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Speaker 1: economy from a macro economy, a macro point of view,

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Speaker 1: what do you guys think, what does your team think

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Speaker 1: at AMP in relation to the macroeconomics? And I'm going

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Speaker 1: to do which parts of it I'm interested in of

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Speaker 1: Australia today, And let's start with just GDP, So I

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Speaker 1: will to about inflation to GDP for stuff like in

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Speaker 1: other words, how we're traveling like as a as a nation.

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Speaker 1: You know, the way one way of measuring this is

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Speaker 1: gross domestic product. You know, I know it's flawed and

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Speaker 1: that sort of stuff. But where do you think, how

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Speaker 1: do you think we're traveling in terms of traditional methodologies

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Speaker 1: of measurement.

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Speaker 3: I think Australia is doing okay. But the more important

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Speaker 3: thing is we're likely to do better in the next

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Speaker 3: twelve months. The last two years, our activity in the

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Speaker 3: economy as measured by GDP, which is basically a sense

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Speaker 3: of production in the economy, how much a business is

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Speaker 3: selling and how much a consumer's buying, it's been pretty soft.

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Speaker 3: It's been running at one to one and a half

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Speaker 3: percent per year.

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Speaker 1: Why is that so off relatives to some other numbers

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Speaker 1: the number.

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Speaker 2: I was about to get to that.

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Speaker 3: So the reason that it's soft is because when you

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Speaker 3: think about how much should GDP grow in the future,

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Speaker 3: it should be a factor of how much is your

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Speaker 3: population growing, how much is the productivity growth in the economy,

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Speaker 3: and what's the participation rate of the lavemark in the economy.

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Speaker 3: So when you put all those things together, because Australia

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Speaker 3: runs very high levels of immigration, we should be running

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Speaker 3: it close to two point seventy five or three percent

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Speaker 3: every single year growth terms. So compare that to a

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Speaker 3: country like China, for example, they're running at five percent

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Speaker 3: because they have their well, they're trying to get their

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Speaker 3: economy growing. And also when you're an emerging economy, it's

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Speaker 3: easier to have higher levels of a gittyp.

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Speaker 1: Grewth this should be growing much, that's right.

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Speaker 3: So all Western countries generally grow between say one to

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Speaker 3: three percent year on year, but one percent one to

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Speaker 3: one half percent, and your growth through Australia is pretty low.

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Speaker 2: That outside of the pandemic.

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Speaker 3: That's actually the lowest pace of economic growth that we've

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Speaker 3: had since the early nineties recession, which was nearly thirty

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Speaker 3: which was more than thirty years ago now, so it's

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Speaker 3: a pretty it was a pretty poor outcome, and I

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Speaker 3: think that's why, especially in the private sector, a lot

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Speaker 3: of people felt like we were in a bit of

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Speaker 3: a recession and per person, our level of GDP growth

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Speaker 3: was actually going backwards, so that's why people were saying

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Speaker 3: as in negative negative that's right. We had seven negative

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Speaker 3: quarters of per capita GDP growth up until the last

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Speaker 3: print of December, so for seven quarters our economy went

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Speaker 3: backwards per person, and that's generally seemed to be a

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Speaker 3: negative for things like living standards, So.

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Speaker 1: Just and as an economist, if you could just sort

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Speaker 1: of help us out here, so these measurements and per person,

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Speaker 1: maybe you could explain why that's important because you mentioned

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Speaker 1: it just a moment ago. We tend to always try

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Speaker 1: to measure everything as human nature, and one of the

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Speaker 1: things we try to measure is how well are we

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Speaker 1: living as individuals? What does my standard of living? What

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Speaker 1: can I afford? What I can't afford? Which what can't

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Speaker 1: I afford that I used to be able to afford,

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Speaker 1: or what could I not afford in the past I

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Speaker 1: can now afford. That was sort of indicated an increase

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Speaker 1: the stand of living. Stand living? Why is it so

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Speaker 1: important to economists? Why do you guys sort of really

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Speaker 1: talk about a lot.

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Speaker 3: Well, there's different ways to measure your standard of living.

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Speaker 3: So there's household income growth, there's productivity growth, there's GDP growth,

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Speaker 3: there's looking at inflation versus wage. I think they are

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Speaker 3: all encompassing of the standard living. But I guess traditionally

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Speaker 3: the best way to measure the wealth of a nation

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Speaker 3: is via GEDDP growth because it's the production of the

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Speaker 3: whole economy. So that's why when GDP per person goes backwards,

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Speaker 3: that tends to be negative. It shows you that per person,

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Speaker 3: you're becoming less wealthy, I mean than it was last year.

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Speaker 3: Then you were even compared to a quarter ago or

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Speaker 3: a year ago.

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Speaker 1: That's right.

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Speaker 2: So we were actually going backwards every quarter for seven.

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Speaker 1: Quarters on a per capit on a purpose.

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Speaker 2: A per person basis, that's right.

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Speaker 3: And the measure of a the measure of a recession,

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Speaker 3: according to GDP growth is two negative quarters, two consecutive

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Speaker 3: negative quarters of GITDP growth, which is why people said

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Speaker 3: when we had seven negative quarters that we were in

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Speaker 3: a per capita recession. I mean, there are other ways

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Speaker 3: to measure, you know, how wealthy you are as your

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Speaker 3: own household, you have your own obviously household balance sheet,

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Speaker 3: we get household wealth numbers as well. Household wealth has

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Speaker 3: actually increased throughout this period, and it's actually increased to

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Speaker 3: a record high because the superannuation balance of the average

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Speaker 3: household has increased so much. Our supersystem has done so

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Speaker 3: well from very high returns. But GITDP is another measure

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Speaker 3: of household wealth, so.

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Speaker 1: It but is it fair to say, and forgive me

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Speaker 1: for the saying this, but these are all fictions, mathematical fictions,

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Speaker 1: because there are all attempts to somehow in a matheticmatical

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Speaker 1: way and in a statistical way, to measure a nation

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Speaker 1: every single individual. And then if you get invited by

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Speaker 1: the number of individuals we get, let's call it to

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Speaker 1: per person number. But they're mathematical fictions because somebody like,

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Speaker 1: let's say, I just make this argument for the moment,

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Speaker 1: I am one of the people live in this country. Therefore, technically,

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Speaker 1: over the last seven quarters, my standard of living has

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Speaker 1: reduced because me as a a person in this country,

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Speaker 1: I've had I've endured seven negative quarters seven yes, seve

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Speaker 1: negative quarters. But on the other hand, maybe my wealth's

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Speaker 1: gone up because all the realist that I own has

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Speaker 1: gone up like quite a bit. So therefore it's a

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Speaker 1: bit fictional.

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Speaker 3: I guess it's a it's an attempt. It's a stock

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Speaker 3: versus a flow as well. So GDP is a flow measure.

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Speaker 3: It does it does change every since what not that

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Speaker 3: wealth doesn't. But when you think about your own wealth,

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Speaker 3: it is it is more of a stock like figure,

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Speaker 3: whereas GDP is a production figure. You know what has

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Speaker 3: changed over that quarter. So it's you're just measuring different things.

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Speaker 1: Basically, is that measurement and I know that media talks

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Speaker 1: about all the time, but is that measure of GDP

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Speaker 1: per person somewhat a little bit I would say, misguided

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Speaker 1: but potentially misleading.

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Speaker 2: Absolutely in some ways.

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Speaker 3: But I think you know, every single statistic is because

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Speaker 3: what is the average household.

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Speaker 1: Thing?

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Speaker 3: And there's not especially in the last few years, I

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Speaker 3: think we've had such high levels of inequality in terms

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Speaker 3: of asset rich versus asset poor households in Australia. Different

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Speaker 3: age brackets doing quite differently in terms of the pain

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Speaker 3: that some households are felt with mortgage repayments, the pain

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Speaker 3: that for example, retirees might fill with inflation because they're

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Speaker 3: not getting their wages that are compensated to inflation. So

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Speaker 3: it's been quite diverse outcome.

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Speaker 2: So it's very.

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Speaker 3: Hard to actually talk aboutage consumer and it's much more absolutely.

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Speaker 1: So, Therefore, do you think it would be a good idea?

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Speaker 1: And I know this sounds a bit esoterical, but I

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Speaker 1: think it's important becaus is rarely we get actually an

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Speaker 1: economist on the show. Do you think that the media

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Speaker 1: should be encouraged to say when you miss the media

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Speaker 1: person right, that it's on a per capita basis, we're

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Speaker 1: in a per capita recession. We should also write though

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Speaker 1: that there's one part of the economy is doing very well,

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Speaker 1: as one part of the economy is doing crap. And

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Speaker 1: maybe you start to talk about other statistical measures like,

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Speaker 1: for example, the Gini coefficient, you know, like the split

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Speaker 1: between rich and poor, and how that's why, Nick, do

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Speaker 1: you think that we need to have They need maybe

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Speaker 1: to talk more of them, need to talk to you.

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Speaker 1: There needs to be more education of our commentary so

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Speaker 1: that we can get an apolitical view on this stuff

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Speaker 1: and in a better sense of how important or how

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Speaker 1: the statistics statistical analysis fits in. Otherwise it can be

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Speaker 1: misleading for sure.

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Speaker 3: Well, this is why people try and nitpick whichever parts

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Speaker 3: of the data that they want, because you can sort

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Speaker 3: of find different statistics to suit your point of view.

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Speaker 3: And was traditionally economists and the media have commented on

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Speaker 3: that specific release that's coming out, So it's not like

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Speaker 3: you get all the released on one day. You get

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Speaker 3: retail sales, you get the home price data, you get

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Speaker 3: GDP growth, so we just naturally just comment on that

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Speaker 3: one bit of data. But it is a good point

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Speaker 3: that we need to keep in mind the whole range

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Speaker 3: of other indicators. And that's what economists try to do, really,

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Speaker 3: is to digest everything and to plug that into whatever

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Speaker 3: model that we use to try and make sense of Actually,

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Speaker 3: what's what's going on in the world.

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Speaker 1: Do you think the Reserve Bank looks at all those

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Speaker 1: things when they're making their call absolutely about what to

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Speaker 1: do with or we might just wheel back one one

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Speaker 1: the will back a little bit what people most people

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Speaker 1: don't realize. Everyone thinks the reserve banks here look at

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Speaker 1: insut rai's relative to inflation. Well, that's sort of right,

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Speaker 1: But the actual mandate is is the growth and welfare

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Speaker 1: of sorry, prosperity and welfare of all Australians. Somehow you've

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Speaker 1: got to measure both of those. But that's part of it,

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Speaker 1: that's the main part of the mandate and the way

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Speaker 1: they do it, the way the measure to something sense

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Speaker 1: using looking inflation and then the way they manage inflation

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Speaker 1: steal interest rates. But when it comes to prosperity and

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Speaker 1: welfare of all Australians, what do you think the Reserve

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Speaker 1: banks looking at apart from DUDP and apart from inflation,

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Speaker 1: what other things do you think they're sort of considered.

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Speaker 3: Well, The two things that are in their mandate is

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Speaker 3: price price stability, which is the inflation target, keeping inflation

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Speaker 3: within two to three percent over the course of business cycle.

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Speaker 3: How long is a business cycle? I don't know how

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Speaker 3: long is a piece of string.

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Speaker 1: But you know they have to a medium term though,

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Speaker 1: don't they?

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Speaker 2: But what is the medium term? Five years? Is it

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Speaker 2: seven years, ten years?

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Speaker 3: A lot of governors have looked at what inflation has

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Speaker 3: been over the course of their of their whole terms

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Speaker 3: term or terms over the course.

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Speaker 2: Of a few years.

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Speaker 3: Do you take out periods like the pandemic? I think

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Speaker 3: it's up. It's open to debate, but yes, like I

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Speaker 3: would say, on a five to seven year basis, what

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Speaker 3: has been average inflation. So they try and target price

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Speaker 3: stability by having inflation at two to three percent. Then

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Speaker 3: they also there are the mandate. They have dual mandate.

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Speaker 3: Their other mandate is full employment, so keeping the unemployment

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Speaker 3: rate basically as low as possible for the prospect.

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Speaker 1: We don't know what full employment means, by the way,

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Speaker 1: and they may unemployment, so they sort of say, well,

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Speaker 1: we don't know what full employment means, but therefore we

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Speaker 1: look at unemployment.

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Speaker 3: They have a list of full employment indicators, and I

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Speaker 3: guess historically we have used the unemployment rate more as

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Speaker 3: a guide to full employment, but more recently, I think

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Speaker 3: it's become a bit more nuanced since the pandemic because

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Speaker 3: the indicators of the labor market have actually been a

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Speaker 3: little bit diverse. We've had some strange outcomes in the

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Speaker 3: employment market. The unemployment rate has been artificially low despite

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Speaker 3: other indicators of the labor market weakening. So there are

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Speaker 3: a few funny things that are going on that I

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Speaker 3: think do have explanations. But it's for this reason that

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Speaker 3: the Reserve Bank basically has a whole list of full

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Speaker 3: employment indicators and it tries to gauge how far away

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Speaker 3: are we from their understanding of where full employment is.

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Speaker 3: But the way I think that there's a simpler way

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Speaker 3: to think about it. When you're think about how to

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Speaker 3: height is a labor market, you basically just need to

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Speaker 3: look at wages growth. If wages growth is slowing, it's

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Speaker 3: basically a signal that the labor market has weakened to

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Speaker 3: some extent. Because if you were still in an environment

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Speaker 3: where things were extremely tight in the labor market, people

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Speaker 3: were competing for jobs, it was hard to find a job,

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Speaker 3: then wages growth should be going up. But in the

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Speaker 3: last twelve months we've seen that wages growth has actually slowed.

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Speaker 3: It's running it just over three percent year on year,

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Speaker 3: but you know, we were running it.

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Speaker 2: Close to four percent, if not a little bit above that.

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Speaker 3: So the slowing in wages growth, to me, is a

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Speaker 3: sign that we're past the point of the peak in

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Speaker 3: full employment. We've sort of gone below that. Now our

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Speaker 3: unemployment rate is running above its full employment level.

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Speaker 1: So we just talked about GDP, in other words, how

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Speaker 1: well the country's performing in terms of let's call it

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Speaker 1: a productivity measurement, full employment somehow measure buying, ploy and

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Speaker 1: other factors let's talk about, and these are reserve band considerations.

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Speaker 1: Let's look at inflation. So headline inflation was what we

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Speaker 1: used to look at, or the RBA used to sort

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Speaker 1: of talk about, and some people still get to be

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Speaker 1: carried away with some of our politicians do, particularly when

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Speaker 1: it's lower. Maybe you could just explain what they mean

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Speaker 1: by the so called trim mean or the underlying inflation.

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Speaker 1: What does that really mean, why is it and why

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Speaker 1: has it become much more important?

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Speaker 3: So it's funny I've listened to a few people say

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Speaker 3: why do economists have all these different measures of inflation.

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Speaker 3: They just try and take out whatever they don't like

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Speaker 3: for prices. But there are reasons for why. We look

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Speaker 3: at a few different things. So there's headline inflation and

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Speaker 3: then there's what Australia calls the trimmed mean. We also

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Speaker 3: have a weighted medium, which is another version of the

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Speaker 3: trim mean. So the trim mean is basically trying to

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Speaker 3: tell you what is going on below the surface. We

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Speaker 3: call it underlying inflat. It takes out the volatilities of

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Speaker 3: headline prices. So for example, there are going to be

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Speaker 3: volatile items happening all the time. When we had a

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Speaker 3: spike in banana prices, banana prices might have increased. Let

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Speaker 3: us whatever one that's righting cabbage gate egg prices at

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Speaker 3: the moment. That is going to skew what happens to

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Speaker 3: headline inflation. Headline inflation is actually what everyone pays. If

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Speaker 3: inflation's running at the moment, it's running at two point

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Speaker 3: four percent year on year on the monthly figure, that

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Speaker 3: is what you're paying compared to a year ago for

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Speaker 3: an average basket. Again, we can debate you know what

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Speaker 3: an average basket is, but for an average basket, according

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Speaker 3: to the ABS, that is what someone's paying. The true

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Speaker 3: mean will take out the fifteen percent of the top

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Speaker 3: volatile items and the bottom fifteen percent most volatile items.

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Speaker 3: So it's trying to give you a read of what's

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Speaker 3: going on beyond some of those volatilities that a lot

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Speaker 3: of the time, we know that those volatilities are not

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Speaker 3: going to persist. We're not going to have a cyclone

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Speaker 3: every month that's going to make food prices go up

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Speaker 3: all the time. We're not going to have electricity rebates

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Speaker 3: continuing forever. So this is why economists like to what

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Speaker 3: we call trim those out and just look at.

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Speaker 1: Blow the surface so as a better indicator of where

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Speaker 1: inflation is hitting.

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Speaker 3: It gives the RBA, I think, more clarity and more

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Speaker 3: guidance as to where they think inflation is going to settle.

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Speaker 3: And also because it does, it does tend to be

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Speaker 3: less volatile, and you could have a situation where the

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Speaker 3: headline figures might might run from you a three percent

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Speaker 3: to two point five percent the next month on a

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Speaker 3: yearly basis, And it's because some of those volatile items

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Speaker 3: that are going to skew the numbers, so the trimmed

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Speaker 3: demean doesn't move around as much, and that's why it

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Speaker 3: gives the RBA better read for longer term inflation.

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Speaker 1: So where where's imp at the moment? So just let's

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Speaker 1: look at the balance of twenty twenty five. There's the

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Speaker 1: next board meeting. When this goes, when you and I

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Speaker 1: go to where on this one will be in late

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Speaker 1: mid to late May, they will have had the March

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Speaker 1: quarter numbers which come out I think the towards the

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Speaker 1: end of April sometime around as a day. What are

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Speaker 1: you guys thinking, are you sort of in the in

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Speaker 1: the in the same vein as the money markets now

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Speaker 1: thinking that we'll probably get another point five point six

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Speaker 1: read for inflation for the quarter.

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Speaker 3: At the moment, we're at point sixty five for the

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Speaker 3: for the quarter March, for the March quarter.

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Speaker 2: I think with that type of number we will see

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Speaker 2: a May cut.

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Speaker 1: Right.

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Speaker 3: The RBA's forecasts are basically somewhere between point seven or

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Speaker 3: point eight. We don't actually know the exact, you know,

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Speaker 3: point estimate that they have, but we can sort of

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Speaker 3: read read as to what they're what what they're forecasting.

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Speaker 3: But so I think it's going to come a tad

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Speaker 3: below their forecast. But what's probably more important to me

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Speaker 3: is what the components are doing. Because we know that

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Speaker 3: the RBA has been concerned about particular parts of the

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Speaker 3: services sector services inflation, so duelling, construction costs, rents, medical costs,

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Speaker 3: insurance costs, education, and we're seeing good signs that a

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Speaker 3: lot of those items are starting to soften.

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Speaker 2: So I think it will.

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Speaker 3: Give the RBA clarity as to how fast that services

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Speaker 3: inflation unwind is progressing, which is quite important for their

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Speaker 3: longer term inflation views. If they're seeing that inflation over

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Speaker 3: the next one to two years is likely to come

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Speaker 3: in below those longer term forecasts, then that will, I

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Speaker 3: think give them the room to cut rates again.

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Speaker 1: So if I could just put it in a sort

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Speaker 1: of more layman term, So if it is a point,

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Speaker 1: let's say, if the RBA's guidances point seven, they're not

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Speaker 1: giving gods, but let's say it is. If you just

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Speaker 1: simply extrapolate that forward and just say four sets of

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Speaker 1: twenty eight, that's two point eight, which is below three.

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Speaker 1: Is somewhere between two and three, which is sort of

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Speaker 1: where the RBA wants to see it. Mind trimman or

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Speaker 1: the underlying inflation sort of where they want to see it,

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Speaker 1: and if it's lower then obviously you know for seas

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Speaker 1: to twenty four four or five two, so like we're

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Speaker 1: in the right territory. So they're looking at they would

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Speaker 1: like to see two quarters of this nice number. We've

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Speaker 1: already got a good quarter in December point five trum mean,

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Speaker 1: they probably like to see another good quarter for March,

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Speaker 1: but they sort of gives them confidence that they should

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Speaker 1: reduce rates. Does the AMP see I maybe ask you this,

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Speaker 1: and I don't know if you're lay to say it,

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Speaker 1: but where does the Where does the AMP think that

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Speaker 1: they see the cash rates settling? So like, are you

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Speaker 1: thinking about one hundred base points from here or twenty five?

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Speaker 1: And there's only prediction that doesn't mean anything.

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Speaker 3: They've been quite careful with guiding the market on this,

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Speaker 3: I think because they worry that people think that this

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Speaker 3: is where the cash rat's going to settle. So when

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Speaker 3: they think about they haven't actually told us where they

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Speaker 3: think the cash rates going to end up, but they

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Speaker 3: do give estimates about what they call the neutral level

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Speaker 3: of interest rates, which is basically a guide us to

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Speaker 3: the longer term level of cash rate, and that's somewhere

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Speaker 3: between three to three and a half percent. And I

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Speaker 3: think our own view at AMP is that the cash

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Speaker 3: rates going to settle at three point one percent at

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Speaker 3: the end of this cycle, so one point two five

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Speaker 3: percent basis one point two five percent worth of rate

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Speaker 3: cuts in this.

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Speaker 1: Cycle to five more cuts, potentially five more cuts, five

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Speaker 1: more twenty five if they're twenty five base point cuts,

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Speaker 1: five more cuts and this cycle are you talking about

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Speaker 1: this calendar year or what are you guys thinking is

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Speaker 1: going to be the cycle? Is that between say now

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Speaker 1: and June next year, and cycles could be going out

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Speaker 1: longer than in the past.

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Speaker 3: We think we'll get two rate cuts this year, two

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Speaker 3: more rate cuts. Two more rate cuts were May in August,

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Speaker 3: so we've already had one in February, and then two

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Speaker 3: to three next next year.

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Speaker 1: Really do you see one it may then?

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Speaker 3: Yes, So we expect a rate cut in May after

441
00:21:39,920 --> 00:21:42,360
Speaker 3: the March quarter inflation figure. So we think the March

442
00:21:42,440 --> 00:21:44,560
Speaker 3: cored inflation figures will be good again because we already

443
00:21:44,560 --> 00:21:47,360
Speaker 3: had January and February monthly data and that was quite positive,

444
00:21:47,960 --> 00:21:51,360
Speaker 3: a little bit below consensus forecasts and in line with

445
00:21:51,760 --> 00:21:55,119
Speaker 3: our own estimates, and the full March quarter figures we

446
00:21:55,160 --> 00:21:57,240
Speaker 3: think will show another good read for some of those

447
00:21:57,320 --> 00:22:02,680
Speaker 3: problematic services areas. So that's why we think that it will.

448
00:22:02,840 --> 00:22:05,359
Speaker 3: The inflation data will just point them into the direction

449
00:22:05,640 --> 00:22:07,760
Speaker 3: of needing to ease interest rates.

450
00:22:07,800 --> 00:22:10,320
Speaker 1: So now I could you just explain something is important.

451
00:22:10,359 --> 00:22:13,399
Speaker 1: I mean to you, its second nature. But when you're

452
00:22:13,400 --> 00:22:16,560
Speaker 1: talking about services, what we've got everyone's going to understand

453
00:22:16,560 --> 00:22:20,159
Speaker 1: is that the inflation is measured against a basket that

454
00:22:20,760 --> 00:22:23,600
Speaker 1: strain bististics lects you and I don't, but someone else

455
00:22:23,640 --> 00:22:28,000
Speaker 1: slects a basket of the prices and changes in those

456
00:22:28,040 --> 00:22:32,320
Speaker 1: prices of they call a basket of goods and services.

457
00:22:34,920 --> 00:22:37,159
Speaker 1: The goods seem to be under control. In other words,

458
00:22:37,760 --> 00:22:43,200
Speaker 1: price rises in goods in that basket, as calculated or

459
00:22:43,240 --> 00:22:47,000
Speaker 1: assessed by the reserve by the ABS is performing quite

460
00:22:47,040 --> 00:22:50,480
Speaker 1: well in the range between two and three. But the

461
00:22:50,560 --> 00:22:53,760
Speaker 1: services have been very stubborn. And in the services with

462
00:22:53,960 --> 00:22:56,880
Speaker 1: you you mentioned, but with think things like insurance costs,

463
00:22:57,320 --> 00:23:02,159
Speaker 1: school fees or education costs. Yeah, basically everything that you

464
00:23:02,160 --> 00:23:05,120
Speaker 1: don't want to pay for. Yeah, yeah, they're not things

465
00:23:05,160 --> 00:23:07,320
Speaker 1: like this, you know they're not. You know, they're not things,

466
00:23:07,359 --> 00:23:10,439
Speaker 1: we tangible things we take away the services, they've been

467
00:23:10,520 --> 00:23:13,600
Speaker 1: quite difficult and a lot of it has to do

468
00:23:13,640 --> 00:23:16,320
Speaker 1: with infrastructure and stuff like that and various other policies,

469
00:23:16,440 --> 00:23:18,800
Speaker 1: changes around immigration, et cetera of cause these problems, but

470
00:23:19,080 --> 00:23:25,119
Speaker 1: or attributed to these problems. But why why are services

471
00:23:25,320 --> 00:23:28,440
Speaker 1: so stubborn? And is this a global issue?

472
00:23:29,400 --> 00:23:31,720
Speaker 3: In the Western world? It's been a global issue. I

473
00:23:31,720 --> 00:23:33,800
Speaker 3: think in Australia as well. We haven't had as much

474
00:23:33,800 --> 00:23:37,080
Speaker 3: goods deflation to deflations when price actually go negative, so

475
00:23:37,080 --> 00:23:40,080
Speaker 3: they go down. Because a lot of people don't even

476
00:23:40,160 --> 00:23:42,560
Speaker 3: understand when I when I talk to them and I say,

477
00:23:42,640 --> 00:23:45,080
Speaker 3: inflations come down from basically eight percent in your own

478
00:23:45,160 --> 00:23:47,040
Speaker 3: year to two point four percent, And people say, well,

479
00:23:47,160 --> 00:23:49,040
Speaker 3: but when I go to the shops, things are still expensive.

480
00:23:49,240 --> 00:23:52,400
Speaker 1: Course it hasn't gone down, because that's just a change. Yeah,

481
00:23:52,800 --> 00:23:54,439
Speaker 1: that's the importantoint you go through that.

482
00:23:54,680 --> 00:23:57,960
Speaker 3: Yeah, it's really important. So inflation is the change in prices.

483
00:23:58,000 --> 00:24:00,359
Speaker 3: Just because you've had lower inflation still means that prices

484
00:24:00,359 --> 00:24:03,000
Speaker 3: are going up, They're just going up at a slower rate.

485
00:24:03,800 --> 00:24:08,119
Speaker 3: The level of price changes has been about twenty percent

486
00:24:08,720 --> 00:24:10,800
Speaker 3: over the last four years. Wages growth has gone up

487
00:24:10,840 --> 00:24:13,560
Speaker 3: by fifteen percent. So people are feeling this is and

488
00:24:13,600 --> 00:24:15,639
Speaker 3: this is the cost of living issue. People are feeling

489
00:24:15,680 --> 00:24:18,080
Speaker 3: like there is this massive gap between the level of

490
00:24:18,119 --> 00:24:20,879
Speaker 3: prices that they're paying actually their take home pay. And

491
00:24:20,920 --> 00:24:25,200
Speaker 3: I absolutely relate to that and understand that, and the

492
00:24:25,240 --> 00:24:27,320
Speaker 3: government does too, which is why they're giving people back

493
00:24:27,359 --> 00:24:29,639
Speaker 3: these cost of living or rebates. So just because we

494
00:24:29,680 --> 00:24:32,199
Speaker 3: have slower inflation doesn't mean that price rises are not

495
00:24:32,240 --> 00:24:32,720
Speaker 3: going to keep.

496
00:24:32,800 --> 00:24:35,560
Speaker 1: Things are going to become more affordable, things are going

497
00:24:35,600 --> 00:24:35,840
Speaker 1: to be.

498
00:24:35,880 --> 00:24:38,679
Speaker 3: Relative to you know, where we were a few years ago. Core,

499
00:24:38,880 --> 00:24:40,879
Speaker 3: but prices are still going to go up, just at

500
00:24:40,880 --> 00:24:41,720
Speaker 3: a slower rate.

501
00:24:41,880 --> 00:24:44,160
Speaker 1: Yeah. So that's an important point because most people don't

502
00:24:44,200 --> 00:24:48,359
Speaker 1: get that. They think, oh, inflation's not very high, but

503
00:24:48,400 --> 00:24:49,560
Speaker 1: my cost of living is still the same.

504
00:24:49,640 --> 00:24:49,800
Speaker 3: Yeah.

505
00:24:49,800 --> 00:24:51,679
Speaker 1: Of course, you know, because the retailer, just because the

506
00:24:52,119 --> 00:24:54,280
Speaker 1: inflation number comes out, you know, some of the will worse,

507
00:24:54,400 --> 00:24:57,720
Speaker 1: or Coals or one of the big retails, Oh, let's

508
00:24:57,760 --> 00:25:01,120
Speaker 1: now reduce our prices, because that's unlikely because the cost

509
00:25:01,119 --> 00:25:02,639
Speaker 1: of what they're getting is probably about the same. So

510
00:25:02,920 --> 00:25:06,080
Speaker 1: it's a margin game for them. So what we're talking

511
00:25:06,080 --> 00:25:09,160
Speaker 1: about here is the increase in prices on any one

512
00:25:09,240 --> 00:25:13,439
Speaker 1: quarter or any one period from the previous period. But

513
00:25:13,480 --> 00:25:18,359
Speaker 1: it doesn't necessarily follow that a or a decrease doesn't

514
00:25:18,400 --> 00:25:21,000
Speaker 1: necessarily follow that the cost of living is going to improve.

515
00:25:22,359 --> 00:25:27,160
Speaker 3: We need in wages basically to be rising by more

516
00:25:27,160 --> 00:25:31,080
Speaker 3: than inflation to see the gap between prices and wages close,

517
00:25:31,520 --> 00:25:34,800
Speaker 3: and that is possible to in most times. Wages growth

518
00:25:34,840 --> 00:25:38,040
Speaker 3: runs on average and austraight about three percent. Inflation hopefully

519
00:25:38,240 --> 00:25:40,440
Speaker 3: runs at about two and a half percent, so usually

520
00:25:40,480 --> 00:25:44,120
Speaker 3: we should be getting wages growth running above inflation, and

521
00:25:44,200 --> 00:25:45,400
Speaker 3: on current numbers.

522
00:25:45,119 --> 00:25:46,080
Speaker 2: That is actually the case.

523
00:25:46,119 --> 00:25:48,879
Speaker 3: Wages growth is at three point two, headline inflations at

524
00:25:48,880 --> 00:25:50,919
Speaker 3: two point four. I know some people won't feel like

525
00:25:50,920 --> 00:25:53,360
Speaker 3: that though, because again those painful items, like the services

526
00:25:53,400 --> 00:25:57,560
Speaker 3: that you mentioned, they're still their price growth is still

527
00:25:57,600 --> 00:26:00,600
Speaker 3: quite high. Rents are still riuting it over five five percent.

528
00:26:01,080 --> 00:26:03,399
Speaker 3: Insurance prices are running at a similar level. And the

529
00:26:03,440 --> 00:26:07,080
Speaker 3: reason that services prices are what we call sticky or

530
00:26:07,560 --> 00:26:09,920
Speaker 3: or high at those levels is one because they tend

531
00:26:10,000 --> 00:26:12,960
Speaker 3: to lag what happens to other parts of inflation. So

532
00:26:13,000 --> 00:26:15,479
Speaker 3: because we had an inflation problem in twenty twenty two

533
00:26:15,600 --> 00:26:18,560
Speaker 3: twenty twenty three, services prices take time to adjust to that.

534
00:26:18,960 --> 00:26:20,639
Speaker 3: Part of the reason for that is also because wages

535
00:26:20,680 --> 00:26:23,119
Speaker 3: growth increase by such a high rate, and services prices

536
00:26:23,160 --> 00:26:26,000
Speaker 3: are normally driven a lot by what happens to wages growth.

537
00:26:26,640 --> 00:26:29,560
Speaker 1: They're heavily affected by the cost of staff. Yeah, heavily

538
00:26:29,600 --> 00:26:31,560
Speaker 1: effect because it's usually staff that provide the service.

539
00:26:31,680 --> 00:26:32,360
Speaker 2: Yeah, that's right.

540
00:26:33,280 --> 00:26:35,920
Speaker 3: And with things like insurance, so they're going through their

541
00:26:35,960 --> 00:26:41,080
Speaker 3: own industry specific problems around climate change, very high premiums.

542
00:26:40,840 --> 00:26:42,959
Speaker 2: The cost of stuff overall.

543
00:26:43,359 --> 00:26:45,840
Speaker 3: So I think those are some industry specific things that

544
00:26:45,880 --> 00:26:48,800
Speaker 3: are also happening. Healthcare is related to our aging population,

545
00:26:49,000 --> 00:26:52,600
Speaker 3: high immigration, or high population growth, so there are broader

546
00:26:52,800 --> 00:26:55,520
Speaker 3: macroeconomic factors that also influence what happens to some of

547
00:26:55,560 --> 00:26:57,600
Speaker 3: these services areas. The good news, though, I think, is

548
00:26:57,960 --> 00:27:01,520
Speaker 3: that those problematic services areas are slowing. They're just not

549
00:27:01,640 --> 00:27:03,800
Speaker 3: slowing as fast as the IRBIT probably would have wanted

550
00:27:03,840 --> 00:27:06,480
Speaker 3: them to. But I think that in the past six

551
00:27:06,520 --> 00:27:08,760
Speaker 3: months a bit of that has changed. The new dwelling

552
00:27:08,800 --> 00:27:11,400
Speaker 3: construction costs at the cost to build a home has

553
00:27:11,440 --> 00:27:13,800
Speaker 3: come down a lot. Rents has definitely reached a peek.

554
00:27:13,880 --> 00:27:15,679
Speaker 3: You can see that in the new asking rents we're

555
00:27:15,680 --> 00:27:18,720
Speaker 3: getting more supply into the market. Immigration levels are going

556
00:27:18,800 --> 00:27:22,600
Speaker 3: to slow, so the rental market's going to look much

557
00:27:22,640 --> 00:27:24,720
Speaker 3: better for a renter in the next twelve to twenty

558
00:27:24,760 --> 00:27:25,280
Speaker 3: four months.

559
00:27:26,240 --> 00:27:28,639
Speaker 1: It's my final question too, But if Australia it was

560
00:27:29,160 --> 00:27:34,000
Speaker 1: looking for the goldilocks period, like you know, when and

561
00:27:34,040 --> 00:27:38,680
Speaker 1: in terms of economics, I'm talking about when inflation is

562
00:27:39,680 --> 00:27:41,880
Speaker 1: and has been for a long enough time traveling out

563
00:27:41,880 --> 00:27:47,160
Speaker 1: a number less lower than wage growth, and let's call

564
00:27:47,200 --> 00:27:51,919
Speaker 1: immigration out as immigrations settled down from where it was

565
00:27:52,480 --> 00:27:56,919
Speaker 1: back to more normal normal numbers. Does someone like the

566
00:27:56,960 --> 00:27:59,399
Speaker 1: AMP or do you have a general sense when do

567
00:27:59,480 --> 00:28:02,880
Speaker 1: we reach goldilocks period? In other words, if we're paying

568
00:28:02,920 --> 00:28:07,159
Speaker 1: twenty percent more for everything that we're buying and using

569
00:28:08,400 --> 00:28:12,439
Speaker 1: just by way of assumption, but now we're going to

570
00:28:12,440 --> 00:28:16,199
Speaker 1: pick up the difference of the new increase in prices

571
00:28:16,240 --> 00:28:18,679
Speaker 1: of two point four percent relative to an increase in

572
00:28:18,720 --> 00:28:21,200
Speaker 1: wages of three percent, and let's take bracket creep out

573
00:28:21,200 --> 00:28:23,960
Speaker 1: for a second three percent wage growth, do you guys

574
00:28:24,000 --> 00:28:25,440
Speaker 1: get a sense of when do we do it? When

575
00:28:25,440 --> 00:28:28,119
Speaker 1: do we achieve our catch up? When does Australia as

576
00:28:28,119 --> 00:28:31,000
Speaker 1: a nation achieves catch up? Forgetting about trads and mortgage

577
00:28:31,040 --> 00:28:32,760
Speaker 1: and stuff of them. When do we achieve our catchup?

578
00:28:33,160 --> 00:28:34,919
Speaker 1: Is it like a straight line thing, like you know,

579
00:28:34,960 --> 00:28:37,040
Speaker 1: we've had twenty percent increase, we're only going to make it.

580
00:28:37,119 --> 00:28:39,520
Speaker 1: We're going to pick up a difference of one percent preanum.

581
00:28:39,600 --> 00:28:41,080
Speaker 1: So if we're going to wait twenty years to catch

582
00:28:41,120 --> 00:28:43,520
Speaker 1: up or is there a sense of this down the train?

583
00:28:43,600 --> 00:28:46,880
Speaker 3: It's about five to six years if wages growth runs

584
00:28:46,960 --> 00:28:49,200
Speaker 3: at the levels that we think three point twenty five

585
00:28:49,280 --> 00:28:49,440
Speaker 3: or so.

586
00:28:50,720 --> 00:28:53,920
Speaker 2: Yeah, that's right. Yeah, so in the early twenty thirties basically.

587
00:28:54,000 --> 00:28:58,840
Speaker 1: Yeah. So so really we should get back to that

588
00:28:59,040 --> 00:29:04,000
Speaker 1: normal period normalization somewhere towards the end of this ten years,

589
00:29:04,040 --> 00:29:07,640
Speaker 1: the end of this decade. Making some assumptions of course

590
00:29:07,680 --> 00:29:09,360
Speaker 1: that we should get back to what is normal. So

591
00:29:10,920 --> 00:29:13,480
Speaker 1: maybe Australians has just got to buckle down and just

592
00:29:13,920 --> 00:29:16,560
Speaker 1: hold on, you know, that's all you can do. You

593
00:29:16,600 --> 00:29:20,240
Speaker 1: can't hope the government's going to change your prosperity overnight,

594
00:29:21,040 --> 00:29:23,360
Speaker 1: you know, then give you electricity, rebase on sort of stuff,

595
00:29:23,360 --> 00:29:26,240
Speaker 1: but they're not going to change your prosperity overnight.

596
00:29:26,600 --> 00:29:28,800
Speaker 3: I think I think Australians should just focus on trying

597
00:29:28,840 --> 00:29:31,400
Speaker 3: to build their own wealth as much as they can,

598
00:29:31,640 --> 00:29:34,240
Speaker 3: trying to think about investing, investing for the long term,

599
00:29:34,560 --> 00:29:37,880
Speaker 3: the benefits of compound interest. So really it's about getting

600
00:29:37,920 --> 00:29:41,560
Speaker 3: yourself more literate, financial and economic literate, to try and

601
00:29:41,640 --> 00:29:43,760
Speaker 3: understand what's going on the market, try and get the

602
00:29:43,760 --> 00:29:45,320
Speaker 3: best deals that you can for your mortgage.

603
00:29:45,440 --> 00:29:46,640
Speaker 2: Understand what's what's.

604
00:29:46,400 --> 00:29:49,840
Speaker 3: Happening when the castrate declines and your mortgage rate falls,

605
00:29:49,880 --> 00:29:53,000
Speaker 3: try and trying to ask for those things. Look at

606
00:29:53,000 --> 00:29:55,680
Speaker 3: your super trying to make sure that you're invested in

607
00:29:56,240 --> 00:29:58,640
Speaker 3: the right fund. So it's really all about making yourself

608
00:29:58,680 --> 00:30:00,440
Speaker 3: more literate to build your wealth.

609
00:30:00,720 --> 00:30:03,680
Speaker 1: Yeah, I think that's I'm not here to plug game,

610
00:30:03,960 --> 00:30:07,600
Speaker 1: but that's that's that's the thing. Like you made a

611
00:30:07,720 --> 00:30:10,160
Speaker 1: very good point. Australians just can't sit back and way

612
00:30:10,200 --> 00:30:11,560
Speaker 1: for someone else's soult forum.

613
00:30:11,840 --> 00:30:12,600
Speaker 2: No one's going to do it.

614
00:30:12,640 --> 00:30:15,000
Speaker 1: You've got to educate yourself. Yeah, so does a MP

615
00:30:16,680 --> 00:30:19,520
Speaker 1: your whole group? Do you do publications, et cetera? The

616
00:30:19,560 --> 00:30:20,560
Speaker 1: puplic and access is.

617
00:30:20,480 --> 00:30:21,720
Speaker 2: The stuff that absolutely we do.

618
00:30:21,800 --> 00:30:25,480
Speaker 3: Yeah, our team, the economics team, Shane Olvera, me Boy

619
00:30:25,560 --> 00:30:30,000
Speaker 3: and myself, we publish a weekly report, multiple reports a week.

620
00:30:30,240 --> 00:30:32,920
Speaker 3: We we have a podcast channel that people can listen to.

621
00:30:33,240 --> 00:30:35,320
Speaker 1: What's where? Where to? Where do people access this stuff?

622
00:30:36,000 --> 00:30:37,320
Speaker 2: On normal place?

623
00:30:37,360 --> 00:30:40,160
Speaker 3: You can access your podcasts. We're called Simplifying Investing.

624
00:30:40,000 --> 00:30:41,920
Speaker 1: Simplify and Investing. That's I guess.

625
00:30:41,920 --> 00:30:46,400
Speaker 3: It's on Spotify and Spotify, Apple Podcasts, YouTube, or you

626
00:30:46,440 --> 00:30:50,880
Speaker 3: can follow Econo Sights, which is our economics channel on Instagram.

627
00:30:51,600 --> 00:30:53,960
Speaker 1: Econo sites, sites, dot com dot you.

628
00:30:54,440 --> 00:30:57,400
Speaker 3: That Econo Sights is our tag for all the social

629
00:30:57,400 --> 00:31:00,360
Speaker 3: media stuff. So we do short form videos trying to

630
00:31:00,400 --> 00:31:02,960
Speaker 3: make people more financial literate, talking about the data, talking

631
00:31:03,000 --> 00:31:06,640
Speaker 3: about politics, basically a fun way of relating economics to

632
00:31:06,680 --> 00:31:09,640
Speaker 3: the everyday person so that people understand actually what's going

633
00:31:09,680 --> 00:31:12,520
Speaker 3: on and what it actually means for their own wealth.

634
00:31:12,640 --> 00:31:14,360
Speaker 1: And I think that's the whole purpose of my show

635
00:31:14,440 --> 00:31:18,120
Speaker 1: is to introduce people like you to the audience. But

636
00:31:18,560 --> 00:31:20,520
Speaker 1: that audience is up to you to do something about it.

637
00:31:20,600 --> 00:31:23,000
Speaker 1: So you're not going to learn about everything now sitting

638
00:31:23,000 --> 00:31:25,840
Speaker 1: in this room. Just this really an introduction to Deanerlan

639
00:31:26,000 --> 00:31:27,520
Speaker 1: and the team. By the way, shanelv was one of

640
00:31:27,520 --> 00:31:30,680
Speaker 1: the best. So you've got to do something about it,

641
00:31:30,760 --> 00:31:32,160
Speaker 1: and you've got to go That's why I'm asking you

642
00:31:32,200 --> 00:31:34,280
Speaker 1: where can they go on access sisting because people don't know.

643
00:31:34,360 --> 00:31:36,520
Speaker 1: I wouldn't know. I mean I read stuff all the time,

644
00:31:36,560 --> 00:31:38,560
Speaker 1: but I didn't know that you had this KND of

645
00:31:38,600 --> 00:31:42,760
Speaker 1: sights hashtag. I didn't know that you had I didn't

646
00:31:42,760 --> 00:31:45,040
Speaker 1: realize you had a social media environment at all.

647
00:31:46,600 --> 00:31:48,280
Speaker 2: So that's how your team found me.

648
00:31:48,520 --> 00:31:52,040
Speaker 1: Yeah, my team, My team found you. Yeah, but that's

649
00:31:52,040 --> 00:31:54,760
Speaker 1: the point. My team, that's your job used to hunt

650
00:31:54,760 --> 00:31:56,520
Speaker 1: for people like you and bring him to the show,

651
00:31:56,880 --> 00:32:00,200
Speaker 1: and our job is to take you and you push

652
00:32:00,200 --> 00:32:01,840
Speaker 1: you out in front of everybody. But at the same time,

653
00:32:01,880 --> 00:32:04,080
Speaker 1: people need to know how to access you. Guys. You know,

654
00:32:03,880 --> 00:32:05,680
Speaker 1: you might not be on the show again front of

655
00:32:05,680 --> 00:32:07,440
Speaker 1: the Tall month so and you had other stuff to do.

656
00:32:07,520 --> 00:32:10,560
Speaker 1: But what's important is that people and what's interesting here

657
00:32:10,600 --> 00:32:13,000
Speaker 1: is that you're not selling them anything. You're not trying

658
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Speaker 1: to sell them anything from a I mean, you're not

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Speaker 1: a salesperson. You're in the policy division of an organization.

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Speaker 1: It just talks about the economy and that's really important.

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Speaker 1: So Dean, I really appreciate you coming on. Thanks very

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Speaker 1: much doing that. And I think it's important that Australians

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Speaker 1: know that. And it's good that you're female too, that

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Speaker 1: we have economists here who want to share with us

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Speaker 1: their views on how to improve their lot, and having

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Speaker 1: a female for a change, we haven't had one on

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Speaker 1: talking about economics for a long time other than from Westpac.

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Speaker 1: I appreciate a lot.

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Speaker 2: Thank you, thank you,