1 00:00:05,960 --> 00:00:07,840 Speaker 1: Welcome to Fear and Greed Q and A where we 2 00:00:07,880 --> 00:00:11,840 Speaker 1: ask and answer questions about business, investing, economic politics and more. 3 00:00:11,880 --> 00:00:13,920 Speaker 1: I'm Sean Almer, and every Monday we take a look 4 00:00:13,960 --> 00:00:17,400 Speaker 1: at the week ahead for the economy. Sharrell Murphy is 5 00:00:17,480 --> 00:00:21,600 Speaker 1: ewy's chief economist for Oceania. Sharrel, good morning. 6 00:00:21,360 --> 00:00:24,280 Speaker 2: Good morning, Stephen. Couldculos is off on holiday. 7 00:00:24,320 --> 00:00:27,040 Speaker 1: I believe he is. He's got six weeks off. Imagine 8 00:00:27,040 --> 00:00:29,640 Speaker 1: that the cook going away for six weeks and we 9 00:00:29,720 --> 00:00:32,000 Speaker 1: appreciate you steeping in and filling in for him. 10 00:00:32,280 --> 00:00:33,840 Speaker 2: Thank you, go ahead. 11 00:00:35,960 --> 00:00:40,120 Speaker 1: I'm sure you'll tell him too, I hope before we look. 12 00:00:40,159 --> 00:00:42,279 Speaker 1: But the week ahead, which not a lot going on 13 00:00:42,800 --> 00:00:45,920 Speaker 1: quite the last seven days though, with interest rates, with 14 00:00:46,040 --> 00:00:48,160 Speaker 1: commentary from the Reserve Bank, not just after the interest 15 00:00:48,240 --> 00:00:53,040 Speaker 1: rate decision, but the financial Stability report. What I mean, 16 00:00:53,120 --> 00:00:56,200 Speaker 1: where do we stand in the economy at the moment. 17 00:00:56,800 --> 00:00:58,600 Speaker 1: We seem to be a little bit more worried about 18 00:00:58,600 --> 00:01:00,440 Speaker 1: inflation than perhaps we were a week ago. 19 00:01:00,960 --> 00:01:03,760 Speaker 2: Yeah, I think that's probably the main takeaway of the week. 20 00:01:04,319 --> 00:01:06,760 Speaker 2: The commentary from the Reserve Bank following their meeting, at 21 00:01:06,760 --> 00:01:08,760 Speaker 2: which of course, they decided to leave the cash right 22 00:01:08,760 --> 00:01:12,679 Speaker 2: at three point six percent was that they think that 23 00:01:12,800 --> 00:01:15,200 Speaker 2: inflation is probably running a little bit ahead of what 24 00:01:15,360 --> 00:01:18,240 Speaker 2: they where they thought it would be in the September quarter, 25 00:01:18,840 --> 00:01:22,920 Speaker 2: a couple of little indicators giving them that impression. That 26 00:01:23,200 --> 00:01:27,240 Speaker 2: of course caused markets to go, whoa, maybe there won't 27 00:01:27,240 --> 00:01:30,640 Speaker 2: be a rate cut in November as we thought, and 28 00:01:30,680 --> 00:01:33,959 Speaker 2: a few economists across the market changing their call as well, 29 00:01:34,000 --> 00:01:36,880 Speaker 2: pushing a rate cut all the way into next year 30 00:01:36,880 --> 00:01:40,960 Speaker 2: as opposed to having it in either November or December. So, yeah, 31 00:01:41,000 --> 00:01:44,000 Speaker 2: it was quite meaningful from that point of view. Certainly 32 00:01:44,360 --> 00:01:47,240 Speaker 2: there is maybe a little bit of reason for some 33 00:01:48,160 --> 00:01:50,920 Speaker 2: caution there, but as always, you know, it's pretty much 34 00:01:50,920 --> 00:01:53,360 Speaker 2: at the margin and the Reserve Bank, I think, are 35 00:01:53,240 --> 00:01:54,639 Speaker 2: playing it pretty safe. 36 00:01:54,880 --> 00:01:57,080 Speaker 1: Okay. The other thing I thought was interesting was a 37 00:01:57,160 --> 00:02:00,960 Speaker 1: talk about cost of living last week as well, and 38 00:02:01,040 --> 00:02:03,440 Speaker 1: broadly the bank said that, you know, lower interest rates, 39 00:02:03,480 --> 00:02:06,960 Speaker 1: stage three tax cuts they were kind of kicking in, 40 00:02:07,360 --> 00:02:09,400 Speaker 1: and the worst of the cost of living is probably 41 00:02:09,400 --> 00:02:10,000 Speaker 1: behind us. 42 00:02:10,639 --> 00:02:12,760 Speaker 2: Yeah, so it's probably not going to get worse in 43 00:02:12,800 --> 00:02:16,760 Speaker 2: the sense that we're not having inflation rising above wages, 44 00:02:16,800 --> 00:02:19,440 Speaker 2: and so this a real wage story doesn't get worse. 45 00:02:19,480 --> 00:02:22,640 Speaker 2: In fact, it's definitely getting better. And you put that 46 00:02:22,720 --> 00:02:25,040 Speaker 2: together with the tax cuts, you know, the interest rate 47 00:02:25,080 --> 00:02:28,040 Speaker 2: cuts that we've already had so far, and the sort 48 00:02:28,040 --> 00:02:31,440 Speaker 2: of discretion or the dollars sitting and people's pockets are 49 00:02:31,440 --> 00:02:34,520 Speaker 2: probably going up just that little bit, and otherwise it's 50 00:02:34,520 --> 00:02:39,040 Speaker 2: going to feel a little easier for consumers on average 51 00:02:39,280 --> 00:02:42,280 Speaker 2: over the next twelve months compared to the past twelve months. 52 00:02:42,919 --> 00:02:46,120 Speaker 2: I don't think that necessarily means that things are really strong, though, 53 00:02:46,480 --> 00:02:48,280 Speaker 2: and we definitely got a sense of that in the 54 00:02:48,320 --> 00:02:52,400 Speaker 2: household spending numbers this week. They showed just one point 55 00:02:52,520 --> 00:02:54,600 Speaker 2: one percent increase in the month of August, so that's 56 00:02:54,639 --> 00:02:57,360 Speaker 2: about five percent higher of the year. It's not a 57 00:02:57,440 --> 00:03:00,400 Speaker 2: bad result, but it's neither is that a really good result, 58 00:03:01,480 --> 00:03:04,600 Speaker 2: And so I'd say we're kind of doing okay. Consumers 59 00:03:04,639 --> 00:03:07,800 Speaker 2: are slightly happier than they were before, but you wouldn't 60 00:03:07,840 --> 00:03:10,160 Speaker 2: be out there celebrating either, Okay. 61 00:03:10,400 --> 00:03:13,920 Speaker 1: So as we come into the week, the economy, I mean, 62 00:03:13,919 --> 00:03:16,919 Speaker 1: it's not exactly great, but it's not bad. I mean, 63 00:03:17,040 --> 00:03:20,080 Speaker 1: if you could pick where you wanted your economy to be, 64 00:03:20,440 --> 00:03:23,320 Speaker 1: inflation in that two to three percent target, four point 65 00:03:23,320 --> 00:03:26,680 Speaker 1: two percent, unemployment growth is a bit slow definitely, but 66 00:03:27,040 --> 00:03:28,560 Speaker 1: it's not a disaster only stretch. 67 00:03:28,880 --> 00:03:31,240 Speaker 2: No, that's right, it's we're sort of in this kind 68 00:03:31,240 --> 00:03:33,760 Speaker 2: of meek mild in some ways. You know that we 69 00:03:33,840 --> 00:03:36,320 Speaker 2: are getting I think the economy is genuinely getting a 70 00:03:36,320 --> 00:03:38,560 Speaker 2: little stronger. You know, we've got the consumer picking up. 71 00:03:38,600 --> 00:03:41,040 Speaker 2: That's really important, as you know, like half of GDP 72 00:03:41,240 --> 00:03:44,520 Speaker 2: is the consumer, and there's there's reason to expect that 73 00:03:44,520 --> 00:03:49,160 Speaker 2: that optimism will continue, albeit not strongly. The you know, 74 00:03:49,280 --> 00:03:52,200 Speaker 2: has prices picked up again as well in September, which 75 00:03:52,280 --> 00:03:55,120 Speaker 2: is often a sign of consumers feeling a little more 76 00:03:56,240 --> 00:03:59,000 Speaker 2: willing to sort of go out and spend. I think 77 00:03:59,040 --> 00:04:01,600 Speaker 2: that's sort of the weakest point in the economy though 78 00:04:01,600 --> 00:04:04,280 Speaker 2: at the moment is the business sector, which really is 79 00:04:04,320 --> 00:04:07,200 Speaker 2: not spending much at all. In fact, if you look 80 00:04:07,240 --> 00:04:09,960 Speaker 2: at business investment as a share of GDP, it's not 81 00:04:10,080 --> 00:04:13,280 Speaker 2: really far above the levels of recession. So in the 82 00:04:13,480 --> 00:04:16,120 Speaker 2: sort of low point of COVID or even the low 83 00:04:16,120 --> 00:04:19,240 Speaker 2: point of the nineteen nineties, we're not really that much better. 84 00:04:19,960 --> 00:04:22,680 Speaker 2: And so to some extent, where we'd really like to 85 00:04:22,680 --> 00:04:25,919 Speaker 2: see the improvement is more in that business sector, because 86 00:04:25,960 --> 00:04:29,520 Speaker 2: that's generally where you get momentum for future growth as well, 87 00:04:29,600 --> 00:04:32,960 Speaker 2: so that that would be nice to see something better 88 00:04:33,000 --> 00:04:34,039 Speaker 2: going on there. 89 00:04:34,839 --> 00:04:37,599 Speaker 1: That introduces the idea of productivity, something that you've written 90 00:04:37,600 --> 00:04:40,320 Speaker 1: about recently, and the fact that we're just not getting 91 00:04:40,400 --> 00:04:44,120 Speaker 1: enough business investment to improve productivity, which I think according 92 00:04:44,120 --> 00:04:48,440 Speaker 1: to the OECD, we're kind of the second worst developed 93 00:04:48,480 --> 00:04:50,680 Speaker 1: economy in the world at the moment. How do we 94 00:04:50,720 --> 00:04:51,160 Speaker 1: fix it? 95 00:04:52,680 --> 00:04:59,159 Speaker 2: Oh, Sean, you asked the big question. So I think 96 00:04:59,240 --> 00:05:02,000 Speaker 2: we fixed it with a multiple measures. And this is exactly, 97 00:05:02,120 --> 00:05:03,800 Speaker 2: of course what the government's trying to do with the 98 00:05:03,800 --> 00:05:07,719 Speaker 2: Productivity Commission inquiries into the five sort of pillars of 99 00:05:07,800 --> 00:05:12,200 Speaker 2: potential improvement in productivity, and also of course the suggestions 100 00:05:12,240 --> 00:05:14,279 Speaker 2: from their own table, of which there were many which 101 00:05:14,279 --> 00:05:17,000 Speaker 2: I think would improve productivity. But I think that one 102 00:05:17,040 --> 00:05:19,000 Speaker 2: of the main things we need to do is, as 103 00:05:19,040 --> 00:05:22,560 Speaker 2: I say, get that business investment spending again, because if 104 00:05:22,600 --> 00:05:25,920 Speaker 2: businesses are not kind of believing that there's something worth 105 00:05:26,000 --> 00:05:29,360 Speaker 2: investing in, they're not kind of getting involved in innovative spending, 106 00:05:29,400 --> 00:05:32,200 Speaker 2: and they're not doing R and D spending, then we're 107 00:05:32,240 --> 00:05:36,000 Speaker 2: really going to get stuck. I sort of compare the 108 00:05:36,040 --> 00:05:38,000 Speaker 2: economy almost like to a sort of rail tracks on 109 00:05:38,040 --> 00:05:40,120 Speaker 2: a bit of an upward tilt to it's only when 110 00:05:40,160 --> 00:05:43,040 Speaker 2: you can get productivity moving up that the sort of 111 00:05:43,120 --> 00:05:45,359 Speaker 2: high side of that rail can move up and you 112 00:05:45,400 --> 00:05:49,320 Speaker 2: can actually have some more capacity to expand. And at 113 00:05:49,320 --> 00:05:51,520 Speaker 2: the moment, you know, unfortunately we're a bit stuck in 114 00:05:51,560 --> 00:05:56,560 Speaker 2: this quite narrow narrow path. So we'd love to see 115 00:05:56,680 --> 00:05:59,080 Speaker 2: more spending in the business sector, which could come from 116 00:05:59,120 --> 00:06:02,200 Speaker 2: a number of things. Act Forum there I say it. 117 00:06:02,320 --> 00:06:05,800 Speaker 2: You know, we'd love to see some easier conditions there, 118 00:06:05,839 --> 00:06:09,400 Speaker 2: particularly across the corporate sector because we do have a 119 00:06:09,520 --> 00:06:12,599 Speaker 2: very uncompetitive tax rate. We'd like to see some of 120 00:06:12,600 --> 00:06:15,080 Speaker 2: the R and D tax concessions modernized a little bit 121 00:06:15,120 --> 00:06:18,000 Speaker 2: to reflect some of the AI tape spending in the 122 00:06:18,040 --> 00:06:21,120 Speaker 2: software spending that's going on at the moment. So there 123 00:06:21,160 --> 00:06:24,560 Speaker 2: is definitely moves that can be made out removing the 124 00:06:24,640 --> 00:06:28,599 Speaker 2: sort of stringent regulation across the economy. That's also something 125 00:06:28,640 --> 00:06:32,880 Speaker 2: that could improve productivity. So there's lots of little levers 126 00:06:32,880 --> 00:06:36,320 Speaker 2: we could call probably no one big one which is 127 00:06:36,360 --> 00:06:38,840 Speaker 2: going to make a difference, and so it is really 128 00:06:38,839 --> 00:06:42,200 Speaker 2: a sort of multifaceted problem and set of solutions. 129 00:06:42,839 --> 00:06:45,000 Speaker 1: Okay, looking at the next five days, not a lot 130 00:06:45,040 --> 00:06:48,120 Speaker 1: of data around, although Michelle Bullock is is she in 131 00:06:48,200 --> 00:06:51,440 Speaker 1: front of a parliamentary committee maybe later in the week, Is. 132 00:06:51,440 --> 00:06:55,599 Speaker 2: That right, Yes, the Senate Economics Legislation Committee, also with 133 00:06:55,680 --> 00:06:58,680 Speaker 2: Assistant Governor Chris Kent, so that's later in the week. 134 00:06:59,360 --> 00:07:03,400 Speaker 2: We'll also get the monthly Business Turnover Indicator for August 135 00:07:03,800 --> 00:07:06,080 Speaker 2: at the end of next week. That tends to offer 136 00:07:06,160 --> 00:07:08,880 Speaker 2: us sort of like sector bisector insights into where economic 137 00:07:08,960 --> 00:07:13,680 Speaker 2: momentum is in the economy. That has been positive. You know, 138 00:07:13,680 --> 00:07:17,320 Speaker 2: we've certainly seen a rise across the industry of late 139 00:07:18,200 --> 00:07:23,000 Speaker 2: again not especially strong though, so you know, moving at 140 00:07:23,040 --> 00:07:26,960 Speaker 2: a reasonable but not strong pace. Interestingly, one of the 141 00:07:27,000 --> 00:07:30,200 Speaker 2: biggest or fastest moving sectors in the economy of the 142 00:07:30,240 --> 00:07:33,720 Speaker 2: last twelve months has been utility, so electricity, gas, water, 143 00:07:34,160 --> 00:07:36,000 Speaker 2: west services, just where we need it to be. 144 00:07:37,400 --> 00:07:39,720 Speaker 1: Fantastic, Cherl, thank you for talking to Fear and Greed 145 00:07:39,800 --> 00:07:40,200 Speaker 1: Q and DA. 146 00:07:40,680 --> 00:07:42,040 Speaker 2: Thank you Sean Lovely to be here. 147 00:07:42,240 --> 00:07:44,520 Speaker 1: That was e y Chief Economist Cherrelle Murphy. I'm sure 148 00:07:44,600 --> 00:07:47,680 Speaker 1: at this is fear and greed at Q and DA.