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Speaker 1: Do you welcome again to the podcast. Mate. Here we

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Speaker 1: are sitting here on a Friday afternoon, beautiful sunny day outside,

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Speaker 1: and we're inside talking about the economy.

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Speaker 2: We're in here talking about the economy when it's sunny.

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Speaker 2: Spring is here. I'm not sure whether spring is here

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Speaker 2: for the economy though, because we're still going through this.

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Speaker 1: Are we in the winter of economics?

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Speaker 2: Well, I hope we're in the low point of economics.

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Speaker 2: I'm not quite sure yet, because the economy is still weak,

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Speaker 2: no question.

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Speaker 1: Well, let's just talk about that first. What do you

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Speaker 1: make by economy? What are the markers?

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Speaker 2: Okay, there are a range of markers, and some of

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Speaker 2: them slightly overlap GDP Gross domestic product, The whole output

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Speaker 2: of goods and services in the economy only raised by

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Speaker 2: zero point two percent in the June quarter. That's really weak.

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Speaker 1: So what what would you like to see rise by normally?

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Speaker 2: Normally we get aero point seven or a point eight.

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Speaker 1: Which means the annual run rate is about two and

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Speaker 1: a half to three after three.

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Speaker 2: Our angual run rates one currently. So it's saying that

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Speaker 2: the interest rate hikes that have been delivered from the

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Speaker 2: Reserve Bank since May twenty twenty two are working.

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Speaker 1: Yeah, so you're not surprised.

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Speaker 2: Not really. No, the rate hikes have done their job

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Speaker 2: in slowing the economy down.

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Speaker 1: Let's just stop on the GDP for a second, if

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Speaker 1: you don't mind. The GDP is a sum of a

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Speaker 1: number of outputs. So when you say that it's not

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Speaker 1: too bad, that's at point two, which is a run

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Speaker 1: rate of one. You know, if you sort of want

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Speaker 1: to multiply point two by four, it's sort of, you know,

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Speaker 1: within the range of one percent prendum growth. But which

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Speaker 1: parts of that DUTYP are growing and which parts are not?

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Speaker 2: Oh, you've just opened up the can of worms. Because

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Speaker 2: the weakness, the unambiguous weakness, is us consumers, the household

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Speaker 2: consumption they call it, and that is the amount of

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Speaker 2: money that we can spend in the retail sector, the

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Speaker 2: amount of money we spend on insurance premiums, on dwelling rent.

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Speaker 2: It's the amount of money that on a normal day,

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Speaker 2: everybody listening to this will say, Oh, I go and

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Speaker 2: spend I buy a coffee, I pay my car regio,

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Speaker 2: I do the grocery shopping. All of the things that

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Speaker 2: we buy has fallen in per capita terms for six

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Speaker 2: consecutive quarters. It's never done that before, and that's telling

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Speaker 2: us that people are on what we call discretionary items,

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Speaker 2: things that we like to have but don't have to have,

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Speaker 2: things like holidays, for example. Things like expensive items, we

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Speaker 2: tend not to spend them when the economy's in trouble

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Speaker 2: or our personal finances are in trouble. That's where the

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Speaker 2: weakness has been the strength is and Treasurer Jim Charmers

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Speaker 2: has highlighted this. The reason why we didn't get negative

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Speaker 2: GDP and a genuine recession is the government spending lots

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Speaker 2: of money. It's hiring lots of people.

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Speaker 1: All gunmers do, by the way, you do not just federal.

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Speaker 2: Again this and this is not. This is not a

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Speaker 2: criticism because they're spending the money. And if you took

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Speaker 2: a step back to think, well, actually they're spending it

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Speaker 2: on age care nurses in age care facilities. They're spending

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Speaker 2: it on teachers so educating our kids. They're spending it

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Speaker 2: on infrastructure like the wonderful rail system that just opened

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Speaker 2: up here in Sydney. You know that's government spending and

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Speaker 2: it's not. And of course there's some ways you just

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Speaker 2: have to look at money on the con games inficiency.

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Speaker 2: There's a lot of inefficiencies, but some of it's actually good.

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Speaker 2: You know, I want my older Australians to be looked

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Speaker 2: after an age. I want them to be fed crap

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Speaker 2: food and not looked after. No, we're a good country.

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Speaker 2: We need to spend a bit of money. I'm not

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Speaker 2: far behind, so, you know, so some of these things

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Speaker 2: are good, and even things like defense expenditure. You know,

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Speaker 2: there's stuff going on in the geo political space around

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Speaker 2: the world. We've just got to be very cautious. So

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Speaker 2: the question is what would you cut if you wanted

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Speaker 2: to cut those things. It's pretty hard to find something.

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Speaker 2: But at the end of the day, the expenditure on

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Speaker 2: those things is money being put into the economy by

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Speaker 2: the government sector, and it's the one reason the one

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Speaker 2: growth area within our GDP numbers. So household consumption week,

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Speaker 2: government spending strong. Business investment was broadly flat, so it

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Speaker 2: was neither here nor there. It was pretty neutral. And

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Speaker 2: then our net exports we're tending to start to weaken

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Speaker 2: because the Chinese economy is slowing down. They're buying less

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Speaker 2: of our raw materials iron or in particular, and so

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Speaker 2: that's where the weakness was. So we look at where

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Speaker 2: the most severe weakness was. It was in household consumption expended,

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Speaker 2: because that's over half of GDP. It's actually nearly two

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Speaker 2: thirds of GDP.

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Speaker 1: So if we took out the strong government expenditure in

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Speaker 1: the GDP number, we would be cooked.

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Speaker 2: We'd be cooked me a bit. I think it would

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Speaker 2: be about minus point three instead of plus point two.

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Speaker 1: So that's getting into a proper recession.

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Speaker 2: Feeding them recession. Which and so in a funny way,

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Speaker 2: the people who have got the jobs in the AHKF

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Speaker 2: sill is in education and health and all these other things.

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Speaker 2: They're the ones that are keeping the economy with its

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Speaker 2: head just above water. The other one that are sort

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Speaker 2: of getting a pay increase, and they're the ones that

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Speaker 2: are sort of offsetting the weakness that we're seeing in

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Speaker 2: private sector demand.

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Speaker 1: And if I took out or if we took out

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Speaker 1: the immigration build so you know, normally, so our population

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Speaker 1: growth organically that is people having kids, for example, I

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Speaker 1: think was about one hundred and twenty thousand last it's

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Speaker 1: a bit lower than normal, that's a bit lower, so

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Speaker 1: it runs about about one hundred and sixty thousand but it's.

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Speaker 2: A bit lower than normal.

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Speaker 1: But if you look at the immigration numbers, are were

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Speaker 1: quite high and they only come out of a couple

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Speaker 1: of days ago. And so if you took that out,

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Speaker 1: the immigration, the extra immigration that we are seeing currently

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Speaker 1: relative to what we would ordinarily have, and it's around

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Speaker 1: about probably probably three hundred more than we would normally

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Speaker 1: get in a twel month period. And if you took

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Speaker 1: out the government spending, we probably would be in a

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Speaker 1: fairly solid recession and.

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Speaker 2: Even a deeper recession. Yes, the population growth through immigrant

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Speaker 2: in quarterly terms, it's about zero point five or point six.

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Speaker 2: In terms of population growth, normally it's about point two, right,

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Speaker 2: so if it's back to point two, you're losing point three.

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Speaker 2: Let's be generous in our assessment, so on that score

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Speaker 2: would be at minus point one. So the fact that

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Speaker 2: we've got this very high level of immigration, immigrants do

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Speaker 2: spend money. They need a house, they need to eat,

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Speaker 2: they need to get a uber, they need to they

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Speaker 2: spend money and they work too, so they're actually adding

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Speaker 2: to the economy. And that's another reason. The two reasons

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Speaker 2: why we are not in in a deeper downturn, immigration

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Speaker 2: and public sector spending and both of those things can't

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Speaker 2: go on forever.

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Speaker 1: No, well, especially politically. So okay, so you in terms

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Speaker 1: of your assessment of the economy, GDP is sort of

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Speaker 1: going okay, but is responding the way you would expel

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Speaker 1: to respond given that we've had high interest rates for

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Speaker 1: quite a long time.

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Speaker 2: What else, it's weakening a lot o the markers, a

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Speaker 2: couple of other markers. We had the labor force numbers

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Speaker 2: just yesterday we had we're still getting really strong employment growth.

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Speaker 1: What is that?

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Speaker 2: Like?

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Speaker 1: I don't understand, Like, if the economy is sort of weak,

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Speaker 1: how are you still only at four point two unemployment?

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Speaker 1: Is there some some wrong with a calculation or what

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Speaker 1: there might be?

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Speaker 2: But interestingly they're still going up because of the population growth.

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Speaker 2: But we have had an increase in the unemployment rate

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Speaker 2: from where we were a year ago. Yeah, month on month,

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Speaker 2: These figures are all volatile. They're just a survey done

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Speaker 2: by the Bureau of Statistics. A year ago the unemployment

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Speaker 2: rate was three point five percent. So we're now at

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Speaker 2: four point two. So it has crept up. You know,

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Speaker 2: It's been a few ups and a few downs, but

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Speaker 2: generally there's it's.

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Speaker 1: Zigzagging upwards, so the trends up.

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Speaker 2: So the trend is up, there's no doubt about that.

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Speaker 2: And when we look at things like job ads, job vacancies,

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Speaker 2: they're all tilting down and saying that.

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Speaker 1: The ages mate they had, it hasn't really reflected yet.

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Speaker 2: I mean it has a bit. No, it hasn't, not much,

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Speaker 2: not much, one thing. That one thing when the RBA governor,

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Speaker 2: so don't take my word for it, will take Michelle Bullock,

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Speaker 2: the RBA Governor, was asked this very question at her

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Speaker 2: last press conference, and I'm sure on Tuesday at the

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Speaker 2: next board meeting she'll be asked about it again. She'll

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Speaker 2: be asked why is the labor market so resilient? Her

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Speaker 2: auntswer was actually really illustrated. I think it's something that

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Speaker 2: we should consider and everybody listening to just.

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Speaker 1: Talk about it.

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Speaker 2: Then it was called the economic term is labor hoarding.

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Speaker 2: So it sounds like a strange thing for bosses to do,

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Speaker 2: but it's a phenomenon that when the economy slows down.

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Speaker 2: If you're a business owner, your business is slowing down

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Speaker 2: as the economy weakens, You've got ten staff, for example,

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Speaker 2: and you think, oh, gee, you know, I don't really

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Speaker 2: need these ten staff anymore. But I'm not going to

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Speaker 2: sack them yet because I'm not sure whether this downturn

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Speaker 2: is only temporary. And of course it costs a lot

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Speaker 2: to hire and fire people, so I'll just ask them

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Speaker 2: to work a few less hours, you know, no overtime, guys.

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Speaker 2: You know, it can just sort of take take you around.

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Speaker 2: You'll leave now, rise, no pay rise, just the things happens.

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Speaker 2: So the firms hold on to their labor and only

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Speaker 2: sack people. Sounds very harsh thing to say, and the

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Speaker 2: unemployment then only goes up when they say, look, I

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Speaker 2: can't afford to keep you anymore. I've got to sack

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Speaker 2: one or two people.

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Speaker 1: When do you get that? How do we know when

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Speaker 1: we're getting close to that point whereby we no longer

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Speaker 1: hold our labor.

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Speaker 2: It's when there's a clear hit to company profits and

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Speaker 2: company profits because mining is not a very big employer

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Speaker 2: of people. It's a very volatile part of the asx

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Speaker 2: the stock market, company profits are sort of trending down

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Speaker 2: a little bit because of the weakness in the economy.

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Speaker 2: Of course, so firms are not making as much money

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Speaker 2: as they were previously. If we were to get a

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Speaker 2: further down draft in the next quarter or two, you'd

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Speaker 2: expect to see the unemployment rate to go up. So

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Speaker 2: the Reserve Bank is forecasting un imployment rate to get

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Speaker 2: to four point four percent in the next couple of quarters.

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Speaker 2: From four point two. It's huge. It's not we're almost there.

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Speaker 2: It's almost around area you'd say, yeah. Economics, the questions

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Speaker 2: will be will that be the peak? And a lot

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Speaker 2: of people out there. I look at all the market

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Speaker 2: economists that you know, very good people that the banks employ.

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Speaker 2: I think without exception that all sayings is going to

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Speaker 2: go higher than four point four.

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Speaker 1: The general views and two point.

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Speaker 2: Seventy five, five, five and a quarter. As soon as

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Speaker 2: we get towards five, let alone hit five, let alone

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Speaker 2: exceed five. Then that's when the Reserve Bank has a

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Speaker 2: real problem. That's when that's where we start getting serious

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Speaker 2: inter straight cuts. But we're not there yet. And I

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Speaker 2: think that how.

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Speaker 1: Many months of since it is? How many months is

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Speaker 1: it since our last rate rise?

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Speaker 2: It was in November last year, so it's up to ten.

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Speaker 1: Months, so we've had ten months of these.

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Speaker 2: Of no changing rates. That November they hiked them.

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Speaker 1: For the unemployment number still only four point two.

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Speaker 2: Correct, Yes, correct. And the other thing that's sort.

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Speaker 1: Of perplexing me. It is perplexing because because we are

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Speaker 1: seeing the household consumption numbers come off quite dramatically, right.

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Speaker 2: And tail, which is a big employer of people, said,

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Speaker 2: mining doesn't employ a lot of people mining boom, and

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Speaker 2: a bus doesn't employ that many people. Retail, which is

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Speaker 2: really labor intensive. Retail includes your restaurants and cafes, the barista,

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Speaker 2: the chef, the dish, pig washes, a lot of people

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Speaker 2: involved in that. That's where the weakness is beening.

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Speaker 1: And it's quite a big weakness. So I don't understand

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Speaker 1: why if they're a big employer, why are we still

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Speaker 1: at four point two and we had big and we've

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Speaker 1: had big immigration as well.

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Speaker 2: Mark, I'll come back to what we were saying a

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Speaker 2: couple of minutes ago. People are moving into age care,

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Speaker 2: right care education that if you look at.

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Speaker 1: The government's employing them, the government's employing them.

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Speaker 2: Correct. So, in fact, I think it might have been

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Speaker 2: Alex Joina, the fellow from IFM Investors Ye really good

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Speaker 2: econmis He pointed this out, so I'll give him the credit.

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Speaker 2: He pointed out that in the labor force release. What

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Speaker 2: was termed market based employment, which is basically private sector employment,

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Speaker 2: has only just crept up a little bit over the

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Speaker 2: last couple of years. So that's if that was the

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Speaker 2: only labor market indicator of the unemployt rate would be

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Speaker 2: at five percent already. Public sector employment, teachers, police, age care,

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Speaker 2: all those things that has been where I think I

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Speaker 2: don't want to misquote him, but my recollection is about

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Speaker 2: eighty percent of the new jobs that have been created

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Speaker 2: last year have been public sector. Normally, in normal times,

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Speaker 2: public sector creates about fifteen to twenty percent of all

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Speaker 2: the jobs that are created. So as the economy grows,

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Speaker 2: we do need a few more police, we do need

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Speaker 2: a few more teachers, fifteen to twenty percent. Now it's

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Speaker 2: eighty eight zero percent, and only twenty percent of the

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Speaker 2: jobs are coming from the private sector. And so yeah,

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Speaker 2: the public sector doesn't respond to interest rates at all.

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Speaker 2: It's the private sector that's get hits by interest rates.

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Speaker 2: So the reason why you're perplexed, and I'm perplexed about

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Speaker 2: a four point to unimploment rate is that the government

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Speaker 2: is employing the people who are leaving private sect employment

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Speaker 2: and the retail trade in particular.

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Speaker 1: So maybe doctor Jim is a really good economist.

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Speaker 2: Well he's meeting this is the really interesting in the

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Speaker 2: unusual way. But he's meeting his election promises. Okay, we

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Speaker 2: are all critical of governments when they break their promises.

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Speaker 2: Fair enough, you go to election, you promise something, and

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Speaker 2: you break your promise, you deserve a kick in the tail,

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Speaker 2: you know, fair enough. To their credit, they promised that

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Speaker 2: they would put a nurse in twenty four to seven

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Speaker 2: into every age care facility, and they have That was,

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Speaker 2: if I remember correctly, forty or fifty thousand nurses that

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Speaker 2: had to be employed to meet that objective. So they

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Speaker 2: met their promise. Education, indis or these other things which

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Speaker 2: employ a lot of people. They're really labor intensive. Is

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Speaker 2: where a lot of the other employments come too. So

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Speaker 2: the question is, and this comes back to where you know,

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Speaker 2: the size of governments getting bigger. The budget which was

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Speaker 2: in surplus for two years is now in deficit this

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Speaker 2: current year. If you want to get a balanced budget

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Speaker 2: and allow the rviator interest rates, because that's the other debate,

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Speaker 2: the only reason the RBA is not cutting like the Americans,

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Speaker 2: like the Europeans and the new Zealanders and the Canadians.

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Speaker 2: Is because government's spending so strong. What would you cut?

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Speaker 2: And I mean I mean that in a political sense.

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Speaker 2: Would you cut your defense spending? Maybe? Would you cut

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Speaker 2: your nursing and age cam maybe not? Would you hike taxes? Well,

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Speaker 2: nobody wants to pay more tax So this is where

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Speaker 2: the government's got a real dilemma politically explaining that to

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Speaker 2: the people. And that's why they're behind in the polls,

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Speaker 2: to be frank, because that they haven't explained it terribly well,

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Speaker 2: to be honest.

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Speaker 1: And do you think they're behind the polls because of

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Speaker 1: the economic performances? Behind the polls for other reasons. Look,

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Speaker 1: I know it's a little bit outside of our amber,

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Speaker 1: but but I like you what you got to say.

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Speaker 2: Look, I think it's the weak economy. People get pissed off.

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Speaker 1: To be blunt, it is number one on the surveys

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Speaker 1: of the moment cost of.

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Speaker 2: Living and people and we consumers are smart. Australian consumers

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Speaker 2: are really smart. They're really savvy. They know when their

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Speaker 2: bank accounts under financial stress, either through rent coming up

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Speaker 2: or so much money being sucked out of their bank

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Speaker 2: account every month on their mortgagey payments as interest rates

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Speaker 2: have gone up, and they can see their electricity bill,

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Speaker 2: they can see their insurance bill, they can see the

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Speaker 2: cost of their grocery bill, which you know, that high

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Speaker 2: inflation problem was very much about that sort of stuff.

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Speaker 2: And the government, the incumbent government of the day, John

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Speaker 2: Howard found this out a few years back, whatever various

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Speaker 2: governments have found found this out. When the economy is

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Speaker 2: in trouble, people blame the government, whether it's their fault

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Speaker 2: or not. And I'm not saying it is or it

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Speaker 2: isn't at this stage, but they blame the government. So

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Speaker 2: that's what you know, Albow and Jim Charmers have got

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Speaker 2: to deal with politically, because even if some it's their

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Speaker 2: fold or not their fold, or Jim's a miracle worker

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Speaker 2: because he's employing all these public servants or public employees.

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Speaker 2: People at the end of the day thinking, God, my

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Speaker 2: ingestrates are still really high. Oh when's this rate cut coming.

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Speaker 2: It hasn't come through it, Oh Rent, Oh my god,

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Speaker 2: I'm still paying so much. My insurance bill just came in,

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Speaker 2: giving me the a real pressure on my on my finances.

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Speaker 2: Oh the bloody government. I'm going to blame them.

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Speaker 1: But it's a bit of a catch twenty two though,

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Speaker 1: isn't it? Because the more you not you, but the

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Speaker 1: more the government looks after let's call it the public sector,

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Speaker 1: the public employees, and puts money into their hands and

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Speaker 1: they then go and spend in the economy, the more

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Speaker 1: they have to put interest rate or the longer we

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Speaker 1: have to hold interest rates high, because the economies tends

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Speaker 1: to perform better than it really is.

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Speaker 2: Yes, there's an element of truth in them.

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Speaker 1: And which one is it? Though? Which one?

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Speaker 2: Which one?

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Speaker 1: Which one? I've a behavioral economic sense? Which you're an economists?

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Speaker 1: Which one affects people more?

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Speaker 2: Is it?

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Speaker 1: I feel really good because I've got a good job

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Speaker 1: and I'm working, you know, I've got good hours, and

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Speaker 1: I'm getting good pay, and I'm one of the few

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Speaker 1: because I'm in the public sector. I've got wage increases

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Speaker 1: and one of the few people got a proper wage increase.

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Speaker 1: Is Is that prevail? Or does it? No? Hang on,

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Speaker 1: but my cost of living has gone crazy, and I've

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Speaker 1: got paying higher insurances on my house and my car

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Speaker 1: and everything else is going on around me, and everything

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Speaker 1: cost just my cost of living is much more expensive.

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Speaker 1: Which one prevails politically. I mean you're around the gates.

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Speaker 2: Living hits everybody, right, everybody, whether you're the public servant,

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Speaker 2: the tradey, the shop owner, the high for louton whatever

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Speaker 2: lawyer you know, earning truckloads of money, the cost of

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Speaker 2: living still affects you. One hundred percent of the population

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Speaker 2: pay more for their insurance and school fees and all

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Speaker 2: these other things.

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Speaker 1: And by the way, I you've got more access more to.

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Speaker 2: Correct it's only ten percent or twenty percent of the population.

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Speaker 2: I've got the the secure, safe job with the decent payerrise.

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Speaker 2: As you said, So the cost of living impacts one

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Speaker 2: hundred percent of the population. Pensioners, young folk, you know,

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Speaker 2: young people at UNI, you know, getting out of Yuni

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Speaker 2: with their hex stet and you know they're sort of thinking,

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Speaker 2: oh my god, you know rent's gone up there. It

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Speaker 2: hits everybody. Where's the job that you might get in

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Speaker 2: an age caresully with a nice fifteen to twenty five

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Speaker 2: percent pay increase. Great, there's not enough to offset the

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Speaker 2: fact that the cost of living hits everyone. And that's why, well,

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Speaker 2: apart from the Reserve Bank, the government's hoping and hoping

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Speaker 2: like hell that that inflation rate falls and falls quickly

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Speaker 2: because the election is only what seven eight months away now?

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Speaker 1: Yes, So just on that, do you think the RBA

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Speaker 1: of the government current government is sitting there thinking, hoping

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Speaker 1: to themselves we need a rate reduction, an RBA rate

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Speaker 1: reduction before the next election.

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Speaker 2: They're hoping for it, yes, and do they need it? Well, well,

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Speaker 2: Jim Charmers to his credits. I'll give him credit for this. He,

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Speaker 2: since he's been treasured, has always said the RBA is independent.

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Speaker 2: Now there's a debate whether he's saying the right thing,

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Speaker 2: but you know he does not like Keathing said I've

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Speaker 2: got the RBA in my pocket, and you know whether

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Speaker 2: that was true or not with Bernie Fraser back in

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Speaker 2: the day, who knows. But Jim has said the RBA

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Speaker 2: sets interest rates. They do their job. I do my

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Speaker 2: job on government taxing and spending. They do it on

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Speaker 2: interest rates. We talk as they should, you know, I

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Speaker 2: hope they do. Gosh. But at the end of the day,

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Speaker 2: the Labor Party would really love to see a couple

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Speaker 2: of rate cuts before the election because it'll be this

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Speaker 2: sort of situation where rate cuts people think, oh, thank goodness,

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Speaker 2: I've got a couple hundred bucks off my month of

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Speaker 2: the repayments, and of course the discussion amongst us the

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Speaker 2: connels will be, oh, it's probably more to come. So

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Speaker 2: that because there's not only going to be one or

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Speaker 2: two cuts when the cutting cycle starts, there will be

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Speaker 2: multiple rate cuts coming through. And so politically, you know,

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Speaker 2: they could sort of get on their on their high

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Speaker 2: horse and say, look, we had a problem. We had

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Speaker 2: a high interestrates, we had high inflation. But look we've

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Speaker 2: got through that problem, so vote for us.

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Speaker 1: Yes, Well we're not as bad a manager of you

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Speaker 1: as you Yes, And.

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Speaker 2: In fact we've got and we've got through this difficult time,

404
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Speaker 2: you know. And whether that winds botes, I don't know.

405
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Speaker 2: I'm not into that space, but you know, you can

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Speaker 2: sort of see what they're hoping to achieve.

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Speaker 1: So let's look at the apart from GDP and labor market,

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Speaker 1: which came out today. So GDP list.

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Speaker 2: Markets yesterday, yes, yes, So.

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Speaker 1: What are the markers, what are the bits of data?

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Speaker 1: Have we got that hanging around before the next meeting?

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Speaker 2: Inflation? Inflation? Inflation and come out?

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Speaker 1: When's the next one?

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Speaker 2: In fact, we got the next one out this Wednesday, the.

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Speaker 1: Month after she meets.

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Speaker 2: Correct after one, and the big one with the October

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Speaker 2: Board meeting will be the September Corter inflation numbers.

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Speaker 1: Now, so what's the talk now around Wednesday is inflation

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Speaker 1: umber supple.

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Speaker 2: Even this monthly one is really interesting because I get

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Speaker 2: all the banks research and I really value it. They're smart,

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Speaker 2: smart economists in the in the financial markets. But just

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Speaker 2: the two that I that struck me, we're both west

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Speaker 2: Pack and Commwalf banking economists their economics teams. They're saying

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Speaker 2: that the effect of this subsidy on electricity prices, that's

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Speaker 2: seventy five dollars a quarter that came through in our

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Speaker 2: bills this quarter.

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Speaker 1: I can post the last budget YEP.

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Speaker 2: Which was a government policy initiative and plain and simple

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Speaker 2: to these cost of living pressures, is going to see

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Speaker 2: electricity prices dropped sixteen percent in the in the month.

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Speaker 2: That will shave at least point five point six off

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Speaker 2: your monthly inflation.

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Speaker 1: Rate by for the month.

435
00:21:30,760 --> 00:21:33,800
Speaker 2: For the month only, we've got a point six dropping

436
00:21:33,800 --> 00:21:35,840
Speaker 2: out of the run rate from a year ago. So

437
00:21:35,960 --> 00:21:38,879
Speaker 2: the annual figure is going to be hold onto your

438
00:21:38,920 --> 00:21:40,360
Speaker 2: hat two point.

439
00:21:40,119 --> 00:21:44,440
Speaker 1: Seven ye three pot eight down market. That's that's the.

440
00:21:44,800 --> 00:21:48,400
Speaker 2: Heads distorted, but the headline will be distorted. It will

441
00:21:48,440 --> 00:21:53,240
Speaker 2: be distorted by that insurance. So the electricity subsidy that's

442
00:21:53,240 --> 00:21:56,440
Speaker 2: coming through, but that for the month, for the month,

443
00:21:56,680 --> 00:21:59,520
Speaker 2: and it'll continue for twelve months until that subsidy disappears

444
00:21:59,640 --> 00:22:02,120
Speaker 2: in one July twenty twenty five.

445
00:22:02,240 --> 00:22:04,199
Speaker 1: That's but that's not that's not a quarterly. That's not

446
00:22:04,200 --> 00:22:06,240
Speaker 1: going to contribute too much to the quarterly run rate.

447
00:22:06,800 --> 00:22:08,719
Speaker 2: It'll help, it'll help the it'll help drop the run

448
00:22:08,800 --> 00:22:11,520
Speaker 2: rate down to under three. We'll have a headline figure

449
00:22:11,560 --> 00:22:13,959
Speaker 2: under three. Now, the question is I think we discussed

450
00:22:14,000 --> 00:22:16,960
Speaker 2: this last time, Is that the RBA know that it's

451
00:22:16,960 --> 00:22:23,680
Speaker 2: a distortion and I'm I'm sixty forty on it. Yes,

452
00:22:23,720 --> 00:22:25,680
Speaker 2: it's a lower cost of living. It's a good thing

453
00:22:25,920 --> 00:22:29,399
Speaker 2: in that people are paying less for electricity. If the

454
00:22:29,440 --> 00:22:31,920
Speaker 2: inflation rate comes at two point seven for the month

455
00:22:31,960 --> 00:22:34,280
Speaker 2: and for the quarter wages at three and a half,

456
00:22:34,520 --> 00:22:36,359
Speaker 2: it is a true cost of living measure because I'm

457
00:22:36,359 --> 00:22:39,080
Speaker 2: not paying as much from electricity because of this subsidy. Fine,

458
00:22:39,760 --> 00:22:42,080
Speaker 2: But from the RBA's perspective, and this is where there's

459
00:22:42,280 --> 00:22:45,480
Speaker 2: an element of strong element of truth, is that the

460
00:22:45,600 --> 00:22:49,199
Speaker 2: RBA is setting interest rates to adjust how much you

461
00:22:49,280 --> 00:22:52,560
Speaker 2: and I and everybody listening spends in the economy. They

462
00:22:52,600 --> 00:22:56,920
Speaker 2: want us to trim our spending so that businesses don't

463
00:22:56,920 --> 00:23:00,400
Speaker 2: increase their prices, maybe lower them so that it inflation

464
00:23:00,520 --> 00:23:03,920
Speaker 2: comes back under control. Yeah, the government could do all

465
00:23:03,960 --> 00:23:06,720
Speaker 2: sorts of things on beer exercise and petro excise and

466
00:23:06,720 --> 00:23:10,800
Speaker 2: get inflation down. That's not how you do it. You

467
00:23:10,920 --> 00:23:15,359
Speaker 2: manage demand spending in the economy to meet inflation. And

468
00:23:15,400 --> 00:23:17,040
Speaker 2: that's why the Reserve Bank will look at what we

469
00:23:17,080 --> 00:23:21,560
Speaker 2: call the trimmed mean inflation rate, which takes out the

470
00:23:21,600 --> 00:23:24,879
Speaker 2: extremely volatile items, and of course electricity will be minus

471
00:23:24,880 --> 00:23:27,840
Speaker 2: sixteen percent, very volatile item, and they'll look at this

472
00:23:28,240 --> 00:23:31,520
Speaker 2: underlying or core inflation rate, and that's probably still going

473
00:23:31,600 --> 00:23:33,760
Speaker 2: to be in the low threes. Three and a quarter

474
00:23:33,960 --> 00:23:36,400
Speaker 2: three point four three still an improvement, though on improvement,

475
00:23:36,560 --> 00:23:41,120
Speaker 2: it's trending down, as Michelle Bullock I'm sure say it's

476
00:23:41,200 --> 00:23:44,280
Speaker 2: trending down, but we'd like it to fall faster. Yeah,

477
00:23:44,840 --> 00:23:47,000
Speaker 2: we'd like it to fall more and quicker and sooner,

478
00:23:47,720 --> 00:23:49,080
Speaker 2: and until it does, we're on hold.

479
00:23:49,560 --> 00:23:53,879
Speaker 1: So CBA was predicting a rate reduction this year. I

480
00:23:53,880 --> 00:23:56,560
Speaker 1: think they're the only bank out of all the majors

481
00:23:57,400 --> 00:24:00,800
Speaker 1: predictaous are they still at that territory saying November.

482
00:24:00,800 --> 00:24:05,680
Speaker 2: But Garth Aired, who's the chief Aussie economist, excellent too,

483
00:24:05,720 --> 00:24:08,240
Speaker 2: by the way, soorry to give all my economists mates

484
00:24:08,440 --> 00:24:11,960
Speaker 2: an uptick. But they're good. They pushed it out to December, right,

485
00:24:12,119 --> 00:24:15,600
Speaker 2: they're saying Novembers too soon. The reason why they've moved

486
00:24:15,600 --> 00:24:16,119
Speaker 2: it to December.

487
00:24:16,440 --> 00:24:17,160
Speaker 1: Meeting in December.

488
00:24:17,359 --> 00:24:19,719
Speaker 2: Yeah, about the seventh eighth of December. There's only three more.

489
00:24:19,720 --> 00:24:23,160
Speaker 2: There's one twenty fourth of September, there's one late October,

490
00:24:23,200 --> 00:24:24,159
Speaker 2: this last one in December.

491
00:24:24,920 --> 00:24:27,040
Speaker 1: So we don't have the Melbourne Cup day meetings anymore,

492
00:24:27,040 --> 00:24:27,280
Speaker 1: do we?

493
00:24:27,960 --> 00:24:29,760
Speaker 2: No? I think all this one might be about Melbourne

494
00:24:29,760 --> 00:24:32,840
Speaker 2: Cup dates in early November. Don't don't hold.

495
00:24:32,880 --> 00:24:35,080
Speaker 1: One on the second in November, the first Tuesday November

496
00:24:35,080 --> 00:24:35,480
Speaker 1: every year.

497
00:24:35,560 --> 00:24:38,119
Speaker 2: Yeah, we used to because that was.

498
00:24:38,080 --> 00:24:40,080
Speaker 1: Alway an important because they always either put rates uple

499
00:24:40,160 --> 00:24:40,760
Speaker 1: down like.

500
00:24:41,160 --> 00:24:42,680
Speaker 2: They almost always did it always.

501
00:24:42,960 --> 00:24:45,040
Speaker 1: I don't know why, but they just generally speaking do

502
00:24:45,119 --> 00:24:45,760
Speaker 1: something usual.

503
00:24:45,600 --> 00:24:48,960
Speaker 2: Because they've got the quarterly CPI a week beforehand.

504
00:24:48,440 --> 00:24:54,800
Speaker 1: And we'll just check it without production. So this fifth

505
00:24:54,800 --> 00:24:57,160
Speaker 1: of November cover day, great.

506
00:24:57,000 --> 00:25:01,719
Speaker 2: So so anyway, CBI pushed it back one meeting, right

507
00:25:02,000 --> 00:25:07,280
Speaker 2: because they're of the view that resilience in the labor

508
00:25:07,320 --> 00:25:09,119
Speaker 2: market that we were talking about a minute ago was

509
00:25:09,160 --> 00:25:12,600
Speaker 2: important to them and that maybe, just maybe some of

510
00:25:12,640 --> 00:25:15,560
Speaker 2: these measures of income tax cuts might be having a

511
00:25:15,600 --> 00:25:18,760
Speaker 2: lag deffect in terms of spending the electricity subsets that

512
00:25:18,800 --> 00:25:20,960
Speaker 2: we're mentioning in terms of the CPI, that's seventy five

513
00:25:21,000 --> 00:25:24,680
Speaker 2: bucks in people's pockets that they may spend. So it's

514
00:25:24,680 --> 00:25:26,600
Speaker 2: not saying that the economy is still weak, but the

515
00:25:26,760 --> 00:25:30,240
Speaker 2: RBA want to be rolled gold certain that that weakness

516
00:25:30,280 --> 00:25:34,480
Speaker 2: is continuing, that the inflation rate's falling. In December, they'll

517
00:25:34,520 --> 00:25:38,720
Speaker 2: have the next quarterly GDP number, as you were just saying,

518
00:25:38,720 --> 00:25:41,600
Speaker 2: it was only point two last quarter, too early to

519
00:25:41,600 --> 00:25:43,280
Speaker 2: make a forecast and what it might be this time,

520
00:25:43,320 --> 00:25:45,480
Speaker 2: but it's not going to be strong. Retail sales are

521
00:25:45,480 --> 00:25:49,000
Speaker 2: still pretty sluggish, building approvals are still pretty ordinary. Might

522
00:25:49,080 --> 00:25:51,720
Speaker 2: just be saved again by government demand, but we.

523
00:25:51,720 --> 00:25:57,600
Speaker 1: Might also get the Black Friday finals. Yes, there are

524
00:25:57,960 --> 00:26:02,040
Speaker 1: few weird phenomenous that exist around it, which which sort

525
00:26:02,040 --> 00:26:04,320
Speaker 1: of skew the skew the numbers of it, particularly retail

526
00:26:04,320 --> 00:26:04,680
Speaker 1: and they did.

527
00:26:04,720 --> 00:26:07,000
Speaker 2: Last year too. That's why they rate hike in November,

528
00:26:07,040 --> 00:26:11,359
Speaker 2: because they saw the Black Friday consumers come back my

529
00:26:11,480 --> 00:26:11,840
Speaker 2: rates again.

530
00:26:11,880 --> 00:26:14,760
Speaker 3: We become like the Christmas Day shopping days. Christmas forward

531
00:26:15,000 --> 00:26:17,280
Speaker 3: about six or eight weeks. Yeah, so it's really interesting.

532
00:26:17,320 --> 00:26:19,639
Speaker 3: And by the way, by then, of course they have

533
00:26:19,760 --> 00:26:21,879
Speaker 3: a lot more information what's happening globally. You know, the

534
00:26:21,880 --> 00:26:24,879
Speaker 3: Americans only cut rates this week half a percentage point.

535
00:26:25,240 --> 00:26:27,280
Speaker 3: There are more cuts priced in, so I dare say

536
00:26:27,280 --> 00:26:29,679
Speaker 3: the RBA would love to see, you know, they're going

537
00:26:29,760 --> 00:26:32,760
Speaker 3: to cut another couple of times. Bank of England were

538
00:26:32,800 --> 00:26:35,520
Speaker 3: on hold this week even though they've cut previously. So

539
00:26:35,880 --> 00:26:39,959
Speaker 3: will they resume their cutting cycle again? European European Canada

540
00:26:40,200 --> 00:26:42,760
Speaker 3: kiwis they have all cut rates at least once.

541
00:26:42,760 --> 00:26:43,880
Speaker 1: Are they still cutting though?

542
00:26:43,960 --> 00:26:47,800
Speaker 2: I can't. They're still cutting, but they're they're talking of pauses.

543
00:26:47,840 --> 00:26:49,439
Speaker 2: In most of them. There's just one or two cuts,

544
00:26:49,480 --> 00:26:53,119
Speaker 2: just as what we might call insurance rate cuts against

545
00:26:53,119 --> 00:26:56,720
Speaker 2: the hard landing. So they want, like our own Reserve Bank,

546
00:26:56,800 --> 00:26:59,440
Speaker 2: here's a couple of rate cuts just to take a

547
00:26:59,480 --> 00:27:01,960
Speaker 2: bit of pre off the economy. But we're going to

548
00:27:01,960 --> 00:27:05,199
Speaker 2: pause now until we get absolute confirmation that inflations back

549
00:27:05,280 --> 00:27:05,800
Speaker 2: under control.

550
00:27:05,920 --> 00:27:08,200
Speaker 1: So, just just in terms of summary that, I think

551
00:27:08,240 --> 00:27:11,400
Speaker 1: that that's a really important point you just made. Using

552
00:27:11,400 --> 00:27:13,840
Speaker 1: the word hard landing. I think it's fair to say

553
00:27:13,880 --> 00:27:18,240
Speaker 1: that no government wants to see a disaster, so they're

554
00:27:18,240 --> 00:27:20,880
Speaker 1: not exactly sure what that means or how that occurs.

555
00:27:20,880 --> 00:27:22,920
Speaker 1: So they're saying, in the case of the US, we'll

556
00:27:22,960 --> 00:27:25,240
Speaker 1: give it a half a point trim, half a percentage,

557
00:27:26,320 --> 00:27:28,680
Speaker 1: fifty base point trim. I should say we'll give it

558
00:27:28,680 --> 00:27:31,120
Speaker 1: a fifty base point trim, which is a pretty good

559
00:27:31,160 --> 00:27:33,280
Speaker 1: as a good whack that gives buy some bit of

560
00:27:33,320 --> 00:27:36,719
Speaker 1: insurance before they're trying to buy insurance against the economy

561
00:27:36,720 --> 00:27:39,320
Speaker 1: getting out of control. We're going growing too hard. Now

562
00:27:39,359 --> 00:27:42,000
Speaker 1: they're trying to buy insurance for making sure it doesn't

563
00:27:42,000 --> 00:27:43,080
Speaker 1: get too weak.

564
00:27:43,440 --> 00:27:43,760
Speaker 2: Correct.

565
00:27:44,080 --> 00:27:52,600
Speaker 1: And it looks like UK, ECB, European Union and Canada went,

566
00:27:53,160 --> 00:27:56,240
Speaker 1: and it's morey about New Zealand. New Zealand they did

567
00:27:56,240 --> 00:27:58,600
Speaker 1: as well, but they all went way ahead of the USA.

568
00:27:59,000 --> 00:28:00,560
Speaker 2: Do you think it has gone three times?

569
00:28:00,560 --> 00:28:03,040
Speaker 1: By the way, and do you expect do you expect

570
00:28:03,080 --> 00:28:07,359
Speaker 1: that that's how she would react when the time comes?

571
00:28:07,560 --> 00:28:09,480
Speaker 2: I think so too, And that's and that's the really

572
00:28:09,520 --> 00:28:13,800
Speaker 2: interesting thing about some of these rate cuts. And remember

573
00:28:13,800 --> 00:28:15,600
Speaker 2: the fifty basis point from the FED was from a

574
00:28:15,680 --> 00:28:17,639
Speaker 2: five point five percent starting point. We're not at two

575
00:28:17,680 --> 00:28:19,520
Speaker 2: and cutting to one and a half, So you know,

576
00:28:19,560 --> 00:28:21,159
Speaker 2: there's a bit of fat there if you like, for

577
00:28:21,200 --> 00:28:24,200
Speaker 2: the first couple of rate cuts. But again, we've had

578
00:28:24,200 --> 00:28:26,320
Speaker 2: this discussion before. I'm pretty sure we talked about this

579
00:28:26,400 --> 00:28:30,320
Speaker 2: last time in the discussion about rate cuts around the world,

580
00:28:30,359 --> 00:28:34,119
Speaker 2: including here in Australia. Do not think that we're going

581
00:28:34,160 --> 00:28:36,840
Speaker 2: to go back to where rates were. We are not

582
00:28:38,040 --> 00:28:39,640
Speaker 2: this debate about rate cuts up.

583
00:28:39,560 --> 00:28:42,320
Speaker 1: Down, And by the way, said exactly correct.

584
00:28:42,600 --> 00:28:45,520
Speaker 2: Correct. Everybody, every central banker who's spoken about rate cuts

585
00:28:45,520 --> 00:28:48,640
Speaker 2: has said the same thing. So all we are talking

586
00:28:48,720 --> 00:28:52,520
Speaker 2: about in this rate cutting cycle is whether we cut

587
00:28:53,040 --> 00:28:57,840
Speaker 2: this is in total one hundred one fifty basis points

588
00:28:58,360 --> 00:29:00,560
Speaker 2: two hundred if things are worse than expect. But that's it.

589
00:29:00,680 --> 00:29:03,600
Speaker 2: So the case in Australia if and it's a big

590
00:29:03,640 --> 00:29:06,160
Speaker 2: if we've got one hundred and fifty rate basic points

591
00:29:06,200 --> 00:29:09,120
Speaker 2: of rate cuts over the next twelve or eighty months,

592
00:29:09,200 --> 00:29:12,160
Speaker 2: we'd be what down at two point eighty five percent?

593
00:29:12,560 --> 00:29:14,120
Speaker 1: Two. I just can't see it.

594
00:29:14,640 --> 00:29:16,120
Speaker 2: We might only get one hundred, so we're down a

595
00:29:16,120 --> 00:29:19,120
Speaker 2: three point three five. That's we're not talking more rate

596
00:29:19,160 --> 00:29:23,280
Speaker 2: cuts because the structure of the economy, the structure which

597
00:29:23,360 --> 00:29:27,280
Speaker 2: is driving inflation, and even this lower inflation great news.

598
00:29:27,320 --> 00:29:29,480
Speaker 2: I'm delighted to see inflation coming down and all the

599
00:29:29,480 --> 00:29:32,240
Speaker 2: rest of it. But we're not going to be moving

600
00:29:32,240 --> 00:29:34,880
Speaker 2: to one percent or zero percent inflation. We'll be hitting

601
00:29:34,920 --> 00:29:38,640
Speaker 2: the targets. That's great, but not massively overshooting that we

602
00:29:38,760 --> 00:29:43,040
Speaker 2: require cut after cut after cut to get inflation back up.

603
00:29:43,280 --> 00:29:45,160
Speaker 2: We're gonna hit the targets. They're gonna cut, they're gonna hold,

604
00:29:45,160 --> 00:29:47,600
Speaker 2: they're gonna pause, you know. So all we are talking

605
00:29:47,640 --> 00:29:50,520
Speaker 2: about with this rate cutting cycle around the world, but

606
00:29:50,640 --> 00:29:54,400
Speaker 2: also here is yeah, one hundred points and maybe a

607
00:29:54,440 --> 00:29:56,280
Speaker 2: smidge more if something goes wrong.

608
00:29:56,440 --> 00:29:58,600
Speaker 1: So I'd like to refer to this as the interest

609
00:29:58,680 --> 00:30:02,000
Speaker 1: rate tango. You know, it's sort of a little move here,

610
00:30:02,080 --> 00:30:04,200
Speaker 1: then we stop and have a look at each other's eyes,

611
00:30:04,280 --> 00:30:07,080
Speaker 1: and then we have another move over here, because it

612
00:30:07,160 --> 00:30:09,280
Speaker 1: really music stops, and it's going to be like an

613
00:30:09,320 --> 00:30:10,800
Speaker 1: interest rate tangle. It's going to be like a tanger.

614
00:30:10,880 --> 00:30:14,560
Speaker 2: Oh and I think the other thing. Mark. We remember this.

615
00:30:14,640 --> 00:30:17,640
Speaker 2: It's important that everybody listening remembers this too. That the

616
00:30:17,680 --> 00:30:21,440
Speaker 2: COVID period and the period after the COVID lockdowns and

617
00:30:21,480 --> 00:30:24,440
Speaker 2: those all those rate hikes, that's not usually how central

618
00:30:24,480 --> 00:30:28,160
Speaker 2: banks move into If you look at the period, you know,

619
00:30:28,480 --> 00:30:31,480
Speaker 2: I'll even talk about a nineteen year period from the

620
00:30:31,560 --> 00:30:35,560
Speaker 2: year twenty to twenty nineteen. Go to the RBA web page.

621
00:30:35,560 --> 00:30:37,520
Speaker 2: You look at the number of times rates go up

622
00:30:37,640 --> 00:30:41,520
Speaker 2: or down versus the number of times they're steady. We

623
00:30:41,600 --> 00:30:45,080
Speaker 2: often go a year or two with one or two moves.

624
00:30:45,480 --> 00:30:47,760
Speaker 2: Whether it's up or down doesn't matter. The Reserve Bank

625
00:30:47,800 --> 00:30:50,960
Speaker 2: does not like to adjust interest rates. They only do

626
00:30:51,000 --> 00:30:53,360
Speaker 2: it when they have to, and when they have to

627
00:30:53,360 --> 00:30:54,960
Speaker 2: be fine, they'll do it. They'll cut, they'll hike, they'll

628
00:30:55,000 --> 00:30:57,120
Speaker 2: do whatever they do. Normally, they do two or three

629
00:30:57,160 --> 00:30:59,800
Speaker 2: and then they'll pause for a year. So your tango analogy,

630
00:31:00,240 --> 00:31:03,120
Speaker 2: we've done a couple. Let's just sit back and see

631
00:31:03,200 --> 00:31:05,160
Speaker 2: how they are working. You know, let's just see if

632
00:31:05,160 --> 00:31:09,120
Speaker 2: this is enough medicine to meet our growth target, our

633
00:31:09,200 --> 00:31:14,000
Speaker 2: unemployment target, and our inflation target. And if they find out,

634
00:31:14,040 --> 00:31:15,960
Speaker 2: oh gee, we haven't done enough, they'll do another couple

635
00:31:16,000 --> 00:31:19,160
Speaker 2: more in a year's time. And so that's why I

636
00:31:19,160 --> 00:31:20,840
Speaker 2: think we're getting you know, we're saying before that the

637
00:31:20,880 --> 00:31:23,520
Speaker 2: last move in Australia was November last year. So what's

638
00:31:23,560 --> 00:31:24,160
Speaker 2: that ten.

639
00:31:24,000 --> 00:31:27,360
Speaker 1: Months there was Melbourne Cup Day last year.

640
00:31:27,480 --> 00:31:29,520
Speaker 2: Yeah, we could well go another couple of months before

641
00:31:29,520 --> 00:31:33,120
Speaker 2: we get our first cut here, you know whatever, and

642
00:31:33,160 --> 00:31:35,480
Speaker 2: then we might get a couple and then nothing through

643
00:31:35,480 --> 00:31:37,840
Speaker 2: the remainder of twenty five twenty six. We'll see what happens,

644
00:31:37,840 --> 00:31:40,440
Speaker 2: you know, double be forecast that too far out, but

645
00:31:40,480 --> 00:31:44,880
Speaker 2: we're not going to well, barring some awful event or

646
00:31:44,960 --> 00:31:48,080
Speaker 2: something strange happening in the economy or geopolitical event, they're

647
00:31:48,080 --> 00:31:51,040
Speaker 2: just going to tweak them down, hold them. They prefer

648
00:31:51,080 --> 00:31:53,240
Speaker 2: to keep rates steady then to put them up or down.

649
00:31:53,760 --> 00:31:57,720
Speaker 1: So how important then, is the Jerome power Fed reserve

650
00:31:58,600 --> 00:32:03,360
Speaker 1: fifty base of points reduction of their interust rates last week?

651
00:32:04,040 --> 00:32:05,800
Speaker 2: It's important for US?

652
00:32:05,960 --> 00:32:07,880
Speaker 1: Yeah? How important? Though? I mean, what do they do?

653
00:32:08,280 --> 00:32:09,960
Speaker 2: It's not the dominant thing. Look, we don't move rates

654
00:32:10,000 --> 00:32:12,440
Speaker 2: in lockstep with the US, no, but and it's a

655
00:32:12,520 --> 00:32:16,040
Speaker 2: really important butt if the US is cutting inter strates

656
00:32:16,120 --> 00:32:19,240
Speaker 2: using this example, now, it's because the economy is slowing down,

657
00:32:19,280 --> 00:32:22,560
Speaker 2: inflation's falling, they're worried about the labor market and dry

658
00:32:22,600 --> 00:32:26,080
Speaker 2: and Powell, the FED chairperson, said this quite explicitly. We're

659
00:32:26,120 --> 00:32:28,560
Speaker 2: doing this to make sure that the unemployment rate doesn't

660
00:32:28,560 --> 00:32:31,400
Speaker 2: go up too much in twenty twenty five. We're starting

661
00:32:31,440 --> 00:32:35,040
Speaker 2: now with a fifty point move to make sure that

662
00:32:35,200 --> 00:32:39,200
Speaker 2: the economy is not even weaker next year. The US

663
00:32:39,280 --> 00:32:42,960
Speaker 2: is still the world's biggest economy, still bigger than China using.

664
00:32:42,760 --> 00:32:44,800
Speaker 1: Different measures, but especially at the moment.

665
00:32:44,680 --> 00:32:48,320
Speaker 2: And it's a dominant part of global capital markets, stock markets,

666
00:32:48,320 --> 00:32:51,560
Speaker 2: bond markets, everything. It's while we wake up in the morning,

667
00:32:51,760 --> 00:32:53,360
Speaker 2: what happened to the US stock market? What happened to

668
00:32:53,360 --> 00:32:55,800
Speaker 2: the US bond market? It matters. It's not just for

669
00:32:55,840 --> 00:32:59,200
Speaker 2: fun that we do that. If they go barey up,

670
00:32:59,760 --> 00:33:03,000
Speaker 2: it's it's a disaster. If they go well, we get

671
00:33:03,080 --> 00:33:05,920
Speaker 2: dragged along on the coattails. So Jerome Powell and the

672
00:33:05,960 --> 00:33:11,360
Speaker 2: FED cutting fifty is big news. It's saying that the

673
00:33:11,400 --> 00:33:15,280
Speaker 2: FED is willing to be pretty aggressive because it was

674
00:33:15,320 --> 00:33:16,840
Speaker 2: not the consensus. For you, by the way, they only

675
00:33:16,840 --> 00:33:19,920
Speaker 2: thought they'd cut twenty five the Wall Street economists, I

676
00:33:19,920 --> 00:33:22,400
Speaker 2: think the vast majority said twenty five, and we'll see

677
00:33:22,440 --> 00:33:25,680
Speaker 2: how they go. But they went fifty. And it's saying

678
00:33:25,720 --> 00:33:31,720
Speaker 2: that the US economy, if it weakens, will have big

679
00:33:31,720 --> 00:33:34,360
Speaker 2: implications for the global economy. And of course we've got

680
00:33:34,400 --> 00:33:36,560
Speaker 2: the US presidential election to throw into that mix. To

681
00:33:36,640 --> 00:33:39,680
Speaker 2: heaven forbid, who knows what happens there, but the US

682
00:33:39,720 --> 00:33:42,720
Speaker 2: economy by taking this pro growth stance, and that's what

683
00:33:42,760 --> 00:33:46,480
Speaker 2: it is. Aggressive rate cuts are beneficial for the economy

684
00:33:46,520 --> 00:33:49,200
Speaker 2: in six to twelve months time. And if the FED

685
00:33:49,200 --> 00:33:51,240
Speaker 2: cuts a couple more times late this year and in

686
00:33:51,240 --> 00:33:53,600
Speaker 2: the first half of next year, the US economy be

687
00:33:53,680 --> 00:33:57,840
Speaker 2: very strong in twenty twenty five twenty six. Economy is strong,

688
00:33:58,600 --> 00:34:03,680
Speaker 2: huge driver of demand for or consumer goods, huge driver

689
00:34:03,720 --> 00:34:09,080
Speaker 2: of demand for metals and materials and energy, and that

690
00:34:09,160 --> 00:34:12,640
Speaker 2: helps the global economy, helps the Australian economy. So again

691
00:34:12,680 --> 00:34:15,440
Speaker 2: we don't move in lockstep. But if they keep cutting

692
00:34:15,440 --> 00:34:17,200
Speaker 2: and cutting and cutting over the next three or four

693
00:34:17,200 --> 00:34:20,479
Speaker 2: months and we don't, something's gone out out of whack.

694
00:34:20,680 --> 00:34:24,200
Speaker 1: So if the US Federal Reserve has which they have,

695
00:34:24,200 --> 00:34:28,399
Speaker 1: they've cut the industrates in response to where inflation is,

696
00:34:29,960 --> 00:34:32,279
Speaker 1: how important is that to us in terms of our

697
00:34:32,320 --> 00:34:34,640
Speaker 1: important inflation into Australia.

698
00:34:36,680 --> 00:34:38,920
Speaker 2: When we look back at our inflation problem was that,

699
00:34:39,120 --> 00:34:41,560
Speaker 2: but that a lot of that was imported items. The

700
00:34:41,640 --> 00:34:44,839
Speaker 2: supply chain problems, the price of timber and oil and

701
00:34:44,920 --> 00:34:48,400
Speaker 2: all this stuff when it was freight shipping costs nothing

702
00:34:48,440 --> 00:34:49,440
Speaker 2: really to do with Australia.

703
00:34:49,440 --> 00:34:52,680
Speaker 1: I'm Bill Evan saying. We talked about the cost of

704
00:34:52,760 --> 00:34:53,560
Speaker 1: timber imports.

705
00:34:53,640 --> 00:34:56,000
Speaker 2: Yes, it was extraordinary. That's why the building costs went up,

706
00:34:56,040 --> 00:34:58,520
Speaker 2: the cost of construction and items went up in Australia,

707
00:34:58,960 --> 00:35:01,000
Speaker 2: and that was nothing to do with the Ah. It

708
00:35:01,120 --> 00:35:03,239
Speaker 2: was so we imported it. So on the way down

709
00:35:03,560 --> 00:35:07,920
Speaker 2: we import forlly inflation good. Yes, And the interesting thing

710
00:35:07,920 --> 00:35:10,000
Speaker 2: about that market, just in the last day or two

711
00:35:10,040 --> 00:35:13,600
Speaker 2: or three, the Osie dolls back above sixty sixty eight cents,

712
00:35:13,640 --> 00:35:17,320
Speaker 2: i should say, which also adds to the downside risks

713
00:35:17,320 --> 00:35:19,640
Speaker 2: to inflation because everything we import will be a little

714
00:35:19,640 --> 00:35:22,120
Speaker 2: bit cheaper as the OI dollar goes up. So that's

715
00:35:22,160 --> 00:35:25,040
Speaker 2: an important part of our path to lower inflation, if

716
00:35:25,080 --> 00:35:27,000
Speaker 2: you like. And Okay, it's only been a couple of days.

717
00:35:27,000 --> 00:35:28,600
Speaker 2: It's got to stay there for a period of time

718
00:35:28,640 --> 00:35:31,640
Speaker 2: for it to really impact on what importers pay for

719
00:35:31,640 --> 00:35:35,440
Speaker 2: them for their goods and services. But this whole process

720
00:35:35,640 --> 00:35:41,360
Speaker 2: of the FED cutting of US inflation rate tracking lower

721
00:35:42,120 --> 00:35:45,759
Speaker 2: in line with Chinese inflation tracking lower, and inflation around

722
00:35:45,800 --> 00:35:48,239
Speaker 2: the world. You know, the oil prices where commodity prices down.

723
00:35:48,440 --> 00:35:51,080
Speaker 2: Iron ore, which was one hundred and forty US dollars

724
00:35:51,160 --> 00:35:54,319
Speaker 2: a ton, a really important export issue for Australia, is

725
00:35:54,360 --> 00:35:58,040
Speaker 2: now ninety US dollars a ton, So the iron ore

726
00:35:58,040 --> 00:36:00,520
Speaker 2: producers still making money, but not as much. That has

727
00:36:00,560 --> 00:36:03,480
Speaker 2: implications on tax re seats for the government, implications on

728
00:36:03,560 --> 00:36:05,319
Speaker 2: national income. So if you're a shareholder and a big

729
00:36:05,360 --> 00:36:07,160
Speaker 2: iron or producer, you've lost money.

730
00:36:06,960 --> 00:36:08,880
Speaker 1: This last and you're going to get less of dividend,

731
00:36:08,920 --> 00:36:10,760
Speaker 1: which means you've got to explain to spend correct.

732
00:36:10,800 --> 00:36:13,080
Speaker 2: So it does matter all these things. So gosh, the

733
00:36:13,120 --> 00:36:15,400
Speaker 2: economy is one of these amazing So that's why we

734
00:36:15,440 --> 00:36:18,760
Speaker 2: talk for so long every time we get together. There's

735
00:36:18,840 --> 00:36:23,000
Speaker 2: so many moving parts to this economy. It's nice to

736
00:36:23,080 --> 00:36:25,920
Speaker 2: keep it simple, but occasionally things pop up. And you know,

737
00:36:25,960 --> 00:36:27,880
Speaker 2: the US doesn't cut fifty basis points every day of

738
00:36:27,920 --> 00:36:30,359
Speaker 2: the week. In fact, by the way, that was the

739
00:36:30,400 --> 00:36:33,320
Speaker 2: first fifty point cut. They've done a few hikes of

740
00:36:33,360 --> 00:36:37,080
Speaker 2: fifty in sixteen years. Wow, people don't realize. I didn't

741
00:36:37,080 --> 00:36:37,759
Speaker 2: realize until I.

742
00:36:38,800 --> 00:36:42,040
Speaker 1: Know that either. I mean, for some reason I thought they.

743
00:36:41,400 --> 00:36:44,200
Speaker 2: They've cut twenty fives, they've hiked a couple of fifties,

744
00:36:44,960 --> 00:36:48,400
Speaker 2: But it's the first fifty point cut in sixteen years.

745
00:36:48,400 --> 00:36:49,640
Speaker 1: Which is that sort of India.

746
00:36:49,760 --> 00:36:52,360
Speaker 2: That's the global financial crisis. Of course, Steven Brothers was

747
00:36:52,400 --> 00:36:52,759
Speaker 2: going back.

748
00:36:52,800 --> 00:36:58,280
Speaker 1: It doesn't indicate to you they know something about inflation

749
00:36:58,360 --> 00:36:59,120
Speaker 1: that we don't know.

750
00:37:00,080 --> 00:37:03,239
Speaker 2: That's the implication. Yes, and may they and maybe they do.

751
00:37:03,360 --> 00:37:05,520
Speaker 2: You know, they've the FED in the US is very

752
00:37:05,520 --> 00:37:12,160
Speaker 2: different to our RBA. They've got really active state federal reserves.

753
00:37:13,040 --> 00:37:16,879
Speaker 2: There's a St. Louis FAED and you know the Kansas FED.

754
00:37:16,880 --> 00:37:21,280
Speaker 2: They've all got they've got central bank operations or subsets

755
00:37:21,320 --> 00:37:24,080
Speaker 2: or subdivisions whatever in all of the other states, and

756
00:37:24,120 --> 00:37:27,360
Speaker 2: they all monitor that. They don't control interest rates, but

757
00:37:27,440 --> 00:37:30,320
Speaker 2: they monitor how's my state going. So it's a bit

758
00:37:30,520 --> 00:37:32,680
Speaker 2: like having the Reserve Bank of New South Wales. YEA

759
00:37:33,080 --> 00:37:36,200
Speaker 2: just pretend and they wouldn't send instrates, but what they

760
00:37:36,239 --> 00:37:39,319
Speaker 2: would do would be monitoring the economy. What are the

761
00:37:39,360 --> 00:37:42,880
Speaker 2: big New South Wales small companies in New South Wales

762
00:37:42,920 --> 00:37:47,560
Speaker 2: telling us about labor costs, about prices, about economic activity,

763
00:37:47,640 --> 00:37:50,279
Speaker 2: forward orders, all this sort of stuff. And that's where

764
00:37:50,320 --> 00:37:52,319
Speaker 2: we get this thing in the US gosh, without getting

765
00:37:52,320 --> 00:37:55,719
Speaker 2: too too much detail, called the Beige Book, where all

766
00:37:55,760 --> 00:38:02,080
Speaker 2: these state federal reserves report into the central body every month.

767
00:38:02,120 --> 00:38:04,200
Speaker 2: I think it is, how's the economy game? What's this

768
00:38:04,360 --> 00:38:07,239
Speaker 2: bagebok saying, oh, economictavity is weak in the south of

769
00:38:07,280 --> 00:38:10,320
Speaker 2: the US, and it's strolling California, and it's weak everywhere,

770
00:38:10,440 --> 00:38:14,120
Speaker 2: or inflation's coming. So they bring together anecdotes, so in

771
00:38:14,200 --> 00:38:18,000
Speaker 2: a funny way, it doesn't get the attention that other

772
00:38:18,040 --> 00:38:20,440
Speaker 2: economic data does because it's a bit touchy feely. It's

773
00:38:20,440 --> 00:38:22,600
Speaker 2: sort of like it's not hard. I can't say there's

774
00:38:22,640 --> 00:38:25,840
Speaker 2: a fact that the inflation rates falling. They'll report the

775
00:38:25,880 --> 00:38:29,280
Speaker 2: fact that the bulk of companies are telling us price

776
00:38:29,360 --> 00:38:32,760
Speaker 2: pressures are easing. They can't say that the inflation rates falling.

777
00:38:32,840 --> 00:38:35,440
Speaker 2: So it's not a hard number, like an official inflation

778
00:38:35,520 --> 00:38:38,680
Speaker 2: number two point five percent, that's a hard number versus

779
00:38:38,680 --> 00:38:39,760
Speaker 2: the anecdotal evidence.

780
00:38:40,239 --> 00:38:42,440
Speaker 1: But that's interesting, is I know, I just got a

781
00:38:42,520 --> 00:38:44,239
Speaker 1: little bit suspicious when I saw it.

782
00:38:44,520 --> 00:38:46,000
Speaker 2: Yeah, I thought it was.

783
00:38:47,160 --> 00:38:49,160
Speaker 1: I thought it was because I didn't realize it was

784
00:38:49,160 --> 00:38:50,719
Speaker 1: sixteen years, but I knew it was a long time,

785
00:38:51,120 --> 00:38:54,080
Speaker 1: and I thought that's a pretty big number du to

786
00:38:54,680 --> 00:38:57,200
Speaker 1: kick off with. I mean, it's a very big bet.

787
00:38:57,360 --> 00:38:59,960
Speaker 2: And when the inflation rates still.

788
00:38:59,800 --> 00:39:03,319
Speaker 3: Agree towards it, So don't give me there's not one

789
00:39:03,360 --> 00:39:03,839
Speaker 3: point five.

790
00:39:04,080 --> 00:39:08,520
Speaker 2: No, no, no, it's not quite there. And the unemployment rate

791
00:39:08,560 --> 00:39:12,160
Speaker 2: the same as Australiat four point two's gone up a

792
00:39:12,160 --> 00:39:13,759
Speaker 2: bit but not much.

793
00:39:13,920 --> 00:39:15,719
Speaker 1: It's not only unemployment of six or.

794
00:39:17,440 --> 00:39:19,560
Speaker 2: And Europe, which which is why they've cut more than

795
00:39:20,280 --> 00:39:24,399
Speaker 2: the America. Yeah, so it's saying it's a bold move.

796
00:39:24,480 --> 00:39:27,319
Speaker 1: Yeah, yeah, it's well, if nothing else is a bold move,

797
00:39:27,800 --> 00:39:31,719
Speaker 1: it may well be indicative of something worse than we

798
00:39:31,719 --> 00:39:34,200
Speaker 1: would otherwise expect. But I guess we're never going to

799
00:39:34,200 --> 00:39:36,600
Speaker 1: know until we until they have the next meeting. When

800
00:39:36,600 --> 00:39:37,120
Speaker 1: do they meet?

801
00:39:37,600 --> 00:39:43,360
Speaker 2: The next meetings in middle of middle to late late October? Right, Okay,

802
00:39:43,440 --> 00:39:45,799
Speaker 2: so it's about seven weeks from the meeting this week,

803
00:39:45,840 --> 00:39:46,920
Speaker 2: so it's late October.

804
00:39:47,000 --> 00:39:52,560
Speaker 1: And how important is our Australian dollar being relatively speaking

805
00:39:53,080 --> 00:39:56,560
Speaker 1: stronger relative to the US dollar. How important is that

806
00:39:56,800 --> 00:39:58,919
Speaker 1: for us in terms of our inflation control.

807
00:39:59,320 --> 00:40:03,120
Speaker 2: It's I wouldn't want to overstate it. There's a couple

808
00:40:03,160 --> 00:40:04,400
Speaker 2: of things that it has to be there and be

809
00:40:04,440 --> 00:40:07,399
Speaker 2: there for a long time. A spike up, just say

810
00:40:07,400 --> 00:40:09,480
Speaker 2: we got to seventy cents in the next couple of weeks.

811
00:40:09,680 --> 00:40:11,319
Speaker 2: If it goes in then comes back to sixty eight

812
00:40:11,400 --> 00:40:14,200
Speaker 2: has no effect. It's got to go up and stay up.

813
00:40:15,160 --> 00:40:17,160
Speaker 2: If you're lucky enough to have done your trade at

814
00:40:17,200 --> 00:40:19,359
Speaker 2: seventy cents, half you luck. It's got to stay there

815
00:40:19,760 --> 00:40:23,719
Speaker 2: to embed the lower cost of imports. So it's not

816
00:40:23,800 --> 00:40:26,319
Speaker 2: just a one off, one hit. Wonder if it gets

817
00:40:26,360 --> 00:40:29,440
Speaker 2: to seventy seventy two, seventy four whatever, you know, not

818
00:40:29,520 --> 00:40:31,360
Speaker 2: my forecast, by the way, but if it were to

819
00:40:31,400 --> 00:40:34,640
Speaker 2: do that it would have important implications. But the fact

820
00:40:34,680 --> 00:40:36,840
Speaker 2: that it's now breaking out of this range. Yeah, the

821
00:40:36,840 --> 00:40:40,160
Speaker 2: Ausis dollar until now has been remarkably stable. It's been

822
00:40:40,200 --> 00:40:43,000
Speaker 2: sixty three sixty or sixty five sixty six now through

823
00:40:43,040 --> 00:40:48,320
Speaker 2: sixty eight. And the discussion is that if the FED

824
00:40:48,400 --> 00:40:51,120
Speaker 2: does cut more and the RBA is stubborn in its

825
00:40:51,320 --> 00:40:54,080
Speaker 2: decision on interest rates, and a few other things happen.

826
00:40:54,440 --> 00:40:56,960
Speaker 2: You know, the Chinese stimulus gives a perception that China's

827
00:40:57,000 --> 00:40:59,399
Speaker 2: going to recover next year or whatever. We could easily

828
00:40:59,400 --> 00:41:01,080
Speaker 2: be at seventy sense for the first time in a

829
00:41:01,080 --> 00:41:03,240
Speaker 2: couple of years, and that would and that would start

830
00:41:03,280 --> 00:41:05,480
Speaker 2: to have implications for what the reserve back would be thinking.

831
00:41:05,960 --> 00:41:09,200
Speaker 1: Right, mate, Well, let's look at our board go through it,

832
00:41:10,280 --> 00:41:12,920
Speaker 1: because I think we've pretty much done done the job.

833
00:41:12,920 --> 00:41:15,800
Speaker 1: But let's go through a gin vision quite quickly.

834
00:41:16,360 --> 00:41:19,040
Speaker 2: Radio mark this for the checklist. I'm going to be

835
00:41:19,040 --> 00:41:23,840
Speaker 2: putting a number of these markers way over to the

836
00:41:23,920 --> 00:41:25,400
Speaker 2: right hand side, which is neutral.

837
00:41:26,360 --> 00:41:27,520
Speaker 1: I'm looking forward to that.

838
00:41:28,560 --> 00:41:32,080
Speaker 2: One percent annual GDP zero point two percent quarterly GDP

839
00:41:32,600 --> 00:41:34,960
Speaker 2: not good enough. I'm sorry, we should be growing stronger

840
00:41:35,000 --> 00:41:39,319
Speaker 2: than that. Inflation. I'm already putting to neutral because we

841
00:41:39,400 --> 00:41:42,200
Speaker 2: do know that that headline versus underlying thing that we

842
00:41:42,280 --> 00:41:46,319
Speaker 2: spoke about. Headline inflation is great. Underlying still stubborn, but

843
00:41:46,360 --> 00:41:48,359
Speaker 2: it's neutral. It doesn't mean we have to hike again

844
00:41:48,560 --> 00:41:51,919
Speaker 2: the time time in a couple of years.

845
00:41:52,239 --> 00:41:53,640
Speaker 1: That's the first time I've seen it over there for

846
00:41:53,719 --> 00:41:54,560
Speaker 1: a long long time.

847
00:41:55,120 --> 00:41:58,040
Speaker 2: Labor market, I'm going to keep in neutral. I think

848
00:41:58,120 --> 00:41:59,960
Speaker 2: last time I moved a little bit more towards these,

849
00:42:00,160 --> 00:42:03,480
Speaker 2: but we've had that resilience in employment growth. It's certainly

850
00:42:03,520 --> 00:42:05,600
Speaker 2: not tightening because we know that job ads are falling

851
00:42:05,640 --> 00:42:09,439
Speaker 2: and there's probably more weakness out there, but it's just neutral.

852
00:42:10,120 --> 00:42:14,719
Speaker 2: Wages neutral again quarterly wages. In fact, next in the

853
00:42:14,719 --> 00:42:16,320
Speaker 2: next two or three weeks we get the next wages,

854
00:42:16,600 --> 00:42:19,480
Speaker 2: but really important, but wages growth is already starting just

855
00:42:19,520 --> 00:42:22,479
Speaker 2: to come down a bit as the economy weakens again.

856
00:42:22,520 --> 00:42:25,440
Speaker 2: We're not going back to where we were pre pandemic

857
00:42:25,440 --> 00:42:28,000
Speaker 2: with two percent wages growth, but more instead of four

858
00:42:28,000 --> 00:42:29,600
Speaker 2: to four and a half three, three and a half,

859
00:42:29,640 --> 00:42:32,799
Speaker 2: three points something. So that's the Goldie locks. Not too hot,

860
00:42:32,960 --> 00:42:36,799
Speaker 2: not too cold, just right. International economy, I'm putting that

861
00:42:36,840 --> 00:42:38,759
Speaker 2: at easy. We just rattle off all those countries and

862
00:42:38,760 --> 00:42:41,160
Speaker 2: the cutting grates. They're not cutting greats because their economies

863
00:42:41,160 --> 00:42:43,120
Speaker 2: are strong. They're coming because they're And.

864
00:42:43,120 --> 00:42:45,960
Speaker 1: What's interesting, but this is the first time we've been

865
00:42:46,000 --> 00:42:49,160
Speaker 1: able to say that the US is cutting yep. And

866
00:42:49,239 --> 00:42:54,280
Speaker 1: that's that, and that means everyone's in alignment correct Europe, UK, Canada,

867
00:42:54,680 --> 00:42:57,719
Speaker 1: the United States and China. Animates and news.

868
00:42:57,920 --> 00:42:59,960
Speaker 2: It makes in key we land house prices, we hadn't

869
00:43:00,000 --> 00:43:04,560
Speaker 2: discussed them for at lot. They're cooling. You know, Melbourne, Hobart,

870
00:43:04,800 --> 00:43:07,960
Speaker 2: darn and Canberra are really weak. Sydney slowing down. There's

871
00:43:07,960 --> 00:43:11,560
Speaker 2: a lot more listings coming on board. Adelaide, Perth and

872
00:43:11,680 --> 00:43:14,239
Speaker 2: Brisbane is still strong, but even in the rate of

873
00:43:14,280 --> 00:43:17,160
Speaker 2: increases just starting to come off. But you know, the

874
00:43:17,239 --> 00:43:19,320
Speaker 2: RBA would not be worried about house prices on the

875
00:43:19,440 --> 00:43:23,480
Speaker 2: upside or the downside, so neutral retail sales. We mentioned

876
00:43:23,760 --> 00:43:30,160
Speaker 2: shocking their household spending. We mentioned dismal consumer sentiments, weak

877
00:43:30,239 --> 00:43:34,000
Speaker 2: as water, building approvals, we are not building enough houses marketing.

878
00:43:34,400 --> 00:43:37,160
Speaker 2: We've had this discussion for years, you know what I mean,

879
00:43:37,640 --> 00:43:41,200
Speaker 2: even decade ago. We need to build more bloody houses

880
00:43:41,560 --> 00:43:45,040
Speaker 2: and we're having trouble getting counsels to approve the land

881
00:43:45,239 --> 00:43:47,839
Speaker 2: builders to build them. The government's struggling to get Oh,

882
00:43:48,840 --> 00:43:51,440
Speaker 2: don't talk to me about the Greens blocking this project

883
00:43:51,440 --> 00:43:54,080
Speaker 2: in the Senate. Okay, it wasn't the magic wand that

884
00:43:54,160 --> 00:43:55,600
Speaker 2: was going to fix housing, but it was with another

885
00:43:55,680 --> 00:43:59,680
Speaker 2: forty thousand dwellings. Now the housing crisis isn't going to

886
00:43:59,719 --> 00:44:00,160
Speaker 2: be fixed.

887
00:44:00,080 --> 00:44:02,000
Speaker 3: With one single and it's not just here by the way,

888
00:44:02,040 --> 00:44:03,400
Speaker 3: It'll be a number of issues.

889
00:44:03,520 --> 00:44:04,520
Speaker 1: Same in America.

890
00:44:04,600 --> 00:44:06,480
Speaker 2: It's extraordinary, it's very poor.

891
00:44:06,600 --> 00:44:08,560
Speaker 1: It seems to me that there is a phenomenon that

892
00:44:08,600 --> 00:44:11,399
Speaker 1: exists nearly around most of the developed world right now.

893
00:44:11,640 --> 00:44:14,040
Speaker 2: It is we've got a shortage of housing, correct, yep,

894
00:44:14,239 --> 00:44:16,120
Speaker 2: your manage shortage everywhere we need to build.

895
00:44:16,520 --> 00:44:21,040
Speaker 1: Not just because of immigration, we have a shortage of housing, personalhold.

896
00:44:20,520 --> 00:44:23,760
Speaker 2: Household formation as well as part of the issue business investments. Okay,

897
00:44:24,920 --> 00:44:27,440
Speaker 2: not again, that's in the groove. So there's a bit

898
00:44:27,440 --> 00:44:29,600
Speaker 2: of cape's going on. So it's not in the easing column,

899
00:44:29,800 --> 00:44:30,840
Speaker 2: certainly not in the titan.

900
00:44:30,880 --> 00:44:32,440
Speaker 1: But it's not decisive one way or the other.

901
00:44:32,600 --> 00:44:35,720
Speaker 2: Business the RBA would look at it and think, that's okay,

902
00:44:36,120 --> 00:44:39,080
Speaker 2: what are we worried about? Yeah, business confidence, I'm wouldn't

903
00:44:39,080 --> 00:44:42,080
Speaker 2: get to slightly easy because the NAB survey came out

904
00:44:42,400 --> 00:44:45,840
Speaker 2: a couple of weeks ago. Business conditions and business confidence

905
00:44:45,960 --> 00:44:50,840
Speaker 2: tilting down again. Profit expectations we're talking about profits before

906
00:44:51,000 --> 00:44:54,359
Speaker 2: tilting a little bit lower. So just starting to get

907
00:44:54,360 --> 00:44:58,720
Speaker 2: a little bit of a hint on business confidence softening

908
00:44:58,760 --> 00:44:59,839
Speaker 2: a bit too much.

909
00:45:00,360 --> 00:45:03,200
Speaker 1: What's crazy about that is that the stock market's on fire.

910
00:45:03,280 --> 00:45:06,719
Speaker 2: Stock markers at a record high. Isn't that crazy anyway?

911
00:45:07,080 --> 00:45:10,719
Speaker 2: Anomalies commodity prices. I'm putting that in easing. Look at

912
00:45:10,719 --> 00:45:12,960
Speaker 2: the oil price. Everybody filling out your car this weekend

913
00:45:13,040 --> 00:45:15,959
Speaker 2: or next weekend. It's good, you know, depending which city

914
00:45:15,960 --> 00:45:18,560
Speaker 2: you're in and which suburb you're in. The oil price

915
00:45:18,640 --> 00:45:21,040
Speaker 2: is a bit fickle, but you know, oil prices down,

916
00:45:21,160 --> 00:45:24,560
Speaker 2: iron ore prices down, copper prices down. It's like something

917
00:45:24,640 --> 00:45:27,680
Speaker 2: you mentioned, stocks booming. I'm putting that the RBA doesn't

918
00:45:27,719 --> 00:45:29,879
Speaker 2: target stock market fact that we're a record high. They'll

919
00:45:29,880 --> 00:45:32,759
Speaker 2: be thinking, well, wealth effect, Oh, yes, unless it's a

920
00:45:33,200 --> 00:45:35,160
Speaker 2: it's more when there's a crash. They look at it.

921
00:45:35,360 --> 00:45:37,160
Speaker 2: If it sort of grinds up a couple of percent

922
00:45:37,200 --> 00:45:39,200
Speaker 2: every couple of months, they'll be happy because there is

923
00:45:39,200 --> 00:45:39,640
Speaker 2: a wealth.

924
00:45:39,480 --> 00:45:42,799
Speaker 1: Effect, Yes, but probably not enough because it's sitting in

925
00:45:42,840 --> 00:45:45,560
Speaker 1: super so it's probably not enough to drive the economy correct.

926
00:45:45,560 --> 00:45:46,600
Speaker 2: A lot of us can't get their hands on it.

927
00:45:46,800 --> 00:45:49,680
Speaker 2: Stuck in our superannuation accounts and current rates. I'm putting

928
00:45:49,719 --> 00:45:52,120
Speaker 2: them in easy because they are restricted. The RBA even

929
00:45:52,160 --> 00:45:54,960
Speaker 2: acknowledges that four point three to five is restrictive. We're

930
00:45:54,960 --> 00:45:57,040
Speaker 2: not talking about an interesstrate discussion where the cash rates

931
00:45:57,120 --> 00:45:59,759
Speaker 2: zero point one, it's already four point three five. So

932
00:45:59,800 --> 00:46:01,560
Speaker 2: you'll look at our scorecard.

933
00:46:01,040 --> 00:46:04,280
Speaker 1: Here seven seven in the easing and six in the

934
00:46:04,320 --> 00:46:05,480
Speaker 1: hold and.

935
00:46:05,400 --> 00:46:09,600
Speaker 2: None in the titan. And I defy anybody to send

936
00:46:09,640 --> 00:46:13,759
Speaker 2: in to the to you guys on the podcast.

937
00:46:13,239 --> 00:46:15,239
Speaker 1: Whatever, Warren Hogan, Warren.

938
00:46:15,239 --> 00:46:17,400
Speaker 2: What is in the tightening category?

939
00:46:17,600 --> 00:46:18,120
Speaker 1: Which one?

940
00:46:18,840 --> 00:46:19,439
Speaker 2: Which part?

941
00:46:19,520 --> 00:46:22,680
Speaker 1: Which which one do we need to tip you over

942
00:46:22,719 --> 00:46:24,880
Speaker 1: into easing? Which one?

943
00:46:25,680 --> 00:46:29,440
Speaker 2: It has to be inflation has to be confirmed lower,

944
00:46:29,960 --> 00:46:32,600
Speaker 2: but with a very close watch on the labor market.

945
00:46:32,960 --> 00:46:35,439
Speaker 1: So if labor market goes to four point four, let's

946
00:46:35,520 --> 00:46:36,520
Speaker 1: just put what we do.

947
00:46:37,120 --> 00:46:39,600
Speaker 2: If we come back in two months, we've got two

948
00:46:39,640 --> 00:46:41,879
Speaker 2: more readings on the labor market numbers and one more

949
00:46:41,880 --> 00:46:43,880
Speaker 2: reading on inflation. If we're at four point four, I

950
00:46:43,920 --> 00:46:47,759
Speaker 2: would be putting that in the easing column column the

951
00:46:47,800 --> 00:46:51,319
Speaker 2: inflation two point seven. Yeah, it'd sort of be. It'll

952
00:46:51,360 --> 00:46:52,520
Speaker 2: be gravitating that way.

953
00:46:52,719 --> 00:46:55,239
Speaker 1: So but do you think inflation Newsy are down to two?

954
00:46:56,040 --> 00:46:56,400
Speaker 2: No?

955
00:46:56,400 --> 00:46:58,880
Speaker 1: No, no, no, So I forgets in a two point five

956
00:47:00,080 --> 00:47:01,480
Speaker 1: line headline headline.

957
00:47:01,880 --> 00:47:04,040
Speaker 2: The RBA will be thrilled with that. They'll be looking

958
00:47:04,080 --> 00:47:06,440
Speaker 2: at the trimm to mean, if the trim main gets

959
00:47:06,480 --> 00:47:10,160
Speaker 2: to three point zero at the same time headlines at

960
00:47:10,160 --> 00:47:13,640
Speaker 2: two point five with the unemploment rate at four point four,

961
00:47:14,040 --> 00:47:19,240
Speaker 2: that's the rate cut. That's goldilocks, that's that's the target

962
00:47:19,400 --> 00:47:22,759
Speaker 2: being hit. I don't want to say mission accomplished, but

963
00:47:22,800 --> 00:47:25,239
Speaker 2: it'll be mission accomplished for the RBA. We can trim

964
00:47:25,320 --> 00:47:27,759
Speaker 2: rates a little again. You heard it to be to them.

965
00:47:27,760 --> 00:47:29,680
Speaker 2: We're not talking mass rate cuts. See, we're only talking

966
00:47:29,719 --> 00:47:32,600
Speaker 2: a couple and to just take some of the some

967
00:47:32,719 --> 00:47:34,280
Speaker 2: of the pressure off the economy.

968
00:47:34,320 --> 00:47:36,880
Speaker 1: Do you think they're able to go ten bases points

969
00:47:36,960 --> 00:47:38,440
Speaker 1: or something like that. Do you think they could do

970
00:47:38,480 --> 00:47:39,920
Speaker 1: something like that or do you think they're just going

971
00:47:39,920 --> 00:47:41,520
Speaker 1: to get back to the traditional.

972
00:47:41,160 --> 00:47:43,600
Speaker 2: I think we just do twenty five. Yeah. Look, I

973
00:47:43,719 --> 00:47:46,920
Speaker 2: like the concept of a ten yeah, just as a signal.

974
00:47:47,080 --> 00:47:51,200
Speaker 2: And maybe this is for the next time we get together,

975
00:47:51,640 --> 00:47:55,319
Speaker 2: because we know this. I've observed this in a lot

976
00:47:55,320 --> 00:47:57,279
Speaker 2: of the stuff that I've done. A lot of the

977
00:47:57,360 --> 00:48:00,680
Speaker 2: monetary policy and interest rate issue is not so much

978
00:48:00,719 --> 00:48:02,640
Speaker 2: the cash flow effect of a rate move.

979
00:48:03,000 --> 00:48:07,240
Speaker 1: It's psychology the move. They've cut rates, the move itself.

980
00:48:07,040 --> 00:48:08,960
Speaker 2: And that's the headline. You spoken about in the media

981
00:48:09,040 --> 00:48:10,960
Speaker 2: for days and weeks, and that's other cut rates. They

982
00:48:11,040 --> 00:48:13,480
Speaker 2: cut rates so that what do we call animal spirits?

983
00:48:13,520 --> 00:48:16,040
Speaker 2: I think John Maynard Canes used to call it. It's

984
00:48:16,040 --> 00:48:17,879
Speaker 2: not just the cash, okay, saying you even the money

985
00:48:17,880 --> 00:48:20,840
Speaker 2: on the rate, Cat's fine. But what are they saying?

986
00:48:21,440 --> 00:48:23,839
Speaker 2: How do I feel, Oh, there's a rate cut few

987
00:48:24,280 --> 00:48:27,399
Speaker 2: even though it might only be a few bucks a month, Yeah,

988
00:48:28,280 --> 00:48:30,919
Speaker 2: ten paces points, that'd be worse thing that we'll.

989
00:48:30,840 --> 00:48:33,440
Speaker 1: Get it at four twenty five. You know what I'm saying.

990
00:48:33,480 --> 00:48:35,200
Speaker 2: I quite like that. I like it too.

991
00:48:35,280 --> 00:48:36,759
Speaker 1: I don't know what it is. I don't like the

992
00:48:36,800 --> 00:48:40,239
Speaker 1: four thirty five and forget it like I don't know

993
00:48:40,400 --> 00:48:42,080
Speaker 1: like and it gets us back into some sort of

994
00:48:42,160 --> 00:48:45,480
Speaker 1: better cadence. I don't know why. It's just mathematically seems

995
00:48:45,520 --> 00:48:49,680
Speaker 1: right to me. Well, mate, so the meeting on tomorrow,

996
00:48:49,960 --> 00:48:51,120
Speaker 1: what do you think is going to happen?

997
00:48:51,200 --> 00:48:54,560
Speaker 2: Make no change? You're going to say one hundred percent certain,

998
00:48:54,560 --> 00:48:56,520
Speaker 2: but they're not going to change. It's what she says,

999
00:48:56,560 --> 00:48:57,680
Speaker 2: that's what the change.

1000
00:48:57,800 --> 00:49:00,440
Speaker 1: What are you looking for her to say that? Are

1001
00:49:00,480 --> 00:49:01,239
Speaker 1: we going to hang off?

1002
00:49:01,680 --> 00:49:05,200
Speaker 2: I'm looking for her to soften her views about a

1003
00:49:05,280 --> 00:49:07,560
Speaker 2: rate hike. I think she can come out and say,

1004
00:49:07,560 --> 00:49:10,080
Speaker 2: we are not going to hike. Remember the last statement, Oh,

1005
00:49:10,160 --> 00:49:12,720
Speaker 2: we did discuss rates on hold, and we also discussed

1006
00:49:12,719 --> 00:49:16,920
Speaker 2: the possibility, however remote, of a rate hike. I think

1007
00:49:16,960 --> 00:49:19,960
Speaker 2: she'll get rid of that and acknowledge that since that

1008
00:49:20,080 --> 00:49:23,319
Speaker 2: last meeting that we've had the world economy US in

1009
00:49:23,360 --> 00:49:27,480
Speaker 2: particular slowing down, that we've had a disappointing response to

1010
00:49:27,520 --> 00:49:30,200
Speaker 2: the tax cuts, with the retail sales numbers and consumers sentiment,

1011
00:49:30,239 --> 00:49:35,000
Speaker 2: consumer spending still being as weak as water. They'll come out,

1012
00:49:35,080 --> 00:49:36,800
Speaker 2: or she'll come out and say, look, we're confident that

1013
00:49:36,880 --> 00:49:39,920
Speaker 2: headline inflation will be lower, and we welcome that, but

1014
00:49:39,960 --> 00:49:42,040
Speaker 2: we are going to look at trim Demean. We're not

1015
00:49:42,040 --> 00:49:45,200
Speaker 2: ready to adjust interest rates yet, but we're watching the

1016
00:49:45,360 --> 00:49:49,279
Speaker 2: trim Demean inflation rate and the unemployment rate for the

1017
00:49:49,320 --> 00:49:51,120
Speaker 2: signal on our next move.

1018
00:49:51,200 --> 00:49:53,799
Speaker 1: And what are the money Marc is betting money.

1019
00:49:53,520 --> 00:49:56,640
Speaker 2: Marks are betting a very small possibility of a move tomorrow.

1020
00:49:57,520 --> 00:50:00,239
Speaker 2: They're betting about a sixty percent chance of a cut

1021
00:50:00,239 --> 00:50:04,120
Speaker 2: before Christmas. Still, it got to about eighty eighty five

1022
00:50:04,200 --> 00:50:07,439
Speaker 2: percent a couple of about a week ago. It's come

1023
00:50:07,440 --> 00:50:09,520
Speaker 2: off a bit as the bond market's sold off just

1024
00:50:09,520 --> 00:50:12,279
Speaker 2: just in recent times, but it's still about yeah, about

1025
00:50:12,280 --> 00:50:14,720
Speaker 2: a sixty percent chance of a cut at one twenty

1026
00:50:14,719 --> 00:50:18,000
Speaker 2: five point cut in December. Then through twenty twenty five,

1027
00:50:18,040 --> 00:50:21,919
Speaker 2: we've got a round it. It's about one hundred points

1028
00:50:21,920 --> 00:50:24,560
Speaker 2: of rate cuts through twenty twenty five. So will the

1029
00:50:24,680 --> 00:50:27,919
Speaker 2: ending if the market's correct, at the end of twenty

1030
00:50:28,000 --> 00:50:30,480
Speaker 2: twenty five, will have a cash rate at three point

1031
00:50:30,520 --> 00:50:32,760
Speaker 2: three five percent, one hundred bases of points lower than today.

1032
00:50:32,840 --> 00:50:35,799
Speaker 1: Well, sitting here today and you can't you know, like

1033
00:50:35,880 --> 00:50:37,800
Speaker 1: it could be completely different in two months time, but

1034
00:50:37,880 --> 00:50:41,520
Speaker 1: sitting here today it would be. It's never it's never

1035
00:50:41,640 --> 00:50:47,360
Speaker 1: wise for anyone to bet against the market. It's tough

1036
00:50:48,760 --> 00:50:51,399
Speaker 1: because they got the best information as of today, and.

1037
00:50:51,360 --> 00:50:55,040
Speaker 2: The markets are involving investors with billions of dollars buying,

1038
00:50:55,120 --> 00:50:56,799
Speaker 2: selling bank bills and bonds, and.

1039
00:50:56,719 --> 00:50:59,040
Speaker 1: They more information than anybody correct anybody.

1040
00:50:59,680 --> 00:51:02,600
Speaker 2: The markets can change their mind too, you know that I'm.

1041
00:51:02,480 --> 00:51:05,560
Speaker 1: Saying today though I'm saying today, yes, the money market's

1042
00:51:05,600 --> 00:51:07,520
Speaker 1: saying what you just said then that we're looking at

1043
00:51:07,560 --> 00:51:09,680
Speaker 1: perhaps one hundred base points over the next twelve months.

1044
00:51:11,680 --> 00:51:14,800
Speaker 1: When Michelle Bulloch gets out there and says he doesn't

1045
00:51:14,800 --> 00:51:17,440
Speaker 1: say anything, and actually fact sort of says, you know,

1046
00:51:18,520 --> 00:51:20,760
Speaker 1: Lasia said the last meeting, we were sort of considered

1047
00:51:20,800 --> 00:51:23,239
Speaker 1: putting rates up or leaving them the same said nothing

1048
00:51:23,239 --> 00:51:27,000
Speaker 1: about putting rates down. Is that? Do you think that

1049
00:51:27,080 --> 00:51:29,440
Speaker 1: they take the same view as we would take. You

1050
00:51:29,480 --> 00:51:31,239
Speaker 1: don't bet against the money markets. The last time that

1051
00:51:31,280 --> 00:51:33,320
Speaker 1: happened was our previous governor bet against the markets. And

1052
00:51:33,400 --> 00:51:36,960
Speaker 1: he've got an extraordinarily wrong in terms of his narry

1053
00:51:37,040 --> 00:51:39,160
Speaker 1: no rate hikes till twenty three four years, his narrative

1054
00:51:39,280 --> 00:51:41,479
Speaker 1: like you know, because he would over with the money market,

1055
00:51:41,480 --> 00:51:44,359
Speaker 1: saying you it's a dangerous thing for the Reserve bank.

1056
00:51:44,960 --> 00:51:46,640
Speaker 1: It's a dangerous thing for the Reserve bank to bet

1057
00:51:46,680 --> 00:51:47,560
Speaker 1: against the money markets.

1058
00:51:47,640 --> 00:51:50,000
Speaker 2: I think it is they should pay a lot of

1059
00:51:50,040 --> 00:51:52,640
Speaker 2: attention and not be beholding to the money.

1060
00:51:52,880 --> 00:51:54,960
Speaker 1: No, no, no, different, but just sort.

1061
00:51:54,760 --> 00:51:57,239
Speaker 2: Of saying, well, what And this is the thing that

1062
00:51:57,320 --> 00:51:59,399
Speaker 2: I often find you say, Yeah, I'm an economist, Mark,

1063
00:51:59,400 --> 00:52:01,680
Speaker 2: and I often look at the economy to work out

1064
00:52:01,719 --> 00:52:04,080
Speaker 2: what's going to happen with interestrates. Every now and then,

1065
00:52:04,160 --> 00:52:06,759
Speaker 2: in fact more frequently as I'm getting older, I take

1066
00:52:06,760 --> 00:52:09,360
Speaker 2: a step back and say what are the markets telling

1067
00:52:09,560 --> 00:52:12,800
Speaker 2: me about the economy? Why is the AX at a

1068
00:52:12,840 --> 00:52:16,680
Speaker 2: record high today? What's it seeing that I can't see

1069
00:52:16,680 --> 00:52:19,440
Speaker 2: when I'm saying, gee, the economy's week, what's the bond

1070
00:52:19,480 --> 00:52:22,319
Speaker 2: market telling me that they've got four rate cuts priced in?

1071
00:52:23,040 --> 00:52:24,799
Speaker 2: When Michelle Bullock saying, oh, we're not going to cut

1072
00:52:24,880 --> 00:52:28,920
Speaker 2: rates anytime soon? What is happening? And that causes me

1073
00:52:28,960 --> 00:52:33,000
Speaker 2: to reflect on errors in my analysis or changes or

1074
00:52:33,040 --> 00:52:35,520
Speaker 2: something that I've overlooked. Don't you know this? Oh goodness,

1075
00:52:35,520 --> 00:52:38,080
Speaker 2: I forgot about that particular aspect. So I often look

1076
00:52:38,120 --> 00:52:39,480
Speaker 2: at them, and I think the Reserve Bank would be

1077
00:52:39,480 --> 00:52:42,200
Speaker 2: wise to do the same. Not all the markets are wrong,

1078
00:52:42,280 --> 00:52:45,000
Speaker 2: you know, but to say, well, what's the market saying

1079
00:52:46,360 --> 00:52:49,359
Speaker 2: about the economy that we are missing when we are

1080
00:52:49,480 --> 00:52:51,480
Speaker 2: so dogmatic that we're not going to cut rates.

1081
00:52:51,280 --> 00:52:51,959
Speaker 1: In terms of data?

1082
00:52:52,000 --> 00:52:53,399
Speaker 2: I agree in terms of data yet yeah.

1083
00:52:53,440 --> 00:52:56,480
Speaker 1: And then we also know that money markets review their

1084
00:52:56,960 --> 00:52:59,399
Speaker 1: talk anyway, because money markets, if you remember, this time

1085
00:52:59,480 --> 00:53:01,400
Speaker 1: last year, was saying we're going to get ray cuts

1086
00:53:01,400 --> 00:53:04,200
Speaker 1: in June, and in fact West pag was saying seven

1087
00:53:04,320 --> 00:53:07,440
Speaker 1: rate reductions. That's right, Yes, this time last year they

1088
00:53:07,480 --> 00:53:10,200
Speaker 1: were for twenty twenty four yep and.

1089
00:53:10,680 --> 00:53:13,040
Speaker 2: So, and that was broadly priced into markets where I

1090
00:53:13,040 --> 00:53:15,759
Speaker 2: remember correctly it was markets changed the way, and they

1091
00:53:15,880 --> 00:53:18,399
Speaker 2: change on every snippet of news. So I can't remember

1092
00:53:18,400 --> 00:53:19,920
Speaker 2: what data's out in the US to night. But when

1093
00:53:19,920 --> 00:53:22,520
Speaker 2: the US has a you know, a non farm payrolls

1094
00:53:22,600 --> 00:53:26,200
Speaker 2: number or initial jobless claims and the US markets move,

1095
00:53:26,960 --> 00:53:32,080
Speaker 2: they're repricing on new information. Again another Canes gap. When

1096
00:53:32,080 --> 00:53:33,520
Speaker 2: the information changes, what do you do?

1097
00:53:33,640 --> 00:53:35,880
Speaker 1: I changed my mind, which is by the way, this

1098
00:53:35,960 --> 00:53:37,560
Speaker 1: had the mIRC works. So anyone who thinks are getting

1099
00:53:37,560 --> 00:53:40,600
Speaker 1: brain damageter from all this sort of stuff. That's the

1100
00:53:40,600 --> 00:53:42,680
Speaker 1: purpose of what we do is actually to bring up

1101
00:53:42,719 --> 00:53:46,439
Speaker 1: to day to today, not beyond today. We can only

1102
00:53:46,480 --> 00:53:49,319
Speaker 1: talk about it in the Reserve Bank only opines on

1103
00:53:49,400 --> 00:53:51,920
Speaker 1: what they know as of the day of their decision.

1104
00:53:52,239 --> 00:53:55,239
Speaker 1: Correct and they probably would well accept them, maybe never

1105
00:53:55,280 --> 00:53:57,880
Speaker 1: say it, but if it dramatically trained change the next thing,

1106
00:53:57,880 --> 00:53:59,480
Speaker 1: they would dramatically change their position.

1107
00:54:00,120 --> 00:54:03,000
Speaker 2: To finish up on this one mark, I remember Glenn Stevens,

1108
00:54:03,080 --> 00:54:05,600
Speaker 2: the XRBA governor when the global financial is one of

1109
00:54:05,600 --> 00:54:06,840
Speaker 2: the best. He was great.

1110
00:54:07,320 --> 00:54:08,319
Speaker 1: I think he was one of the best.

1111
00:54:08,360 --> 00:54:11,600
Speaker 2: I agree in the early stages of the global financial

1112
00:54:11,640 --> 00:54:17,080
Speaker 2: crisis in two thousand and seven. Eight that period, he

1113
00:54:17,520 --> 00:54:19,920
Speaker 2: gave a speech saying, oh, inflation, and that's when inflation

1114
00:54:20,000 --> 00:54:22,319
Speaker 2: was a little elevated, and yeah, they had hiking rates,

1115
00:54:22,320 --> 00:54:23,719
Speaker 2: so we're going to have to hike interstrates again.

1116
00:54:23,719 --> 00:54:25,680
Speaker 1: It is the beginning of two thousand and eight, rates

1117
00:54:25,680 --> 00:54:26,279
Speaker 1: were quite high.

1118
00:54:26,320 --> 00:54:30,400
Speaker 2: Two months later after that really hawkish view on the economy, August,

1119
00:54:31,080 --> 00:54:33,880
Speaker 2: the shit hit the fan in the global financial crisis.

1120
00:54:34,080 --> 00:54:37,200
Speaker 2: The wheels fell on August. I remember data was falling,

1121
00:54:37,280 --> 00:54:40,239
Speaker 2: banks were going belly up. He cut fifty bases. Well,

1122
00:54:40,320 --> 00:54:42,279
Speaker 2: he said, I'm reacting to the new news. Yeah. No

1123
00:54:42,320 --> 00:54:45,520
Speaker 2: one said, oh, you were wrong, because he acted so

1124
00:54:45,680 --> 00:54:49,440
Speaker 2: quickly and he was transparent about it. Yeah, he built

1125
00:54:49,480 --> 00:54:51,840
Speaker 2: his credibility. And I agree with you as one of

1126
00:54:51,840 --> 00:54:54,040
Speaker 2: the best central bankers Australia has had.

1127
00:54:54,120 --> 00:54:57,520
Speaker 1: Yeah, I totally koogie. Thanks very much, mate. I'm getting excited.

1128
00:54:57,600 --> 00:55:00,000
Speaker 1: I just got a feeling of rate reductions. But anyway,

1129
00:55:00,080 --> 00:55:02,759
Speaker 1: I'm not off for this meeting. I'm coming up and

1130
00:55:02,800 --> 00:55:05,919
Speaker 1: I think it's gonna be twenty twenty five anyway. Look,

1131
00:55:06,080 --> 00:55:10,480
Speaker 1: even if even if the money markets are corrected sixty percent,

1132
00:55:10,560 --> 00:55:16,200
Speaker 1: chance before Christmas and even if CBA is right twenty

1133
00:55:16,200 --> 00:55:20,279
Speaker 1: five base point reduction in December this year, I think

1134
00:55:20,320 --> 00:55:22,920
Speaker 1: the RBA has gone so far into LIMBA making so

1135
00:55:23,000 --> 00:55:25,560
Speaker 1: clear that they're not going to reduce rates this year.

1136
00:55:26,719 --> 00:55:29,719
Speaker 1: It'll be a very big call for her to turn

1137
00:55:29,800 --> 00:55:31,680
Speaker 1: back on that statement that she's already made.

1138
00:55:31,560 --> 00:55:33,799
Speaker 2: Correct unless they get one shock number and we haven't

1139
00:55:33,800 --> 00:55:34,040
Speaker 2: had that.

1140
00:55:34,239 --> 00:55:36,440
Speaker 1: I don't think that. That's my view. I don't think.

1141
00:55:36,960 --> 00:55:40,000
Speaker 1: And you just said something very interesting about Glenn Stevens.

1142
00:55:40,320 --> 00:55:41,920
Speaker 1: We had the shock number we did.

1143
00:55:41,920 --> 00:55:45,640
Speaker 2: Oh yes, yes, Lehman Brothers was Yeah. There was catastrophe

1144
00:55:45,680 --> 00:55:50,719
Speaker 2: in global markets and the market said, thank goodness, you're listening. Yeah, yeah,

1145
00:55:50,760 --> 00:55:53,359
Speaker 2: yeah that the markets were so happy rather than him

1146
00:55:53,360 --> 00:55:56,800
Speaker 2: being dogmatic and I'm not going to change my mind,

1147
00:55:57,040 --> 00:56:00,360
Speaker 2: Holy smokes. He changed his mind when the facts change

1148
00:56:00,520 --> 00:56:03,799
Speaker 2: for the worst. And we got through that, and I

1149
00:56:03,840 --> 00:56:06,600
Speaker 2: think in our painless but we got through it.

1150
00:56:06,719 --> 00:56:08,840
Speaker 1: During the COVID period. I think that's sort of our

1151
00:56:09,360 --> 00:56:11,560
Speaker 1: previous governor. He sort of did the same thing too.

1152
00:56:11,719 --> 00:56:14,960
Speaker 2: Oh yeah, yeah. The way that policy and even Josh

1153
00:56:15,000 --> 00:56:20,080
Speaker 2: Rodenberg with is some of the fiscal similar measures at

1154
00:56:20,120 --> 00:56:23,000
Speaker 2: the time when we thought unemployment was going to fifteen percent.

1155
00:56:23,040 --> 00:56:24,960
Speaker 2: We thought we were in the worst GDP since the

1156
00:56:24,960 --> 00:56:28,000
Speaker 2: Great Depression of the nineteen thirties. I don't think there

1157
00:56:28,040 --> 00:56:30,200
Speaker 2: was a policy mistake in hindsight saying oh, maybe they

1158
00:56:30,200 --> 00:56:32,680
Speaker 2: shouldn't have done this. No, at the time, it's a

1159
00:56:32,719 --> 00:56:34,880
Speaker 2: bit like fighting a fire. Should I really use all

1160
00:56:34,920 --> 00:56:36,920
Speaker 2: this water? Should I save water? Now? You put out

1161
00:56:36,960 --> 00:56:39,480
Speaker 2: the bloody fire and then worry about it. So both

1162
00:56:39,800 --> 00:56:43,520
Speaker 2: Philip Light, the RBA, Josh Rodenberger's treasurer at the time,

1163
00:56:43,600 --> 00:56:46,880
Speaker 2: during the glow, during the COVID pandemic, through the kitchen

1164
00:56:46,960 --> 00:56:50,120
Speaker 2: sink at the problem. We got out of it, thank goodness,

1165
00:56:50,160 --> 00:56:51,800
Speaker 2: you know, we got out of it in really good shape.

1166
00:56:51,880 --> 00:56:57,040
Speaker 2: The economy, that is. Maybe. But at the end of

1167
00:56:57,080 --> 00:56:59,400
Speaker 2: the day, I think what they did was broadly correct.

1168
00:57:00,000 --> 00:57:02,839
Speaker 2: That's correct. That was correct, you know. And if they

1169
00:57:02,840 --> 00:57:05,400
Speaker 2: spent a dollar too much, so be it. Take it

1170
00:57:05,440 --> 00:57:08,160
Speaker 2: back now. And if they cut too much, we'll hike

1171
00:57:08,239 --> 00:57:10,240
Speaker 2: a bit more, which is what they did, of course.

1172
00:57:10,040 --> 00:57:11,920
Speaker 1: Which is what we've all got to be cognizant of.

1173
00:57:13,040 --> 00:57:17,640
Speaker 1: We are now still paying for the reactions and the

1174
00:57:17,680 --> 00:57:22,040
Speaker 1: overreaction as a result of the reactions to COVID. I mean,

1175
00:57:22,080 --> 00:57:23,720
Speaker 1: like that was an extraordinary period.

1176
00:57:24,000 --> 00:57:26,640
Speaker 2: We don't often. In fact, a lot of the analysis

1177
00:57:26,680 --> 00:57:28,800
Speaker 2: today doesn't actually refer back to that, and in fact,

1178
00:57:28,800 --> 00:57:31,680
Speaker 2: a lot of the hangover of COVID, both in terms

1179
00:57:31,720 --> 00:57:36,520
Speaker 2: of the inflation pressures not just globally inflation pressures, skills shortages,

1180
00:57:36,960 --> 00:57:39,400
Speaker 2: the current budget positions, all that sort of stuff is

1181
00:57:39,440 --> 00:57:42,440
Speaker 2: still being repaired, if that's the right word, from what

1182
00:57:42,680 --> 00:57:46,120
Speaker 2: was the medicine that was sort of dished out during

1183
00:57:46,120 --> 00:57:49,200
Speaker 2: the COVID pandemic to the economy, And that'll take another

1184
00:57:49,200 --> 00:57:51,200
Speaker 2: couple of years to sort of completely wash out of

1185
00:57:51,240 --> 00:57:52,840
Speaker 2: the system and we'll get back onto an even gain.

1186
00:57:52,880 --> 00:57:54,800
Speaker 1: I think we're ever going to get back to, you know,

1187
00:57:54,800 --> 00:57:57,400
Speaker 1: because we've suffered two sort of structural changes, which is

1188
00:57:57,640 --> 00:57:59,600
Speaker 1: one was COVID, but prior to that was GFC. But

1189
00:57:59,680 --> 00:58:01,080
Speaker 1: you ever think we'll get back to the days when

1190
00:58:01,120 --> 00:58:03,160
Speaker 1: you and I first met each other, when we know

1191
00:58:03,200 --> 00:58:06,120
Speaker 1: we would have five rate rises, five rate reductions over

1192
00:58:06,160 --> 00:58:08,840
Speaker 1: the night long period. Then you know, then you have

1193
00:58:08,920 --> 00:58:11,560
Speaker 1: a loll and have a six up, six down, five up,

1194
00:58:11,600 --> 00:58:14,439
Speaker 1: five six down. You know, we it was so sort

1195
00:58:14,440 --> 00:58:17,480
Speaker 1: of easy to predict, and we always had inflation around

1196
00:58:17,480 --> 00:58:18,200
Speaker 1: two to three He.

1197
00:58:18,240 --> 00:58:20,120
Speaker 2: Got to three point one and went to two point five.

1198
00:58:20,320 --> 00:58:23,880
Speaker 1: Was always in the from ninety six it was extraordinary

1199
00:58:23,960 --> 00:58:27,320
Speaker 1: right to extraordinary twenty twenty sort of thing.

1200
00:58:27,680 --> 00:58:31,720
Speaker 2: It was a little odd blippe up and down whatever,

1201
00:58:31,760 --> 00:58:32,720
Speaker 2: but it was remarkable.

1202
00:58:32,720 --> 00:58:34,320
Speaker 1: Do you think we'll ever get back to those sort

1203
00:58:34,360 --> 00:58:35,840
Speaker 1: of that that that's that rhythm.

1204
00:58:36,040 --> 00:58:40,040
Speaker 2: Look, you're reminded me of a speech that the former

1205
00:58:40,080 --> 00:58:42,480
Speaker 2: governor Philip Low gave a very good, really good speech

1206
00:58:43,120 --> 00:58:47,040
Speaker 2: where he said that the nature of economy economies now,

1207
00:58:47,800 --> 00:58:52,480
Speaker 2: artificial intelligence, technology and even things like climate change are

1208
00:58:52,480 --> 00:58:55,240
Speaker 2: going to make the economy more volatile. So if you

1209
00:58:55,240 --> 00:58:58,880
Speaker 2: get another flood that washes out cabbages and lettuces and

1210
00:58:58,920 --> 00:59:00,840
Speaker 2: the price spikes up, you do about it. Then you

1211
00:59:00,840 --> 00:59:03,960
Speaker 2: get insurance premiums going up because the cost of ensuring

1212
00:59:04,480 --> 00:59:06,960
Speaker 2: you know, property in Lismo is unaffordable now on the

1213
00:59:06,960 --> 00:59:09,920
Speaker 2: floodplains and all this sort of stuff. So I'm wondering

1214
00:59:10,240 --> 00:59:14,680
Speaker 2: that maybe we won't. Maybe we'll have like more intense

1215
00:59:14,840 --> 00:59:18,120
Speaker 2: moves up and down according to these shock events that

1216
00:59:18,160 --> 00:59:19,160
Speaker 2: come along every now and then.

1217
00:59:19,240 --> 00:59:22,720
Speaker 1: Below the weather yeap, yep, everything's more extreme ye and

1218
00:59:23,600 --> 00:59:25,040
Speaker 1: cold window storm out.

1219
00:59:25,200 --> 00:59:27,360
Speaker 2: The one thing that we should never get is geopolitics

1220
00:59:27,360 --> 00:59:29,520
Speaker 2: that you know, the events that are going on in

1221
00:59:29,800 --> 00:59:33,200
Speaker 2: Russia and Ukraine and the Middle East now and the China.

1222
00:59:33,320 --> 00:59:36,440
Speaker 2: The China one's still there. We've got the US presidential election.

1223
00:59:37,440 --> 00:59:41,200
Speaker 2: I don't know what's happening there other than it could

1224
00:59:41,200 --> 00:59:43,280
Speaker 2: be big. No, you're right, and I don't even know

1225
00:59:43,320 --> 00:59:43,760
Speaker 2: what direction.

1226
00:59:43,920 --> 00:59:46,919
Speaker 1: We've never seen any US presidential elections being like this either.

1227
00:59:47,040 --> 00:59:49,040
Speaker 1: I mean, this is this is like this is this

1228
00:59:49,120 --> 00:59:52,720
Speaker 1: is sort of a bit mental and it's sort of like,

1229
00:59:53,960 --> 00:59:58,280
Speaker 1: you know, the two extremes, two extreme individuals, totally different,

1230
00:59:59,160 --> 01:00:02,400
Speaker 1: and either one is probably not a good outcome. I'm

1231
01:00:02,440 --> 01:00:05,240
Speaker 1: just talking about economically, probably not a good outcome either way.

1232
01:00:05,480 --> 01:00:07,760
Speaker 1: And by the way, no one can predict what the

1233
01:00:07,800 --> 01:00:09,560
Speaker 1: net effects is going to be. It's quite interesting. The

1234
01:00:09,560 --> 01:00:12,480
Speaker 1: world has changed, mate, So maybe answer that. My question is, no,

1235
01:00:12,520 --> 01:00:14,560
Speaker 1: we won't. It's not going to come back that way.

1236
01:00:14,640 --> 01:00:16,640
Speaker 1: We're not going to have that lack of We never

1237
01:00:16,680 --> 01:00:17,760
Speaker 1: had volatility before.

1238
01:00:17,880 --> 01:00:21,760
Speaker 2: No, it's been a phenomenon since the GFC and then COVID.

1239
01:00:21,920 --> 01:00:24,400
Speaker 1: Yeah, it's amazing, thanks mate, talk so thanks Mark.

1240
01:00:24,520 --> 01:00:24,880
Speaker 2: See it