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Speaker 1: Welcome to Ask Fear and Greed, where we take your

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Speaker 1: questions and do our best to answer them. I'm Michael Thompson,

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Speaker 1: and good afternoon, Sean Aylmer.

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Speaker 2: Hi, Michael, Sean.

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Speaker 1: If you have a question for us, jump onto Fear

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Speaker 1: and Greed dot com, dot are you or any of

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Speaker 1: the social media platforms Facebook, Instagram LinkedIn Facebook is where

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Speaker 1: this one has come from. It's come from Luke, and

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Speaker 1: I have never been so glad that you are here today, Sean.

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Speaker 1: And I'm not trying to wing it on this one

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Speaker 1: because the question is a multi part question, and Luke

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Speaker 1: says via Facebook, he goes, is it just me or

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Speaker 1: a market's way off in pricing in rate cuts more

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Speaker 1: so than normal. I'm not old enough to have paid

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Speaker 1: much attention to market changes prior to twenty fourteen, But

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Speaker 1: that's a bit of a dig at you, I think, Sean.

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Speaker 1: But possibly it seems that the COVID pandemic was completely

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Speaker 1: unprecedented and the shockwaves are unable to be managed. As

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Speaker 1: a result, we have high inflation, strong economic growth, good

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Speaker 1: unemployment numbers, decent real estate, and people still have plenty

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Speaker 1: of money to spend less and less each month However,

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Speaker 1: is this normal historically?

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Speaker 2: Oh, Michael, what is normal?

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Speaker 1: That's a very good question. I could probably answer that one.

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Speaker 2: Yeah, so many parts of this cracking question. Let's go

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Speaker 2: through them. Our market's way off in pricing in rate

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Speaker 2: cuts Part one, Yes, I think so. Reserve Bank Governor

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Speaker 2: Michelle Bullock has made it very clear there won't be

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Speaker 2: a rate cut until next year, but still one is

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Speaker 2: priced in this year. Now, the Reserve Bank isn't always right.

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Speaker 2: We found that out in twenty twenty two, to the

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Speaker 2: detriment of many people. And so maybe the market is

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Speaker 2: right and the Reserve Bank is wrong. There will be

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Speaker 2: a rate cut later this year, but that's not what

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Speaker 2: the Reserve Bank is saying, and it is what's priced in.

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Speaker 2: Time will tell who is right. But given everything the

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Speaker 2: Central Bank has said, well, I think it's fair to

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Speaker 2: say markets are off the pace on that one. Part

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Speaker 2: two of the question. It seems that the COVID pandemic

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Speaker 2: was completely unprecedented and the shot waves are unable to

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Speaker 2: be managed as a result. I agree about COVID being

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Speaker 2: completely unprecedented, certainly over the last century. Maybe the Spanish

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Speaker 2: flu or something like that, Michael, perhaps could be compared

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Speaker 2: to it.

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Speaker 1: I wasn't alive at that time, unfortunately.

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Speaker 2: Nor me Michael, nor me clarify, I might have been

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Speaker 2: here for the clara. Now the second part, managing the

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Speaker 2: shot waves have proven extremely difficult, There's no doubt about that.

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Speaker 2: And then I mean, I always think of the supply

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Speaker 2: chain disruption. That's the one that really hit hardest. Trade

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Speaker 2: is slowed markedly. All this flow of goods stopped. It

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Speaker 2: took a long time, or maybe it's still taking a

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Speaker 2: long time to get things normalized. The way I think

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Speaker 2: about this one is, you know, the world is going

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Speaker 2: a bit mad when used haigh prices start rising, and

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Speaker 2: they start rising fast because dealers can't get new cards

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Speaker 2: into the country. That's exactly what happened during COVID, So

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Speaker 2: very difficult to manage, definitely unprecedented, very difficult to manage.

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Speaker 2: The upshot of that was inflation, and authorities have been

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Speaker 2: fighting to deal with inflation ever since. It is getting

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Speaker 2: under control, though it isn't there yet. It might be

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Speaker 2: almost there in Europe, maybe almost there in US, but

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Speaker 2: not in Australia. So to the question we have high inflation,

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Speaker 2: tick on that one strong economic growth, I'm not sure

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Speaker 2: about that one, and we don't really. Growth is running

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Speaker 2: at about one percent per anum, and that's only because

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Speaker 2: of immigration. We're actually in a per capita recession. If

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Speaker 2: the same number of people were in the economy as

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Speaker 2: it was two years ago, we would be in a recession.

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Speaker 2: But certainly, given how fast and far rates have gone,

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Speaker 2: we've done pretty well good. Unemployment numbers definitely tick on

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Speaker 2: that one. Real estate take on that one. People still

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Speaker 2: have plenty of money to spend less and less each month.

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Speaker 2: I'm not sure about this one, Luke. Some demographics are

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Speaker 2: definitely finding it very tough, like first home buys, lower

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Speaker 2: income groups. Others aren't, notably many retirees. The point is

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Speaker 2: this normal historically, well, broadly, very broadly. Yes, this is

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Speaker 2: how the economy runs. Each economic cycle has its own quirks,

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Speaker 2: and they hangover from COVID is quite the quirk. But

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Speaker 2: interest rates have slayed the economy. They continue you to do,

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Speaker 2: so they are doing what they're supposed to do. Keep

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Speaker 2: in mind the unemployment rate, which is the unemployment rate,

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Speaker 2: is still relatively low. It's a lagging indicator, so it

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Speaker 2: takes a while to catch up to what's happening. In

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Speaker 2: the real economy, people don't just think, oh, we had

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Speaker 2: a bad day today, I'm going to sack someone. They

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Speaker 2: actually wait for months and six months maybe before they

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Speaker 2: decide we just can't afford the people anymore, we're going

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Speaker 2: to let them go. So that's why unemployment is a

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Speaker 2: lagging indicator. Don't be surprised if it quickly heads to

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Speaker 2: four and a half percent or beyond this year, as

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Speaker 2: it does start to catch up with what's happening in

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Speaker 2: the real economy. Inflation has proven very tough to control,

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Speaker 2: particularly services inflation, which includes lots of labor costs. But

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Speaker 2: there are definitely signs that service inflation is moderating, and

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Speaker 2: Governor shell Bullock from Reserve Bank is very determined color inflation,

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Speaker 2: as she keeps saying, the alternate is much worse than

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Speaker 2: the long runs. Bottom line is that economics is working

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Speaker 2: broadly as you would expect, Luke. But to your point,

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Speaker 2: COVID is such a weird and wild starting point. This

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Speaker 2: economic cycle is just a lot more quirkier than the others.

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Speaker 1: That's exactly what I was going to say.

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Speaker 2: All of that.

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Speaker 1: You took the words right out of my mouth, Johan,

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Speaker 1: just before I had a chance to unleash on that question.

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Speaker 1: What a brilliant question that was.

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Speaker 2: Yeah, yeah, that's just like that is appearing to my ego. Luke,

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Speaker 2: it's just like start crapping on it about the economy. Sean,

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Speaker 2: thank you very much to think.

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Speaker 1: Just switch off the mic and just wander off for

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Speaker 1: about three or four minutes. Come back and he'll still

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Speaker 1: be going.

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Speaker 2: Absolutely no.

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Speaker 1: They thought that was a RiPP up. So thank you

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Speaker 1: Luke for sending that one in, and thank you Sean

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Speaker 1: for answering it so eloquently.

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Speaker 2: Thank you, Michael, Thank you, Luke. Great question.

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Speaker 1: Indeed, remember if you've got something that you would like

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Speaker 1: to know, it doesn't need to be on the economy.

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Speaker 1: It can be on anything to do with business or

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Speaker 1: anything really, and we'll give it a crack. God, that's

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Speaker 1: that's risky, isn't it saying really, we'll give it a crack?

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Speaker 2: Can we do it? Can we do an ask?

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Speaker 1: Michael?

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Speaker 2: Yeah?

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Speaker 1: Do like relationships coaching?

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Speaker 2: Yeah? I was going to say a mathematical problem would

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Speaker 2: be good for you.

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Speaker 1: Yeah, that too, that too. I could do my own

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Speaker 1: version of Dolly Doctor remember that, Yeah, Dolly magazines?

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Speaker 2: Wow, yes, I do vaguely.

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Speaker 1: Okay, anyway, going to a weird place now. If you

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Speaker 1: have something that you would like to know, send it

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Speaker 1: on through via LinkedIn, Instagram, Facebook, or at Fear and

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Speaker 1: Green dot com dot au. I'm Michael Thompson and this

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Speaker 1: is as Fear and Great