1 00:00:03,800 --> 00:00:06,180 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,230 --> 00:00:08,879 Sean Aylmer: Aylmer. For the second month in a row, the Reserve 3 00:00:08,880 --> 00:00:11,619 Sean Aylmer: Bank Board has increased the official cash rate but, this 4 00:00:11,619 --> 00:00:15,110 Sean Aylmer: time, the central bank surprised economists with a 50 basis 5 00:00:15,110 --> 00:00:19,540 Sean Aylmer: point jump. It's the biggest single increase since 2000, taking 6 00:00:19,720 --> 00:00:23,040 Sean Aylmer: the cash rate to 0. 85%. We're now left with 7 00:00:23,040 --> 00:00:26,009 Sean Aylmer: plenty of questions: What impact will the increase have? How 8 00:00:26,010 --> 00:00:28,190 Sean Aylmer: many more can we expect? Will it be enough to get 9 00:00:28,190 --> 00:00:31,930 Sean Aylmer: inflation under control? Gareth Aird is Commonwealth Bank's head of 10 00:00:31,990 --> 00:00:34,309 Sean Aylmer: Australian Economics. Gareth, welcome back to Fear and Greed. 11 00:00:34,310 --> 00:00:36,510 Gareth Aird: Good day, Sean. It's nice to be here. 12 00:00:37,030 --> 00:00:38,770 Sean Aylmer: You had a busy day yesterday, I'm imagining. 13 00:00:39,430 --> 00:00:42,460 Gareth Aird: Oh, look, I did and many of the market did. 14 00:00:42,550 --> 00:00:44,809 Gareth Aird: The decision by the Reserve Bank to increase the cash 15 00:00:44,810 --> 00:00:48,340 Gareth Aird: rate by 50 basis points caught almost everyone by surprise. 16 00:00:49,060 --> 00:00:52,080 Gareth Aird: I say almost everyone; there were actually a couple of analysts out there 17 00:00:52,080 --> 00:00:54,700 Gareth Aird: who did pick the 50 basis points but, in the 18 00:00:54,700 --> 00:00:58,410 Gareth Aird: main, most people were thinking either 25 or 40. We 19 00:00:58,410 --> 00:01:01,000 Gareth Aird: thought they'd do 25 at Commonwealth Bank, given that's what they 20 00:01:01,080 --> 00:01:03,720 Gareth Aird: did last month, and they said that was business as 21 00:01:03,720 --> 00:01:07,670 Gareth Aird: usual. We thought if they were going to not do 25, they might do 22 00:01:07,690 --> 00:01:10,350 Gareth Aird: 40 given they flagged to us in the May Board 23 00:01:10,350 --> 00:01:13,790 Gareth Aird: minutes that they had considered 40 basis points. But look, 24 00:01:13,790 --> 00:01:16,300 Gareth Aird: to come out and do 50 basis points, I thought 25 00:01:16,300 --> 00:01:19,490 Gareth Aird: was a very big deal. It also tells you a 26 00:01:19,490 --> 00:01:22,130 Gareth Aird: little bit about where their head space is and how 27 00:01:22,130 --> 00:01:24,780 Gareth Aird: quickly now they're going to move to try and put 28 00:01:24,780 --> 00:01:28,679 Gareth Aird: downward pressure on inflation, which actually changes the growth outlook. 29 00:01:30,140 --> 00:01:32,150 Sean Aylmer: There's a bit to unpack in all that. The Reserve 30 00:01:32,209 --> 00:01:36,360 Sean Aylmer: Bank seem to be fairly confident about inflation until the 31 00:01:36,360 --> 00:01:39,450 Sean Aylmer: last few months, really. Now, it seems to have flipped, 32 00:01:39,650 --> 00:01:43,910 Sean Aylmer: totally. Why did it go 50 basis points yesterday, do 33 00:01:43,910 --> 00:01:44,190 Sean Aylmer: you think? 34 00:01:44,490 --> 00:01:47,120 Gareth Aird: You're right. They've changed their assessment on the outlook for 35 00:01:47,120 --> 00:01:50,690 Gareth Aird: inflation very, very quickly. They've gone from pretty much all 36 00:01:50,690 --> 00:01:52,900 Gareth Aird: of last year and earlier this year to telling us 37 00:01:53,000 --> 00:01:56,540 Gareth Aird: they wanted inflation up. Their concern was that it wouldn't 38 00:01:56,540 --> 00:01:59,000 Gareth Aird: be up in a sustainable way because it wouldn't be 39 00:01:59,000 --> 00:02:01,960 Gareth Aird: accompanied with higher wages growth and, therefore, they were going 40 00:02:01,960 --> 00:02:04,120 Gareth Aird: to wait until the last possible minute to raise the 41 00:02:04,120 --> 00:02:07,360 Gareth Aird: cash rate. Now, having increased the cash rate in May, 42 00:02:07,760 --> 00:02:11,080 Gareth Aird: they've now accelerated the size of the rate hike to 50 basis 43 00:02:11,080 --> 00:02:14,930 Gareth Aird: points, and they're talking about needing to get inflation down and the 44 00:02:14,930 --> 00:02:18,470 Gareth Aird: Board being committed to doing what is necessary to ensure 45 00:02:18,470 --> 00:02:23,130 Gareth Aird: that inflation returns to target. It's a really radical shift 46 00:02:23,270 --> 00:02:26,190 Gareth Aird: in a very short amount of time. I think it 47 00:02:26,190 --> 00:02:29,040 Gareth Aird: wasn't actually necessary to make such a radical shift. I 48 00:02:29,040 --> 00:02:33,290 Gareth Aird: think 25s from here would've suffice because the Australian household 49 00:02:33,290 --> 00:02:35,510 Gareth Aird: sector's very leveraged. They'll now get a lot of mileage 50 00:02:35,510 --> 00:02:38,500 Gareth Aird: out of rate hikes. There's already a few cracks appearing 51 00:02:38,500 --> 00:02:41,750 Gareth Aird: in the data. Consumer confidence is well below average levels. 52 00:02:42,280 --> 00:02:45,250 Gareth Aird: Our card spend data at the bank suggests that spending 53 00:02:45,250 --> 00:02:48,280 Gareth Aird: momentum has slowed quite a bit in the last five 54 00:02:48,280 --> 00:02:52,579 Gareth Aird: weeks, and home prices are already coming off. I think the 55 00:02:52,580 --> 00:02:55,220 Gareth Aird: case was actually stronger just to keep the business its usual 56 00:02:55,230 --> 00:02:58,530 Gareth Aird: 25s going for a while but, clearly, the Reserve Bank 57 00:02:58,700 --> 00:03:00,900 Gareth Aird: doesn't think that way, which is really what matters in 58 00:03:00,910 --> 00:03:04,220 Gareth Aird: the end. It feels like they're in the same place now as the 59 00:03:04,220 --> 00:03:07,220 Gareth Aird: Fed, the RBNZ, the Bank of Canada where they really 60 00:03:07,220 --> 00:03:10,630 Gareth Aird: want to run hard now against inflation. I think that 61 00:03:10,630 --> 00:03:13,980 Gareth Aird: does actually alter the growth outlook because the harder they 62 00:03:13,980 --> 00:03:16,900 Gareth Aird: go in terms of rate hikes, the more that's going 63 00:03:16,900 --> 00:03:20,649 Gareth Aird: to weigh on consumer spending. In time away on inflation, 64 00:03:20,650 --> 00:03:23,570 Gareth Aird: it won't weigh on inflation straight away. But I do think 65 00:03:23,570 --> 00:03:25,790 Gareth Aird: now it's actually starting to change the picture as we 66 00:03:25,790 --> 00:03:27,870 Gareth Aird: think about how the economy will evolve from here. 67 00:03:28,280 --> 00:03:30,540 Sean Aylmer: When I studied economics many years ago, and they talked 68 00:03:30,770 --> 00:03:34,340 Sean Aylmer: about the transmission mechanism of monetary policy, it was something 69 00:03:34,340 --> 00:03:37,460 Sean Aylmer: like 18 months where the full effect of higher interest 70 00:03:37,460 --> 00:03:39,310 Sean Aylmer: rates or lower interest rates were supposed to hit the 71 00:03:39,310 --> 00:03:43,180 Sean Aylmer: economy. What you just said then suggests that, even if 72 00:03:43,180 --> 00:03:45,810 Sean Aylmer: it's not the interest rates, perhaps, it's the expectations of 73 00:03:45,810 --> 00:03:47,760 Sean Aylmer: higher interest rates or something seems to be hitting the 74 00:03:47,860 --> 00:03:48,880 Sean Aylmer: economy pretty quickly. 75 00:03:49,540 --> 00:03:52,190 Gareth Aird: Look, it's a good point. I think the lags between 76 00:03:52,190 --> 00:03:54,670 Gareth Aird: changes in the cash rate and the impact on the economy 77 00:03:54,770 --> 00:03:56,660 Gareth Aird: are now a lot smaller than what they used to 78 00:03:56,660 --> 00:04:00,000 Gareth Aird: be. You can see that in the housing market. Historically, 79 00:04:00,000 --> 00:04:02,720 Gareth Aird: if we look back at previous tightening cycles, home prices 80 00:04:03,030 --> 00:04:05,550 Gareth Aird: have been rising into the tightening cycle, and then they've 81 00:04:05,550 --> 00:04:09,320 Gareth Aird: kept rising as rates have gone up. It's only after 82 00:04:09,400 --> 00:04:11,830 Gareth Aird: several rate hikes have been delivered that home prices start 83 00:04:11,830 --> 00:04:14,480 Gareth Aird: to slow. Whereas this time around, we've had one rate hike 84 00:04:15,040 --> 00:04:17,529 Gareth Aird: and home prices are already coming off. I think they'll 85 00:04:17,529 --> 00:04:21,020 Gareth Aird: actually come off quite quickly from here. A key reason 86 00:04:21,020 --> 00:04:24,020 Gareth Aird: here as to why the lags between changes in the cash 87 00:04:24,020 --> 00:04:26,810 Gareth Aird: rate and the impact on the economy and the housing market 88 00:04:26,850 --> 00:04:30,210 Gareth Aird: and consumer psyche is far more immediate is that households 89 00:04:30,290 --> 00:04:33,710 Gareth Aird: simply carry so much more debt than they did previously, which 90 00:04:33,710 --> 00:04:36,950 Gareth Aird: means they're way more exposed to a rate hike than 91 00:04:36,950 --> 00:04:40,820 Gareth Aird: ever before. On top of that, because the starting rate 92 00:04:40,820 --> 00:04:44,859 Gareth Aird: is actually so low, the percentage change in the rate is actually 93 00:04:44,860 --> 00:04:48,339 Gareth Aird: very, very big. To put some context around it for 94 00:04:48,339 --> 00:04:52,060 Gareth Aird: the listeners, if you went from a 8% mortgage rate to 95 00:04:52,060 --> 00:04:54,930 Gareth Aird: a 16% mortgage rate, that was a doubling in your 96 00:04:54,930 --> 00:04:57,320 Gareth Aird: interest cost on debt. It's going to be the same 97 00:04:57,320 --> 00:05:00,850 Gareth Aird: going from 2% to 4%. I think the reason that 98 00:05:00,900 --> 00:05:03,330 Gareth Aird: the lag between changing the cash rate and the economy will be 99 00:05:03,330 --> 00:05:05,479 Gareth Aird: a lot shorter now is simply these rate hikes will 100 00:05:05,480 --> 00:05:08,230 Gareth Aird: be quite powerful. It's one of the reasons why we 101 00:05:08,230 --> 00:05:10,839 Gareth Aird: thought they didn't need to be too heavy- handed about 102 00:05:11,190 --> 00:05:14,750 Gareth Aird: pushing the cash rate up quickly. But 50 basis points 103 00:05:14,820 --> 00:05:18,300 Gareth Aird: is a big increase relative to the average mortgage rate 104 00:05:18,300 --> 00:05:20,919 Gareth Aird: right now, and I think lots of households out there 105 00:05:20,920 --> 00:05:23,300 Gareth Aird: will find that the interest costs on their debt goes up 106 00:05:23,300 --> 00:05:27,080 Gareth Aird: quite quickly and their mortgage repayments are rising quite, quite 107 00:05:27,080 --> 00:05:29,770 Gareth Aird: swiftly. That means they'll need to look at where they're 108 00:05:29,770 --> 00:05:32,670 Gareth Aird: spending money and make some adjustments around where they're spending 109 00:05:32,670 --> 00:05:35,330 Gareth Aird: money. Of course, that has an impact on the economy, 110 00:05:35,330 --> 00:05:38,120 Gareth Aird: which is why we're going to be downgrading our assessment 111 00:05:38,200 --> 00:05:40,760 Gareth Aird: for the economic outlook based on where we think the 112 00:05:40,760 --> 00:05:42,310 Gareth Aird: RBA is going to take rates this year. 113 00:05:42,740 --> 00:05:44,609 Sean Aylmer: Stay with me Gareth. We'll be back in a minute. 114 00:05:50,800 --> 00:05:53,470 Sean Aylmer: I'm speaking to Gareth Aird, head of Australian Economics at 115 00:05:53,470 --> 00:05:58,100 Sean Aylmer: the Commonwealth Bank. Where do you think the RBA will take rates this year? 116 00:05:58,700 --> 00:06:00,540 Sean Aylmer: What is your assessment of the economy now then? 117 00:06:01,120 --> 00:06:04,240 Gareth Aird: Well, having delivered 50 basis points, we think they'll deliver 118 00:06:04,240 --> 00:06:08,370 Gareth Aird: another 50 basis points in July. Then, we've got 25 119 00:06:08,370 --> 00:06:10,619 Gareth Aird: penciled in there for August, but I think there's a risk that we 120 00:06:10,620 --> 00:06:13,980 Gareth Aird: get a big Q2 CPI number, and they want to deliver 121 00:06:13,980 --> 00:06:17,430 Gareth Aird: another 50 basis points. That would be very aggressive tightening. 122 00:06:17,860 --> 00:06:20,400 Gareth Aird: Then we've got a couple more 25s over the second 123 00:06:20,400 --> 00:06:22,710 Gareth Aird: half of this year to see the cash rate in 124 00:06:22,710 --> 00:06:26,510 Gareth Aird: the year at 2.1%. The risk there is that they do 125 00:06:26,510 --> 00:06:28,890 Gareth Aird: a little bit more and take it to 2. 35%. 126 00:06:29,180 --> 00:06:32,140 Gareth Aird: You get those numbers assuming they deliver multiples of either 127 00:06:32,140 --> 00:06:35,469 Gareth Aird: 25 or 50, but no one can be too sure 128 00:06:35,470 --> 00:06:37,800 Gareth Aird: on anything at the moment. What we think for the 129 00:06:37,800 --> 00:06:40,140 Gareth Aird: economy at that point then is that the Reserve Bank 130 00:06:40,140 --> 00:06:44,140 Gareth Aird: has actually taken policy to a contractionary setting. We think 131 00:06:44,140 --> 00:06:48,680 Gareth Aird: about interest rates as either being stimulatory, neutral, or contractionary, 132 00:06:49,270 --> 00:06:52,589 Gareth Aird: and we think that neutral rate in Australia is very, very low, 133 00:06:52,730 --> 00:06:56,760 Gareth Aird: somewhere around 1.5%, given how much debt the household sector 134 00:06:56,760 --> 00:07:00,040 Gareth Aird: is carrying. We sort of run some sensitivities to say, " 135 00:07:00,580 --> 00:07:02,860 Gareth Aird: What kind of changes in the cash rate? What will 136 00:07:02,860 --> 00:07:05,360 Gareth Aird: they do to mortgage repayments as a share of income?" 137 00:07:05,860 --> 00:07:09,160 Gareth Aird: When the cash rate is around about 1.5% mortgage repayments 138 00:07:09,160 --> 00:07:11,770 Gareth Aird: as a share of household income, we'll go back to 139 00:07:11,770 --> 00:07:15,000 Gareth Aird: a 20 year average. Our thinking is that any interest 140 00:07:15,000 --> 00:07:18,310 Gareth Aird: rate or cash rate above that level is actually contractionary. 141 00:07:18,750 --> 00:07:22,180 Gareth Aird: That's then when you're talking about monetary policy slowing the 142 00:07:22,180 --> 00:07:26,080 Gareth Aird: economy down and generating an increase in unemployment, which we 143 00:07:26,080 --> 00:07:28,990 Gareth Aird: think will start to come through this year. Without kind 144 00:07:28,990 --> 00:07:31,610 Gareth Aird: of getting too cute on it here, we've actually put 145 00:07:31,610 --> 00:07:33,580 Gareth Aird: out a call now today that we think the RBA 146 00:07:33,580 --> 00:07:36,100 Gareth Aird: will end up taking the cash rate back down in 147 00:07:36,100 --> 00:07:39,370 Gareth Aird: late 2023 simply because it looks like they're going to 148 00:07:39,370 --> 00:07:41,960 Gareth Aird: front load the tighten cycle such that the economy will probably 149 00:07:41,960 --> 00:07:45,030 Gareth Aird: be slowing quite a bit now into 2023. 150 00:07:45,720 --> 00:07:48,030 Sean Aylmer: One of the comments that the Reserve Bank Governor Philip 151 00:07:48,200 --> 00:07:52,770 Sean Aylmer: Lowe made yesterday is that he expects price inflation to get 152 00:07:52,860 --> 00:07:55,720 Sean Aylmer: worse before coming back to the 2% to 3% target 153 00:07:55,720 --> 00:07:59,190 Sean Aylmer: range. How does that fit into your scenario there? 154 00:07:59,660 --> 00:08:02,810 Gareth Aird: Well, look, it will get worse, and it didn't matter 155 00:08:02,810 --> 00:08:06,480 Gareth Aird: what the Reserve Bank did yesterday or what they're going to do in the next 156 00:08:06,480 --> 00:08:09,780 Gareth Aird: month. The inflation that we're going to see for Q2 is already baked 157 00:08:09,780 --> 00:08:12,430 Gareth Aird: in there, and there's nothing that the Reserve Bank can do 158 00:08:12,430 --> 00:08:16,270 Gareth Aird: to run harder against higher energy prices, higher oil price, 159 00:08:17,020 --> 00:08:19,410 Gareth Aird: or higher food prices as a result of the flood. 160 00:08:20,010 --> 00:08:21,370 Gareth Aird: All that is going to be picked up in the 161 00:08:21,370 --> 00:08:24,960 Gareth Aird: near term inflation print. The governor is absolutely right to 162 00:08:24,970 --> 00:08:27,700 Gareth Aird: acknowledge that the inflation rate will lift before it comes 163 00:08:27,700 --> 00:08:31,640 Gareth Aird: off, but it doesn't necessarily mean that their rate hikes, they 164 00:08:31,640 --> 00:08:34,050 Gareth Aird: need to be running hard against that because they can't 165 00:08:34,130 --> 00:08:37,099 Gareth Aird: actually do much about that. They clearly think that they're 166 00:08:37,100 --> 00:08:40,940 Gareth Aird: in an uncomfortable place and they're going to push the cash rate 167 00:08:40,940 --> 00:08:43,240 Gareth Aird: up to what they think is a neutral rate ahead 168 00:08:43,240 --> 00:08:45,449 Gareth Aird: of where we think neutral is. I think the risk in all of 169 00:08:45,450 --> 00:08:49,400 Gareth Aird: this is that the RBA actually thinks that the economy 170 00:08:49,400 --> 00:08:52,290 Gareth Aird: can withstand a higher interest rate than we think is 171 00:08:52,290 --> 00:08:54,989 Gareth Aird: appropriate. It's one of those things we're going to know 172 00:08:54,990 --> 00:08:57,740 Gareth Aird: when we get there. But our sense is that the Reserve 173 00:08:57,740 --> 00:09:00,700 Gareth Aird: Bank thinks that they can take the policy rate higher 174 00:09:00,850 --> 00:09:04,040 Gareth Aird: and quicker than we think is probably right for the economy, which 175 00:09:04,040 --> 00:09:05,780 Gareth Aird: is why we're going to be looking for quite a 176 00:09:05,780 --> 00:09:07,260 Gareth Aird: slowing into 2023. 177 00:09:08,250 --> 00:09:11,310 Sean Aylmer: Australia is sounding more like the US where the concerns 178 00:09:11,370 --> 00:09:14,980 Sean Aylmer: are that the Fed lifts so quickly that it actually 179 00:09:14,980 --> 00:09:18,820 Sean Aylmer: pushes the economy into a slowdown and potentially a recession. 180 00:09:19,080 --> 00:09:20,929 Sean Aylmer: Is there potential for that in Australia? 181 00:09:21,500 --> 00:09:24,439 Gareth Aird: Look, there is. There's also the potential to avoid it because 182 00:09:24,440 --> 00:09:27,100 Gareth Aird: the RBA hasn't delivered it yet. I think there's a 183 00:09:27,100 --> 00:09:30,300 Gareth Aird: lot of things that are different about Australia, which should mean 184 00:09:30,300 --> 00:09:32,900 Gareth Aird: we shouldn't go down that path, albeit that the decision 185 00:09:32,900 --> 00:09:35,439 Gareth Aird: yesterday runs the risk they're going to do that. But 186 00:09:35,440 --> 00:09:38,179 Gareth Aird: we simply don't have the wages growth that they have 187 00:09:38,179 --> 00:09:40,800 Gareth Aird: in the US at the moment. Our wages growth has 188 00:09:40,800 --> 00:09:43,610 Gareth Aird: actually been quite underwhelming to this point, even though we 189 00:09:43,610 --> 00:09:46,390 Gareth Aird: know the labor market's very tight. The other thing too 190 00:09:46,390 --> 00:09:49,290 Gareth Aird: is we also have a transmission mechanism from the cash 191 00:09:49,290 --> 00:09:52,470 Gareth Aird: rate to the mortgage rate, which is very, very direct 192 00:09:52,840 --> 00:09:55,050 Gareth Aird: because the bulk of borrowers in Australia are on floating 193 00:09:55,050 --> 00:09:57,689 Gareth Aird: rate mortgages whereas, in the US, they're on these very 194 00:09:57,690 --> 00:10:00,540 Gareth Aird: long dated fixed rate loans. What I think that means 195 00:10:00,540 --> 00:10:02,800 Gareth Aird: is the Reserve Bank should not be running as hard 196 00:10:02,800 --> 00:10:08,569 Gareth Aird: against inflation as what their decision yesterday implies. But in a 197 00:10:08,570 --> 00:10:10,420 Gareth Aird: lot of ways, it doesn't matter what I think. It 198 00:10:10,420 --> 00:10:13,489 Gareth Aird: matters what they're going to do. I think that decision 199 00:10:13,490 --> 00:10:16,819 Gareth Aird: to do 50 basis points yesterday is a pretty firm signal 200 00:10:17,200 --> 00:10:19,309 Gareth Aird: that, in the near term, they're going to run hard against 201 00:10:19,309 --> 00:10:22,059 Gareth Aird: this. And I think that runs the risk. They overcook 202 00:10:22,059 --> 00:10:24,199 Gareth Aird: it, and then we see in the data that things 203 00:10:24,200 --> 00:10:27,050 Gareth Aird: actually slow in a way that they're probably not anticipating. 204 00:10:27,250 --> 00:10:29,760 Sean Aylmer: Economics just got a whole lot more interesting. It's always 205 00:10:29,760 --> 00:10:32,309 Sean Aylmer: interesting, Gareth. I should be careful that I'm talking to 206 00:10:32,309 --> 00:10:34,559 Sean Aylmer: here, but it got really interesting yesterday. 207 00:10:35,050 --> 00:10:38,140 Gareth Aird: Look, it did. It just shows how fluid the situation 208 00:10:38,140 --> 00:10:40,429 Gareth Aird: is right now. There's so much going on in the 209 00:10:40,429 --> 00:10:44,040 Gareth Aird: economy. We've come out of a pandemic into a booming 210 00:10:44,040 --> 00:10:48,100 Gareth Aird: economy that has clearly generated higher inflation, a very tight 211 00:10:48,100 --> 00:10:50,559 Gareth Aird: labor market but, suddenly we've now got a central bank, 212 00:10:50,970 --> 00:10:54,929 Gareth Aird: not only normalizing the cash rate, but seeming very intent 213 00:10:54,929 --> 00:10:58,480 Gareth Aird: to do it as quickly as possible now. I think 214 00:10:58,700 --> 00:11:01,050 Gareth Aird: that makes our job trying to pick where things are going 215 00:11:01,050 --> 00:11:03,809 Gareth Aird: that little bit harder. I also think it makes it 216 00:11:03,809 --> 00:11:07,500 Gareth Aird: tough for Australian households and businesses out there because they're 217 00:11:07,500 --> 00:11:09,390 Gareth Aird: not getting a lot of certainty here now on the 218 00:11:09,390 --> 00:11:13,280 Gareth Aird: policy front. They've gone from being under the impression rates 219 00:11:13,280 --> 00:11:15,640 Gareth Aird: weren't going up for a long time to then, in 220 00:11:15,640 --> 00:11:18,550 Gareth Aird: May, finding out rates have gone up by 25 basis 221 00:11:18,550 --> 00:11:21,350 Gareth Aird: points because that's a normal thing to do. Then suddenly, 222 00:11:21,350 --> 00:11:23,900 Gareth Aird: they've gone up by 50 basis points a month later. 223 00:11:24,420 --> 00:11:26,990 Gareth Aird: So, there's a risk in all of this that households 224 00:11:26,990 --> 00:11:30,960 Gareth Aird: and businesses become quite concerned about the economic outlook simply 225 00:11:30,960 --> 00:11:32,500 Gareth Aird: because of what the Reserve Bank's doing. 226 00:11:32,760 --> 00:11:34,260 Sean Aylmer: Gareth, thank you for talking to Fear and Greed. 227 00:11:34,960 --> 00:11:36,330 Gareth Aird: Great to chat, Sean. Cheers. 228 00:11:36,559 --> 00:11:38,940 Sean Aylmer: That was Gareth Aird, head of Australian Economics at the 229 00:11:38,940 --> 00:11:42,160 Sean Aylmer: Commonwealth Bank. This is a Fear and Greed Daily Interview. Remember, 230 00:11:42,160 --> 00:11:45,720 Sean Aylmer: you should get professional advice before making any investment decisions. 231 00:11:45,990 --> 00:11:48,179 Sean Aylmer: Join us every morning for the full episode of Fear 232 00:11:48,179 --> 00:11:51,340 Sean Aylmer: and Greed, Australia's most popular business podcast. I'm Sean Aylmer. 233 00:11:51,580 --> 00:11:52,250 Sean Aylmer: Enjoy your day.