1 00:00:01,340 --> 00:00:09,530 Speaker 1: I'm Ruby Jones, and you're listening to 7am. For years, 2 00:00:09,560 --> 00:00:12,650 Speaker 1: we've heard from older generations that the current interest rate 3 00:00:12,710 --> 00:00:17,370 Speaker 1: pain is nothing compared to the horror of 17.5% rates 4 00:00:17,690 --> 00:00:20,770 Speaker 1: in the late 80s and early 90s. But now, as 5 00:00:20,850 --> 00:00:24,530 Speaker 1: the RBA delivers its fourth hike this year, analysis shows 6 00:00:24,590 --> 00:00:29,610 Speaker 1: the pain being inflicted on homeowners is comparatively worse. So 7 00:00:29,990 --> 00:00:34,790 Speaker 1: as the official cash rate hits a 15-year high of 4.6%, 8 00:00:34,790 --> 00:00:40,010 Speaker 1: how bad could it get? Today, KPMG senior economist Terry Rawnsley, 9 00:00:40,570 --> 00:00:43,290 Speaker 1: on the chance of more interest rate hikes, the flow-on 10 00:00:43,330 --> 00:00:46,229 Speaker 1: effects of this latest hit, and whether we should be 11 00:00:46,270 --> 00:00:50,690 Speaker 1: looking at alternatives, like tax hikes, to get inflation under control. 12 00:00:53,950 --> 00:01:02,610 Speaker 1: It's Wednesday, September 30th. Terry, this hike from the RBA 13 00:01:02,650 --> 00:01:05,949 Speaker 1: takes the official cash rate to its highest level in 14 00:01:05,950 --> 00:01:10,310 Speaker 1: 15 years. Talk me through Michelle Bullock's reasoning here. 15 00:01:10,750 --> 00:01:12,990 Speaker 2: Yeah, and Michelle kind of outlined a whole range of 16 00:01:13,050 --> 00:01:16,010 Speaker 2: reasons what's happening here. So she talked about the fuel 17 00:01:16,050 --> 00:01:18,780 Speaker 2: supply shock coming through from the conflict in the Middle East. 18 00:01:19,000 --> 00:01:23,030 Speaker 3: Disruptions to oil supply could last longer than anticipated. and 19 00:01:23,069 --> 00:01:25,850 Speaker 3: cause energy price pressures to last for longer than we 20 00:01:25,910 --> 00:01:26,910 Speaker 3: previously assumed. 21 00:01:27,030 --> 00:01:28,950 Speaker 2: She talked about AI build-outs. 22 00:01:29,030 --> 00:01:31,490 Speaker 3: The AI boom is also adding to demand in the 23 00:01:31,550 --> 00:01:35,380 Speaker 3: Australian economy at a time when we already have capacity pressures. 24 00:01:35,640 --> 00:01:38,420 Speaker 2: She talked about sort of lack of productivity in the 25 00:01:38,440 --> 00:01:39,160 Speaker 2: business sector. 26 00:01:39,280 --> 00:01:42,720 Speaker 3: The bottom line is that productivity is doing nothing. And 27 00:01:42,760 --> 00:01:45,480 Speaker 3: I know we talk about productivity a lot, but it's 28 00:01:45,540 --> 00:01:48,660 Speaker 3: so important... if we want the economy to be able 29 00:01:48,700 --> 00:01:50,140 Speaker 3: to grow and create jobs. 30 00:01:50,480 --> 00:01:53,120 Speaker 2: She talked about sort of excess demand coming through from 31 00:01:53,140 --> 00:01:55,780 Speaker 2: the economy as well. So she kind of described quite 32 00:01:55,820 --> 00:01:58,680 Speaker 2: a complex situation where there's a whole range of factors 33 00:01:58,720 --> 00:02:01,680 Speaker 2: which are sort of pushing up overall demand and sort 34 00:02:01,720 --> 00:02:04,870 Speaker 2: of pushing up inflationary pressures. And she's trying to tap 35 00:02:04,890 --> 00:02:07,170 Speaker 2: the brakes by increasing rates to kind of take some 36 00:02:07,190 --> 00:02:09,210 Speaker 2: of the heat out of the economy and reduce some 37 00:02:09,230 --> 00:02:09,750 Speaker 2: of that demand. 38 00:02:10,389 --> 00:02:12,989 Speaker 1: And at the press conference, she was asked whether the 39 00:02:13,070 --> 00:02:17,410 Speaker 1: solution has become detached from the problem in that inflation 40 00:02:17,490 --> 00:02:19,869 Speaker 1: is being driven, as you say, and as she said, 41 00:02:20,090 --> 00:02:23,459 Speaker 1: by oil prices, by the situation in the Middle East, AI, 42 00:02:24,000 --> 00:02:28,460 Speaker 1: data centre spending, but the response, it hits households who 43 00:02:28,500 --> 00:02:31,000 Speaker 1: have no control over those things. So, is that a 44 00:02:31,060 --> 00:02:31,739 Speaker 1: problem here? 45 00:02:32,120 --> 00:02:35,250 Speaker 2: Yeah, and it's probably flagging that, as the Governor said 46 00:02:35,280 --> 00:02:37,830 Speaker 2: many times, they only have one lever to pull, and 47 00:02:37,850 --> 00:02:40,330 Speaker 2: that's really interest rates. So, even though we have this 48 00:02:40,350 --> 00:02:44,190 Speaker 2: sort of complex economic patchwork of factors coming through. The 49 00:02:44,290 --> 00:02:47,810 Speaker 2: RBA can either hold rates, cut rates or increase rates. So, 50 00:02:47,830 --> 00:02:50,330 Speaker 2: they've got the one tool and today they've just pulled 51 00:02:50,350 --> 00:02:52,530 Speaker 2: the lever to increase interest rates across the whole economy. 52 00:02:53,130 --> 00:02:56,119 Speaker 1: And so, do you think it's a good decision to 53 00:02:56,360 --> 00:02:57,060 Speaker 1: raise rates right now? 54 00:02:57,360 --> 00:02:59,980 Speaker 2: Yeah, it's an unfortunate decision for all those mortgage holders 55 00:03:00,320 --> 00:03:02,440 Speaker 2: out there and businesses who will be impacted. But it's 56 00:03:03,020 --> 00:03:05,160 Speaker 2: the point the Reserve Bank Governor made was that there's 57 00:03:05,180 --> 00:03:08,410 Speaker 2: this excess demand within the economy which we're trying to 58 00:03:08,500 --> 00:03:12,700 Speaker 2: stamp out. And what we've seen over the last, you know, 18, 59 00:03:12,700 --> 00:03:16,750 Speaker 2: 24 months is that the inflation has been too high. 60 00:03:17,070 --> 00:03:19,550 Speaker 2: It's kind of been eating away into people's real wages. 61 00:03:19,610 --> 00:03:22,670 Speaker 2: The whole economy has been suffering. So, this period of 62 00:03:22,710 --> 00:03:25,279 Speaker 2: trying to increase interest rates, we're trying to stamp out 63 00:03:25,320 --> 00:03:30,600 Speaker 2: that inflationary growth. And the governor also talked about inflationary expectations. 64 00:03:30,680 --> 00:03:33,870 Speaker 2: And this is basically where If people expect inflation to 65 00:03:33,910 --> 00:03:37,070 Speaker 2: be 3% or 4% next year, they'll account for that. 66 00:03:37,110 --> 00:03:40,160 Speaker 2: They'll be expecting their local cafe to put up prices 3% 67 00:03:40,160 --> 00:03:42,500 Speaker 2: or 4%. Businesses will feel they can put up their 68 00:03:42,540 --> 00:03:44,900 Speaker 2: prices 3%, 4%, or 5%. So, you don't want to 69 00:03:44,940 --> 00:03:47,980 Speaker 2: get these expectations entrenched that everyone's like, oh, it's a 70 00:03:48,000 --> 00:03:50,800 Speaker 2: new financial year, let's increase prices 3% or 4%. We 71 00:03:50,820 --> 00:03:53,480 Speaker 2: want to try and squeeze back down on those expectations 72 00:03:53,540 --> 00:03:56,090 Speaker 2: so that people go, okay, the cost of doing business 73 00:03:56,100 --> 00:04:00,110 Speaker 2: goes up 2%, let's put up inflation by 2%. 74 00:04:00,110 --> 00:04:02,890 Speaker 1: This might not be enough to tame inflation though, right? 75 00:04:02,930 --> 00:04:06,630 Speaker 1: There's already talk of another interest rate hike soon. The 76 00:04:06,710 --> 00:04:09,810 Speaker 1: RBA says it's prepared to continue to lift rates if 77 00:04:09,850 --> 00:04:13,220 Speaker 1: it's necessary to fight inflation. So how high do you 78 00:04:13,250 --> 00:04:14,310 Speaker 1: think things could go? 79 00:04:14,720 --> 00:04:16,419 Speaker 2: The other sort of point the governor made was that 80 00:04:16,740 --> 00:04:19,359 Speaker 2: this is the fourth tapping of the brakes this year. 81 00:04:20,100 --> 00:04:22,960 Speaker 2: That whole one percentage point's worth of interest rates is 82 00:04:22,980 --> 00:04:25,159 Speaker 2: still flowing to the economy. There's people who were making 83 00:04:25,220 --> 00:04:27,830 Speaker 2: investment decisions at the end of last year are now 84 00:04:27,850 --> 00:04:32,289 Speaker 2: probably rethinking those. People might have cancelled travel plans or 85 00:04:32,370 --> 00:04:35,810 Speaker 2: eating out less. So, those previous four increases are kind 86 00:04:35,830 --> 00:04:38,270 Speaker 2: of still working their way through their economy, but the 87 00:04:38,330 --> 00:04:40,830 Speaker 2: markets are still seeing that we might see another interest 88 00:04:40,850 --> 00:04:43,870 Speaker 2: rate rise later in the year, maybe Melbourne Cup Day, 89 00:04:44,730 --> 00:04:45,870 Speaker 2: and then it's probably going to be a wait and 90 00:04:45,910 --> 00:04:49,479 Speaker 2: see to see how the rate rises during 2026 plays 91 00:04:49,540 --> 00:04:52,260 Speaker 2: out in 2027. Okay. And so, interest. 92 00:04:52,040 --> 00:04:56,500 Speaker 1: Rates are now at their highest level since 2011. What 93 00:04:56,540 --> 00:04:59,659 Speaker 1: does that actually mean for people who have a mortgage 94 00:04:59,740 --> 00:05:00,559 Speaker 1: or other debts? 95 00:05:01,060 --> 00:05:03,279 Speaker 2: What we kind of see is that people with mortgages, 96 00:05:03,580 --> 00:05:06,299 Speaker 2: they'll be paying more interest. And when we look across 97 00:05:06,420 --> 00:05:11,470 Speaker 2: the whole household sector, on average, households are spending about 6% 98 00:05:11,470 --> 00:05:15,590 Speaker 2: of their income just on household mortgage repayments. So, $ 100 99 00:05:15,250 --> 00:05:18,289 Speaker 2: of income, 6% of that is just going to interest 100 00:05:18,310 --> 00:05:20,890 Speaker 2: rate repayments. And we sort of look back over the 101 00:05:20,910 --> 00:05:23,980 Speaker 2: last 30 years, we saw a similar level sort of 102 00:05:24,020 --> 00:05:28,330 Speaker 2: in the late 1980s, when interest rates were kind of 17%, 103 00:05:28,330 --> 00:05:30,409 Speaker 2: and a lot of people of that generation will bring 104 00:05:30,480 --> 00:05:33,080 Speaker 2: up that being a very tough time. But in terms 105 00:05:33,120 --> 00:05:35,420 Speaker 2: of the amount of money going towards interest repayments, we're 106 00:05:35,440 --> 00:05:37,640 Speaker 2: kind of on par with that now. And the other 107 00:05:37,660 --> 00:05:39,720 Speaker 2: thing is that we've been at this level for probably 108 00:05:39,760 --> 00:05:42,800 Speaker 2: the last two years, whereas that late 90s was a 109 00:05:42,850 --> 00:05:46,170 Speaker 2: very short, sharp period of, you know, six, 12 months 110 00:05:46,190 --> 00:05:46,710 Speaker 2: of that level. 111 00:05:47,029 --> 00:05:49,410 Speaker 1: Yeah, let's talk about that a little more, because we 112 00:05:49,450 --> 00:05:52,570 Speaker 1: often hear from older generations that what's happening today isn't 113 00:05:52,589 --> 00:05:56,900 Speaker 1: as bad as that infamous 17.5%. interest rate in the 114 00:05:56,940 --> 00:06:00,839 Speaker 1: late 80s and early 90s. Where Westpac has taken the plunge. 115 00:06:01,279 --> 00:06:04,160 Speaker 3: Australia's biggest private bank has pushed up its home loan 116 00:06:04,220 --> 00:06:08,520 Speaker 3: mortgage rates to an all-time record high of 17%. Now 117 00:06:08,850 --> 00:06:11,570 Speaker 3: I know that's hurt many people and it's hurting people 118 00:06:11,830 --> 00:06:13,490 Speaker 3: but I think we must say to them they'll hurt 119 00:06:13,550 --> 00:06:16,950 Speaker 3: much more if Australia is ultimately forced into a recession. 120 00:06:17,130 --> 00:06:18,410 Speaker 1: So what is the comparison? 121 00:06:18,870 --> 00:06:22,130 Speaker 2: What we had back then was a 17% interest rate 122 00:06:22,470 --> 00:06:24,880 Speaker 2: but median house prices across the country were sort of 123 00:06:25,620 --> 00:06:28,300 Speaker 2: a million dollars or so. Now, we're kind of down 124 00:06:28,320 --> 00:06:32,420 Speaker 2: more about that 4.5%, 5% interest rates, but house prices 125 00:06:32,480 --> 00:06:35,140 Speaker 2: across the country are a million dollars. So, whilst those 126 00:06:35,220 --> 00:06:37,390 Speaker 2: interest rates were much higher back in the late 80s, 127 00:06:37,720 --> 00:06:42,099 Speaker 2: the size of mortgages people were carrying was much, much smaller. So, 128 00:06:42,120 --> 00:06:44,850 Speaker 2: we're basically kind of on parity. Interest rates are much lower, 129 00:06:44,880 --> 00:06:47,810 Speaker 2: but mortgages are much bigger. So, households are spending about 130 00:06:47,850 --> 00:06:50,370 Speaker 2: the same amount of their income on interest repayments. 131 00:06:50,960 --> 00:06:54,320 Speaker 1: And the figure is also averaged across all households. So 132 00:06:54,339 --> 00:06:57,880 Speaker 1: that includes people without a home loan. Home ownership is 133 00:06:57,940 --> 00:07:00,060 Speaker 1: much lower now than it was in the 90s. So 134 00:07:00,100 --> 00:07:03,120 Speaker 1: does that mean that that figure can really understate the 135 00:07:03,180 --> 00:07:06,990 Speaker 1: pressure that is being felt by households with these large mortgages? 136 00:07:07,620 --> 00:07:10,270 Speaker 2: Yeah. And so what you'll have is home ownership rates 137 00:07:10,330 --> 00:07:13,970 Speaker 2: in the late 1980s were probably about 70% of all 138 00:07:14,010 --> 00:07:20,110 Speaker 2: households were homeowners. Today, it's about 66% in terms of homeownership. So, 139 00:07:20,390 --> 00:07:23,830 Speaker 2: you've got that same burden being carried across fewer households. 140 00:07:23,930 --> 00:07:27,950 Speaker 2: And also, we know that some of those homeownership households, 141 00:07:28,350 --> 00:07:32,070 Speaker 2: they're probably that boomer generation who have paid off their mortgage. So, 142 00:07:32,110 --> 00:07:34,250 Speaker 2: we've got more of that Gen Y, the Gen Xs 143 00:07:34,270 --> 00:07:37,310 Speaker 2: who've got the big mortgages they bought in capital cities 144 00:07:37,370 --> 00:07:40,250 Speaker 2: over the last 5 or 10 or 15 years. They're 145 00:07:40,270 --> 00:07:43,890 Speaker 2: carrying the big mortgages. And the other kind of segment 146 00:07:43,970 --> 00:07:47,020 Speaker 2: is that Renters are still being bit by this as well. So, 147 00:07:47,040 --> 00:07:50,200 Speaker 2: we look at the amount of household income going to rents, 148 00:07:50,270 --> 00:07:52,950 Speaker 2: it's about 4%. And that's sort of the highest it's 149 00:07:52,990 --> 00:07:55,230 Speaker 2: been over the last five or 10 years because while 150 00:07:55,310 --> 00:07:59,010 Speaker 2: renters aren't directly paying that mortgage, their landlords are seeing 151 00:07:59,050 --> 00:08:01,310 Speaker 2: their cost of mortgages go up and they're trying to 152 00:08:01,380 --> 00:08:04,560 Speaker 2: recoup some of that in high interest rates by jacking 153 00:08:04,600 --> 00:08:07,020 Speaker 2: up the rents. So, it's not just the homeowners, but 154 00:08:07,040 --> 00:08:08,600 Speaker 2: also we've got renters are kind of being bitten at 155 00:08:08,620 --> 00:08:09,020 Speaker 2: the moment. 156 00:08:11,580 --> 00:08:25,440 Speaker 1: Still to come, could a recession be on the cards? Terry, 157 00:08:25,600 --> 00:08:29,500 Speaker 1: we know that with high interest rates comes higher unemployment. 158 00:08:29,620 --> 00:08:32,179 Speaker 1: So what kind of unemployment rate do you think we're 159 00:08:32,220 --> 00:08:34,900 Speaker 1: going to be looking at here? Because Michelle Bullock, she 160 00:08:34,940 --> 00:08:38,040 Speaker 1: has said that she doesn't want job losses. At the 161 00:08:38,080 --> 00:08:40,780 Speaker 1: same time, the RBA has said in the past that 162 00:08:40,820 --> 00:08:44,820 Speaker 1: it would like to see unemployment at 5%. Jim Chalmers, 163 00:08:44,840 --> 00:08:47,780 Speaker 1: the Treasurer, he says that's too high. What do you think? 164 00:08:48,300 --> 00:08:52,729 Speaker 2: We're thinking probably heading more towards that 4.7%. We're currently 165 00:08:52,770 --> 00:08:57,580 Speaker 2: around 4.5%, 4.6%. So, we will see a tick more up, 166 00:08:57,700 --> 00:09:00,560 Speaker 2: but there's still a lot of pent-up demand. So, the 167 00:09:00,600 --> 00:09:03,860 Speaker 2: Reserve Governor sort of mentioned job vacancies are still at 168 00:09:03,880 --> 00:09:05,840 Speaker 2: a very high level. There's a lot of businesses out 169 00:09:05,880 --> 00:09:09,940 Speaker 2: there looking to employ. So, tapping the brakes through interest 170 00:09:09,960 --> 00:09:12,570 Speaker 2: rates will sort of reduce some of that demand, but 171 00:09:12,590 --> 00:09:14,390 Speaker 2: there's still a lot of vacant jobs out there which 172 00:09:14,429 --> 00:09:20,130 Speaker 2: businesses are trying to fill, and that's across aged care, construction, engineering, 173 00:09:20,910 --> 00:09:23,349 Speaker 2: AI-related jobs. So, there's still a lot of demand in 174 00:09:23,370 --> 00:09:26,720 Speaker 2: the economy. So, we probably won't see huge job losses, 175 00:09:26,760 --> 00:09:30,439 Speaker 2: but the question is, do we land at 4.7%, 4.8%, 176 00:09:30,440 --> 00:09:34,320 Speaker 2: or 5%? And that's kind of the narrow path people 177 00:09:34,360 --> 00:09:37,180 Speaker 2: are trying to move across here with these interest rates 178 00:09:37,220 --> 00:09:39,099 Speaker 2: going up. We want to see a cooling in the 179 00:09:39,140 --> 00:09:41,620 Speaker 2: labour market. We want to see people having less money 180 00:09:41,679 --> 00:09:44,770 Speaker 2: in their pockets as more is going into The mortgages, 181 00:09:44,870 --> 00:09:48,840 Speaker 2: interest repayments, more into rent and just less discretionary spending. 182 00:09:48,860 --> 00:09:50,600 Speaker 2: So we're just trying to tap the brakes so there's 183 00:09:50,679 --> 00:09:54,740 Speaker 2: less demand in the economy without seeing big increases in unemployment. 184 00:09:55,140 --> 00:09:59,530 Speaker 1: And we've been staring down the possibility or the threat 185 00:09:59,610 --> 00:10:02,390 Speaker 1: of a recession. for a while now. What kind of 186 00:10:02,690 --> 00:10:04,229 Speaker 1: likelihood do you think there is of that? 187 00:10:04,700 --> 00:10:07,199 Speaker 2: Yeah, I think it's definitely a conversation that we're going 188 00:10:07,220 --> 00:10:09,160 Speaker 2: to be having over the next six or 12 months, 189 00:10:09,600 --> 00:10:12,699 Speaker 2: just how the economy is responding to these multiple challenges. So, 190 00:10:12,720 --> 00:10:15,880 Speaker 2: we have higher interest rates, we have consumers who might 191 00:10:15,900 --> 00:10:19,140 Speaker 2: be feeling a little less rich as house prices ease off, 192 00:10:19,800 --> 00:10:22,110 Speaker 2: Those households are also seeing the cost of living pressures 193 00:10:22,150 --> 00:10:24,630 Speaker 2: go up and up, so their spending will be crimped. 194 00:10:25,170 --> 00:10:28,330 Speaker 2: But we also have government out still spending a significant 195 00:10:28,350 --> 00:10:31,670 Speaker 2: amount of money across services, infrastructure, and that's both at 196 00:10:31,730 --> 00:10:35,040 Speaker 2: the state and federal level. You've got this big pent-up 197 00:10:35,059 --> 00:10:37,860 Speaker 2: demand that we're seeing coming through through data centres. So, 198 00:10:38,300 --> 00:10:41,800 Speaker 2: billions of dollars investment from companies who are kind of 199 00:10:42,080 --> 00:10:45,770 Speaker 2: immune effectively for interest rate rises domestically with very deep 200 00:10:45,830 --> 00:10:49,620 Speaker 2: pockets investing tens of millions, hundreds of millions in Australia 201 00:10:49,640 --> 00:10:52,990 Speaker 2: across data centres. And we've also kind of got a 202 00:10:53,050 --> 00:10:57,030 Speaker 2: housing shortage where there's a pent-up demand where housing construction 203 00:10:57,070 --> 00:10:59,910 Speaker 2: will still continue. So, there's a whole range of growth 204 00:10:59,970 --> 00:11:03,729 Speaker 2: factors across there. But regardless, we go into a technical recession, 205 00:11:03,770 --> 00:11:06,290 Speaker 2: which is two quarters of negative growth. The next sort 206 00:11:06,320 --> 00:11:07,599 Speaker 2: of six or 12 months, it's going to be a 207 00:11:07,600 --> 00:11:10,640 Speaker 2: real grind. The economy will not be growing rapidly at all. 208 00:11:11,179 --> 00:11:13,840 Speaker 1: And we all know that interest rates are this blunt 209 00:11:14,280 --> 00:11:17,300 Speaker 1: lever as a tool to bring inflation down. Do you 210 00:11:17,320 --> 00:11:20,800 Speaker 1: think that it is still the best option? Because last 211 00:11:20,860 --> 00:11:24,160 Speaker 1: month we talked with economist Saul Eslake about super as 212 00:11:24,200 --> 00:11:27,500 Speaker 1: an alternative. There are now some calls for targeted tax 213 00:11:27,590 --> 00:11:29,930 Speaker 1: rises as a way to cool demand. What do you 214 00:11:29,970 --> 00:11:30,850 Speaker 1: think of those ideas? 215 00:11:31,350 --> 00:11:33,610 Speaker 2: This is where the interest rate is kind of a 216 00:11:33,670 --> 00:11:36,110 Speaker 2: blunt tool, but it's a very quick and easy one 217 00:11:36,390 --> 00:11:40,720 Speaker 2: to bring into being. So announcement today, interest rates are 218 00:11:40,750 --> 00:11:44,099 Speaker 2: going up effectively at midnight tonight. rates will increase and 219 00:11:44,120 --> 00:11:47,000 Speaker 2: it'll flow through the financial system. If the economy was 220 00:11:47,040 --> 00:11:50,000 Speaker 2: to slow dramatically at the start of next year, very 221 00:11:50,040 --> 00:11:52,650 Speaker 2: easy to cut rates. If you're starting to talk about 222 00:11:52,710 --> 00:11:56,230 Speaker 2: like changing taxation rates or different fees and charges across 223 00:11:56,250 --> 00:11:59,230 Speaker 2: the economy, it takes it longer for those to be administered. 224 00:11:59,670 --> 00:12:02,030 Speaker 2: So that's kind of the trade-off. You have some ability 225 00:12:02,110 --> 00:12:05,740 Speaker 2: to kind of craft some very focused policies to try 226 00:12:05,760 --> 00:12:07,540 Speaker 2: and take some heat out of the economy, but that 227 00:12:07,580 --> 00:12:11,110 Speaker 2: takes time, whereas the Reserve Bank's interest rates It's a 228 00:12:11,130 --> 00:12:13,370 Speaker 2: blunt tool, but it happens pretty much instantaneously. 229 00:12:13,929 --> 00:12:18,450 Speaker 1: And just to finish on housing, does your research ultimately 230 00:12:18,530 --> 00:12:23,350 Speaker 1: suggest something bigger about Australia's housing system? Because we now 231 00:12:23,490 --> 00:12:27,189 Speaker 1: need such enormous mortgages to buy a home, and so 232 00:12:27,250 --> 00:12:31,929 Speaker 1: households have become unusually vulnerable to even relatively modest interest 233 00:12:32,010 --> 00:12:32,490 Speaker 1: rate moves. 234 00:12:33,010 --> 00:12:36,490 Speaker 2: Yeah, the Australian housing system, nothing's gone right in that 235 00:12:36,530 --> 00:12:38,470 Speaker 2: sector for probably a good 25 to 30 years. We've 236 00:12:38,490 --> 00:12:43,140 Speaker 2: had probably the taxation settings not being quite right. We've 237 00:12:43,160 --> 00:12:48,120 Speaker 2: had local planning controls blocking development in well-located areas. We've 238 00:12:48,160 --> 00:12:52,810 Speaker 2: had greenfield areas not having enough infrastructure to support bigger populations. 239 00:12:53,190 --> 00:12:56,630 Speaker 2: We've had this big demographic shift where the boomer generation 240 00:12:56,710 --> 00:13:00,030 Speaker 2: are holding onto their houses for much longer. So, not 241 00:13:00,070 --> 00:13:02,800 Speaker 2: much right has gone for the Australian housing system over 242 00:13:02,820 --> 00:13:05,390 Speaker 2: the last 25 years. And once again, there's been a 243 00:13:05,390 --> 00:13:07,330 Speaker 2: lot of good reforms over the last five or 10 244 00:13:07,330 --> 00:13:10,900 Speaker 2: years around getting more density, especially into established suburbs in 245 00:13:10,940 --> 00:13:14,040 Speaker 2: Sydney and Melbourne. But those things take two, three, four, 246 00:13:14,179 --> 00:13:17,360 Speaker 2: five years to come through. So, all these changes are 247 00:13:17,380 --> 00:13:19,959 Speaker 2: coming through, but the housing system is still in a 248 00:13:20,000 --> 00:13:22,380 Speaker 2: very tough spot and will be for a few years. 249 00:13:23,070 --> 00:13:24,830 Speaker 1: And I mean, how dismayed do you think people are 250 00:13:24,870 --> 00:13:27,670 Speaker 1: going to be by today's announcement and the prospect of 251 00:13:27,809 --> 00:13:31,550 Speaker 1: future rate rises in the context of this housing market 252 00:13:32,020 --> 00:13:34,319 Speaker 1: in which, as you say, not a lot has gone right. 253 00:13:35,240 --> 00:13:39,120 Speaker 2: Yeah, there'll be no champagne corks popped for recent home 254 00:13:39,160 --> 00:13:42,620 Speaker 2: buyers or people who've purchased over the last five-year period 255 00:13:42,640 --> 00:13:45,300 Speaker 2: who have still got big mortgages. They may not have 256 00:13:45,760 --> 00:13:48,430 Speaker 2: built up much of an offset account for them or 257 00:13:48,450 --> 00:13:51,089 Speaker 2: built up a lot of equity depending on where you've bought. 258 00:13:51,630 --> 00:13:52,949 Speaker 2: So a lot of the community is not going to 259 00:13:52,970 --> 00:13:55,210 Speaker 2: be very happy about that. We sort of looked at 260 00:13:55,290 --> 00:14:01,190 Speaker 2: some life satisfaction data from the ABS and in 2021, 261 00:14:01,830 --> 00:14:04,450 Speaker 2: During the height of the pandemic, Australians said that on average, 262 00:14:04,929 --> 00:14:07,589 Speaker 2: out of a scale of zero to 10, they were 263 00:14:07,710 --> 00:14:11,320 Speaker 2: about 7.4% was their life satisfaction. We fast forward to 264 00:14:11,360 --> 00:14:14,080 Speaker 2: sort of 2025 and they asked the same question again, 265 00:14:14,620 --> 00:14:18,480 Speaker 2: and it was 7.1%. So on average, Australian society was 266 00:14:18,900 --> 00:14:21,610 Speaker 2: feeling sadder about things last year than they were during 267 00:14:21,630 --> 00:14:24,290 Speaker 2: the pandemic. And that's because they've been sort of ground 268 00:14:24,350 --> 00:14:27,720 Speaker 2: down by two or three years of high cost of 269 00:14:27,740 --> 00:14:30,700 Speaker 2: living pressures. They've seen the mortgage go up and up. 270 00:14:30,960 --> 00:14:33,140 Speaker 2: They've seen the rent go up and up. So it's 271 00:14:33,180 --> 00:14:35,920 Speaker 2: no surprise that the average Australian household is feeling pretty 272 00:14:36,020 --> 00:14:39,380 Speaker 2: glum because it's not just been six months of sort 273 00:14:39,400 --> 00:14:42,400 Speaker 2: of challenges. It's kind of been a very challenging period 274 00:14:42,420 --> 00:14:44,590 Speaker 2: over the last three or four years. You throw in 275 00:14:44,610 --> 00:14:46,590 Speaker 2: the pandemic before that. So a lot of society has 276 00:14:46,630 --> 00:14:48,950 Speaker 2: been under a lot of stress and strain over the 277 00:14:48,990 --> 00:14:49,850 Speaker 2: past five years. 278 00:14:52,610 --> 00:14:54,450 Speaker 1: Well, Terry, thank you so much for speaking with me. 279 00:15:08,940 --> 00:15:12,440 Speaker 1: Also in the news, OpenAI has apologised for its AI 280 00:15:12,560 --> 00:15:16,260 Speaker 1: agent breaching Australian government systems and shelved the planned release 281 00:15:16,300 --> 00:15:19,550 Speaker 1: of its next chatbot model. In a blog post on Tuesday, 282 00:15:19,610 --> 00:15:23,110 Speaker 1: the company admitted it should have notified Australian authorities sooner 283 00:15:23,210 --> 00:15:26,200 Speaker 1: about a Medicare breach... in which an AI agent gained 284 00:15:26,220 --> 00:15:30,860 Speaker 1: unauthorised access to its statistics service and retrieved non-public files. 285 00:15:31,480 --> 00:15:34,100 Speaker 1: OpenAI says it was aware of the breach in August, 286 00:15:34,160 --> 00:15:37,460 Speaker 1: but only notified the Australian government a month later. It 287 00:15:37,500 --> 00:15:40,170 Speaker 1: has also stated the planned October release of its next 288 00:15:40,230 --> 00:15:43,830 Speaker 1: model has been delayed after it failed internal safety tests. 289 00:15:44,970 --> 00:15:48,090 Speaker 1: And Sarah Hansen-Young has announced she'll run to replace Larissa 290 00:15:48,110 --> 00:15:51,870 Speaker 1: Waters as leader of the Greens. Waters resigned on Monday 291 00:15:51,930 --> 00:15:54,670 Speaker 1: due to worsening kidney disease, but will remain in the 292 00:15:54,720 --> 00:15:58,200 Speaker 1: Senate after taking medical leave. The Greens are expected to 293 00:15:58,240 --> 00:16:00,720 Speaker 1: choose their new leader at a two-day party room retreat 294 00:16:00,780 --> 00:16:04,600 Speaker 1: in Sydney this week. I'm Ruby Jones. This is 7am. 295 00:16:04,860 --> 00:16:05,480 Speaker 1: Thanks for listening.