1 00:00:00,080 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:09,039 --> 00:00:11,360 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:11,360 --> 00:00:13,440 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:13,480 --> 00:00:16,360 Speaker 2: anchors all around the world. Straight Ahead on the program, 5 00:00:16,360 --> 00:00:19,200 Speaker 2: we'll look ahead to the March Jobs Report and Q 6 00:00:19,400 --> 00:00:22,239 Speaker 2: one auto sales and what President Trump's tariffs on auto 7 00:00:22,320 --> 00:00:25,960 Speaker 2: imports could mean to future sales. I'm Tom Busby in 8 00:00:26,040 --> 00:00:26,479 Speaker 2: New York. 9 00:00:26,600 --> 00:00:29,120 Speaker 3: I'm Caroline Hetcke here in London, where we're assessing the 10 00:00:29,160 --> 00:00:32,840 Speaker 3: position of NATO amidst growing global tensions. 11 00:00:33,080 --> 00:00:36,360 Speaker 4: I'm Doug Krisner previewing next week's rate decision from the 12 00:00:36,400 --> 00:00:37,760 Speaker 4: Reserve Bank of Australia. 13 00:00:38,159 --> 00:00:42,200 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:42,240 --> 00:00:45,960 Speaker 1: eleven three Yeero, New York, Bloomberg ninety nine to one, Washington, DC, 15 00:00:46,440 --> 00:00:50,680 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 16 00:00:51,120 --> 00:00:54,320 Speaker 1: Sirius XM one twenty one, and around the world on 17 00:00:54,400 --> 00:00:57,480 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business App. 18 00:01:02,360 --> 00:01:04,560 Speaker 2: Good day to you. I'm Tom Busby. We begin today's 19 00:01:04,560 --> 00:01:06,720 Speaker 2: program with a look at the March Jobs Report out 20 00:01:06,760 --> 00:01:09,640 Speaker 2: this coming Friday. The same day We're gonna hear from 21 00:01:09,680 --> 00:01:13,080 Speaker 2: Federal Reserve Chair Jerome Powell. What could all this mean 22 00:01:13,160 --> 00:01:16,920 Speaker 2: for the US labor market and for FED policy moving forward? Well, 23 00:01:16,920 --> 00:01:19,280 Speaker 2: good news for more. We're joined by Michael McKee of 24 00:01:19,319 --> 00:01:23,480 Speaker 2: Bloomberg International Economics and Policy correspondent. Michael, thank you for 25 00:01:23,480 --> 00:01:26,080 Speaker 2: being here. Well, let's start with that job's report. What 26 00:01:26,120 --> 00:01:27,959 Speaker 2: do you expect to see? 27 00:01:29,160 --> 00:01:35,160 Speaker 5: We expect to see a slowdown in job creation. We're 28 00:01:35,280 --> 00:01:38,360 Speaker 5: still a week out, so there will be a lot 29 00:01:38,360 --> 00:01:42,120 Speaker 5: of data that comes in on employment from other indicators 30 00:01:42,120 --> 00:01:46,840 Speaker 5: that will go into the general forecast. Right now, we 31 00:01:46,880 --> 00:01:49,880 Speaker 5: have one hundred and thirty five thousand as the forecast, 32 00:01:49,920 --> 00:01:53,560 Speaker 5: and it was one hundred and fifty one thousand in February, 33 00:01:53,920 --> 00:01:56,400 Speaker 5: but that could bounce around a little bit. The key 34 00:01:56,440 --> 00:01:59,280 Speaker 5: for the Fed is unemployment and unemployments not expected to 35 00:01:59,400 --> 00:02:02,440 Speaker 5: change state four point one percent. The question is is 36 00:02:02,440 --> 00:02:06,200 Speaker 5: anybody going to care about the jobs report by next Friday? 37 00:02:06,960 --> 00:02:10,680 Speaker 2: Well, well, I guess they'll care because, I mean, with 38 00:02:10,800 --> 00:02:15,280 Speaker 2: the Trump policies, the tens of thousands of federal workers 39 00:02:15,360 --> 00:02:18,760 Speaker 2: being laid off, the you know, and things are changing 40 00:02:18,840 --> 00:02:21,440 Speaker 2: every day. There were tiiffs. I mean, all this adds 41 00:02:21,560 --> 00:02:23,480 Speaker 2: up to the you know what we're going to see. 42 00:02:23,280 --> 00:02:27,120 Speaker 5: In terms of the jobs report. Yes, the real question 43 00:02:27,240 --> 00:02:30,560 Speaker 5: is whether we see a lot in this month because 44 00:02:30,600 --> 00:02:34,519 Speaker 5: of the timing of it. All, the jobs report taken 45 00:02:34,560 --> 00:02:38,040 Speaker 5: in the first weeks of the month, and we don't 46 00:02:38,080 --> 00:02:41,240 Speaker 5: really have a good handle on how many people have 47 00:02:41,480 --> 00:02:46,240 Speaker 5: been fired. Last week the government reported we had only 48 00:02:46,440 --> 00:02:49,960 Speaker 5: eight hundred and twenty one federal workers filing new claims 49 00:02:50,000 --> 00:02:54,040 Speaker 5: for unemployment. Part of it is that people get laid off, 50 00:02:54,200 --> 00:02:58,160 Speaker 5: they get unlaid off, they get laid off again. I imagine 51 00:02:58,080 --> 00:03:00,840 Speaker 5: many federal workers don't know what their jobs situation is, 52 00:03:01,240 --> 00:03:06,600 Speaker 5: so expect to see a lot of cuts in federal employment, 53 00:03:06,680 --> 00:03:08,240 Speaker 5: but maybe not this month. 54 00:03:08,760 --> 00:03:09,040 Speaker 6: Wow. 55 00:03:09,160 --> 00:03:12,400 Speaker 2: And there's other data that we saw come out PCE 56 00:03:12,720 --> 00:03:17,200 Speaker 2: for March indicative of where jobs are maybe coming or going. 57 00:03:17,520 --> 00:03:19,120 Speaker 2: I mean with consumers pulling back. 58 00:03:19,520 --> 00:03:21,960 Speaker 5: Consumers have pulled back just a little bit. It isn't 59 00:03:22,760 --> 00:03:26,520 Speaker 5: a huge drop because we had seen a huge shop 60 00:03:26,800 --> 00:03:32,800 Speaker 5: in spending in January and this was a four tenths rise, 61 00:03:33,520 --> 00:03:36,760 Speaker 5: not too bad. But it did come mostly in durable goods, 62 00:03:37,080 --> 00:03:39,680 Speaker 5: so it suggests maybe people were afraid of tariffs and 63 00:03:39,880 --> 00:03:44,280 Speaker 5: running out and buying stuff. I don't know, refrigerators, stoves 64 00:03:44,360 --> 00:03:48,080 Speaker 5: or something cars before prices went up. And then the 65 00:03:48,200 --> 00:03:51,600 Speaker 5: University of Michigan Sentiment Indicator came out and normally doesn't 66 00:03:51,640 --> 00:03:53,720 Speaker 5: move much between the preliminary and the final, but in 67 00:03:53,720 --> 00:03:56,720 Speaker 5: this case it did. We saw a big drop in 68 00:03:57,240 --> 00:04:00,960 Speaker 5: overall sentiment and in expectations, and then we saw inflation 69 00:04:01,160 --> 00:04:06,080 Speaker 5: expectations rise significantly to five percent over the next year. 70 00:04:06,200 --> 00:04:11,760 Speaker 5: So Americans are anticipating bad news from Liberation Day next week. 71 00:04:11,840 --> 00:04:15,840 Speaker 2: Yeah, that's a lot of inflation fears right there. Well, 72 00:04:15,920 --> 00:04:19,920 Speaker 2: let's talk about Liberation Day and President Trump's tariffs. We 73 00:04:20,279 --> 00:04:22,440 Speaker 2: know they change week to week, day to day, sometimes 74 00:04:22,560 --> 00:04:26,760 Speaker 2: hour to hour, but what is the impact right now 75 00:04:26,800 --> 00:04:30,120 Speaker 2: on the economy on jobs. I mean, clearly people are worried, 76 00:04:30,160 --> 00:04:31,520 Speaker 2: consumers are concerned. 77 00:04:31,800 --> 00:04:34,480 Speaker 5: Right now. It has people concerned, it has businesses concerned. 78 00:04:34,480 --> 00:04:39,279 Speaker 5: We've seen that in business leaders surveys and obviously the 79 00:04:39,360 --> 00:04:42,359 Speaker 5: Michigan and Conference Board numbers show US consumers are feeling 80 00:04:42,400 --> 00:04:46,039 Speaker 5: the same way. They haven't in the hard data acted yet, 81 00:04:46,080 --> 00:04:49,800 Speaker 5: but that's what we're expected to see over the next 82 00:04:49,800 --> 00:04:53,120 Speaker 5: couple of weeks. Especially if people go to the store 83 00:04:53,200 --> 00:04:58,880 Speaker 5: and see prices higher, that really drives consumer behavior, particularly 84 00:04:58,920 --> 00:05:02,120 Speaker 5: for things like gasoline food, which may take a little 85 00:05:02,160 --> 00:05:04,440 Speaker 5: longer to work their way into this. And of course 86 00:05:04,480 --> 00:05:06,559 Speaker 5: you don't buy a car every day, but if you notice, 87 00:05:06,640 --> 00:05:10,080 Speaker 5: prices are going up, so it's something that the FED 88 00:05:10,120 --> 00:05:12,920 Speaker 5: has to worry about. There are all kinds of estimates 89 00:05:13,279 --> 00:05:18,520 Speaker 5: on what this could do to inflation, could push it 90 00:05:18,600 --> 00:05:22,120 Speaker 5: up by one and a half two percent for the year. 91 00:05:23,279 --> 00:05:26,440 Speaker 5: One forecast that came out this last week from a 92 00:05:26,480 --> 00:05:29,080 Speaker 5: Wall Street firm was we would see inflation over four 93 00:05:29,120 --> 00:05:33,000 Speaker 5: percent for the next three four five months. That would 94 00:05:33,000 --> 00:05:35,000 Speaker 5: not go over well with the American public. 95 00:05:35,120 --> 00:05:39,000 Speaker 2: No well, And Susan Collins from the FED Boston Bank said, 96 00:05:39,120 --> 00:05:39,960 Speaker 2: it's coming. 97 00:05:40,080 --> 00:05:42,880 Speaker 5: It's coming. And the thing is the FED doesn't know 98 00:05:42,920 --> 00:05:48,279 Speaker 5: what to do yet because they don't have handle on 99 00:05:48,400 --> 00:05:51,720 Speaker 5: exactly what the president's tariffs are going to do. And 100 00:05:51,760 --> 00:05:57,320 Speaker 5: the best line came from the Richmond Fed president who said, 101 00:05:58,040 --> 00:06:00,880 Speaker 5: this is not a fog of under certainty like you 102 00:06:01,000 --> 00:06:03,839 Speaker 5: normally see. This is a pull over to the side 103 00:06:03,880 --> 00:06:06,080 Speaker 5: of the road and put on your high beams kind 104 00:06:06,160 --> 00:06:10,040 Speaker 5: of fog of uncertainty because we have no idea. Tom 105 00:06:10,080 --> 00:06:12,960 Speaker 5: Barkin saying that we have no idea, what's going to happen. 106 00:06:13,279 --> 00:06:16,120 Speaker 2: Well, let's hope Jerome Powell gives us a little clarity. 107 00:06:16,160 --> 00:06:18,120 Speaker 2: He is speaking this Friday. We're gonna hear from HM. 108 00:06:18,120 --> 00:06:19,320 Speaker 2: Why don't you tell us what you expect. 109 00:06:19,680 --> 00:06:22,320 Speaker 5: That's why the church lady line comes in. How convenient 110 00:06:22,680 --> 00:06:25,840 Speaker 5: that the FED chair is speaking the same week as 111 00:06:26,200 --> 00:06:30,080 Speaker 5: Independence Day. He is speaking on Friday, and we will 112 00:06:30,120 --> 00:06:33,200 Speaker 5: get probably. I don't see how he can avoid giving 113 00:06:33,279 --> 00:06:36,240 Speaker 5: us some view on what impact the tariffs are going 114 00:06:36,279 --> 00:06:38,800 Speaker 5: to have on the economy, both on inflation and growth. 115 00:06:39,279 --> 00:06:42,400 Speaker 5: And if that's the case, then there's going to be 116 00:06:42,440 --> 00:06:45,839 Speaker 5: a lot for investors to try to parse in terms 117 00:06:45,839 --> 00:06:49,360 Speaker 5: of what it means for FED action. So it's going 118 00:06:49,400 --> 00:06:52,640 Speaker 5: to be a very very busy week. Powell and jobs 119 00:06:52,720 --> 00:06:55,159 Speaker 5: on the same day. So all of you who thought 120 00:06:55,160 --> 00:06:57,240 Speaker 5: you were going to get away to the Hamptons or 121 00:06:57,360 --> 00:07:01,040 Speaker 5: upstate early not on Friday this week. 122 00:07:01,279 --> 00:07:04,479 Speaker 2: Well, the March non farm payrolls numbers out this Friday, 123 00:07:04,520 --> 00:07:07,560 Speaker 2: eight thirty am Wall Street Time our thanks to Michael McKee, 124 00:07:07,760 --> 00:07:11,880 Speaker 2: Bloomberg International Economics and Policy correspondent. We turned now to 125 00:07:11,880 --> 00:07:14,720 Speaker 2: the US auto sector ahead of first quarter vehicle sales 126 00:07:14,760 --> 00:07:18,880 Speaker 2: out this Tuesday, just before President Trump's punishing twenty five 127 00:07:18,960 --> 00:07:22,160 Speaker 2: percent tariffs are slated to go into effect on all 128 00:07:22,520 --> 00:07:25,840 Speaker 2: imported autos. For more on how those tariffs, if they 129 00:07:25,880 --> 00:07:30,360 Speaker 2: go into effect, could impact consumers, investors, US and foreign automakers, 130 00:07:30,360 --> 00:07:33,880 Speaker 2: and more, were joined by Steve Mann Bloomberg Intelligence, Global 131 00:07:33,960 --> 00:07:38,400 Speaker 2: Autos and Industrial Research analysts. Steve, thank you for being here, 132 00:07:38,440 --> 00:07:41,040 Speaker 2: and boy, is there a lot to unpack here. Well, 133 00:07:41,120 --> 00:07:43,720 Speaker 2: let's start with look back. It looks like the industry 134 00:07:43,800 --> 00:07:46,280 Speaker 2: was off to a pretty solid start, not spectacular to 135 00:07:46,320 --> 00:07:50,480 Speaker 2: the new year, despite high sticker prices and elevated borrowing rates. 136 00:07:50,520 --> 00:07:54,480 Speaker 2: But boy, if these tariffs, if implemented, things could really change. 137 00:07:54,520 --> 00:07:55,880 Speaker 2: How would that change everything? 138 00:07:56,280 --> 00:07:59,960 Speaker 6: Well, we actually just published a report and we lowered 139 00:08:00,160 --> 00:08:04,280 Speaker 6: our sales forecast for the US passenger vehicle sales. We 140 00:08:04,360 --> 00:08:07,720 Speaker 6: were at down half a percent. Now we're looking at 141 00:08:07,800 --> 00:08:11,360 Speaker 6: down at least three percent for the year. Well, prices 142 00:08:11,400 --> 00:08:15,160 Speaker 6: are going to go up. We're hearing dealerships out there 143 00:08:15,200 --> 00:08:17,960 Speaker 6: telling their customers that prices are going to go up. 144 00:08:18,040 --> 00:08:20,640 Speaker 6: There's different numbers out there, depending on the price of 145 00:08:20,640 --> 00:08:23,760 Speaker 6: the vehicle, could be thirty five hundred or as much 146 00:08:23,840 --> 00:08:27,080 Speaker 6: as ten thousand dollars. So it's gonna really put a 147 00:08:27,160 --> 00:08:30,280 Speaker 6: dent on sales. On the flip side, it's going to 148 00:08:30,320 --> 00:08:32,520 Speaker 6: help use car sales. So if you look at you know, 149 00:08:32,640 --> 00:08:36,480 Speaker 6: Avis and Hurts, they're actually responding positively to the news 150 00:08:36,520 --> 00:08:39,440 Speaker 6: because you know, if they sell their used fleet, they're 151 00:08:39,440 --> 00:08:41,760 Speaker 6: going to get more money for it. And the balance 152 00:08:41,760 --> 00:08:45,720 Speaker 6: sheet Imprus and the other thing that's reacting positively are 153 00:08:46,080 --> 00:08:49,120 Speaker 6: you know, the retail sales part sales companies like O'Reilly 154 00:08:49,320 --> 00:08:53,839 Speaker 6: Advanced autoparts. You know, they're actually bucking the trend. So 155 00:08:53,920 --> 00:08:55,960 Speaker 6: if consumers are not going to buy new cars, they're 156 00:08:55,960 --> 00:08:58,160 Speaker 6: going to have to probably have to fix up the 157 00:08:58,480 --> 00:09:00,000 Speaker 6: old one and keep you a little bit longer. 158 00:09:00,120 --> 00:09:01,840 Speaker 2: So it sounds like a lot of cars are going 159 00:09:01,840 --> 00:09:03,280 Speaker 2: to stay on the road a lot longer. And the 160 00:09:03,320 --> 00:09:05,640 Speaker 2: average now is like eleven and a half twelve years, 161 00:09:05,679 --> 00:09:06,040 Speaker 2: isn't it. 162 00:09:06,640 --> 00:09:10,160 Speaker 6: Yeah, that's right. So you know you kind of mentioned 163 00:09:10,200 --> 00:09:13,360 Speaker 6: it earlier. The consumer is already hesitating by a new 164 00:09:13,400 --> 00:09:18,199 Speaker 6: car because prices have gone up quite a bit, especially 165 00:09:18,240 --> 00:09:22,720 Speaker 6: on those big pickup trucks and SUVs, you know, leasing 166 00:09:23,400 --> 00:09:26,920 Speaker 6: upwards of one thousand to two thousand dollars, So it's 167 00:09:27,080 --> 00:09:29,679 Speaker 6: becoming out of reach for a lot of consumers. 168 00:09:29,679 --> 00:09:32,760 Speaker 2: Now, yeah, the consumer consumer definitely appears to be the 169 00:09:32,800 --> 00:09:37,600 Speaker 2: loser here. Let's talk about the automakers, especially Detroit's Big three, 170 00:09:37,880 --> 00:09:40,760 Speaker 2: and how they'll be impacted, and will they each be 171 00:09:40,800 --> 00:09:42,680 Speaker 2: impacted in the same way. I know, for IT makes 172 00:09:42,720 --> 00:09:44,800 Speaker 2: a lot more of its cars in the US than 173 00:09:44,840 --> 00:09:45,360 Speaker 2: the other two. 174 00:09:45,880 --> 00:09:51,319 Speaker 6: Yeah, look, I think all three, No, silentis, FOURD and 175 00:09:51,400 --> 00:09:56,960 Speaker 6: GM will be impacted by a lot, you know, not 176 00:09:57,240 --> 00:10:01,959 Speaker 6: just just on the initial cost of the tariff. You know, 177 00:10:02,320 --> 00:10:05,800 Speaker 6: also if they have to reshore some of their plants. 178 00:10:05,880 --> 00:10:09,320 Speaker 6: We have an analysis out there that that tells us 179 00:10:09,400 --> 00:10:12,800 Speaker 6: it could cost as much as four billion dollars if 180 00:10:12,840 --> 00:10:16,720 Speaker 6: they have to build a new plant in the US, 181 00:10:17,040 --> 00:10:19,920 Speaker 6: you know, shift that plant back into Mexico and build 182 00:10:19,920 --> 00:10:23,280 Speaker 6: a new one. And in the US, that's a lot 183 00:10:23,320 --> 00:10:25,559 Speaker 6: of spending. That's only for one plan. You know, they 184 00:10:25,559 --> 00:10:29,760 Speaker 6: have multiple plants in Mexico and Canada that they can reshore. 185 00:10:30,200 --> 00:10:33,800 Speaker 6: So it's it's it's it's huge. The other thing for 186 00:10:33,800 --> 00:10:36,600 Speaker 6: Ford specifically too, is one of the things we're looking 187 00:10:36,640 --> 00:10:41,800 Speaker 6: at is their EV sales have been generating huge losses 188 00:10:41,840 --> 00:10:44,560 Speaker 6: for the company in the last two three years, and 189 00:10:45,240 --> 00:10:48,960 Speaker 6: especially for example, the Machi one of the most popular ones. 190 00:10:49,000 --> 00:10:52,280 Speaker 6: They're actually built in Mexico. So if they have to 191 00:10:52,679 --> 00:10:58,040 Speaker 6: lose another ten thousand dollars on that vehicle, it begs 192 00:10:58,040 --> 00:11:01,600 Speaker 6: the question is should they even continue you're building that vehicle, 193 00:11:02,000 --> 00:11:04,640 Speaker 6: and what that means is it's you know, the Big 194 00:11:04,679 --> 00:11:08,520 Speaker 6: three four as well as GM could actually lose EV 195 00:11:08,679 --> 00:11:11,520 Speaker 6: market share to the pure place, not just Tesla, but 196 00:11:11,559 --> 00:11:12,880 Speaker 6: to also Rivian Lucid. 197 00:11:13,840 --> 00:11:16,720 Speaker 2: Well, let's talk about Tesla and the EV's. Tesla makes 198 00:11:16,880 --> 00:11:19,640 Speaker 2: every car it sells in the US in the US 199 00:11:19,640 --> 00:11:23,480 Speaker 2: at plants in Texas and California, and how does it 200 00:11:23,559 --> 00:11:27,400 Speaker 2: stand to win? And as you said, Rivian Lucid, Faraday Future, 201 00:11:27,400 --> 00:11:30,800 Speaker 2: all these other ones, smaller ones, niche ones, are they 202 00:11:30,800 --> 00:11:31,920 Speaker 2: going to be the winners here too? 203 00:11:32,960 --> 00:11:33,440 Speaker 7: Yeah? 204 00:11:33,760 --> 00:11:37,200 Speaker 6: I think so, because you know, they have a very 205 00:11:37,240 --> 00:11:43,160 Speaker 6: different manufacturing footprint or different business model than the legacy automakers. 206 00:11:43,520 --> 00:11:46,840 Speaker 6: They're more vertically integrated. So a lot of the most 207 00:11:46,920 --> 00:11:53,800 Speaker 6: expensive components in an EV, the batteries, right, the charging systems, 208 00:11:53,960 --> 00:11:57,240 Speaker 6: the battery management system, they're actually built in house. The 209 00:11:57,320 --> 00:12:00,880 Speaker 6: motors are actually built in house, so they have much 210 00:12:00,920 --> 00:12:04,720 Speaker 6: better control of the cost. And obviously because they are 211 00:12:04,720 --> 00:12:08,000 Speaker 6: bill in the House. In in the US, they're not 212 00:12:08,120 --> 00:12:11,680 Speaker 6: subject to the tariff as high as the legacy automakers. 213 00:12:12,120 --> 00:12:15,200 Speaker 2: Interesting to watch if it all goes into effect. First 214 00:12:15,240 --> 00:12:18,280 Speaker 2: corder auto sales out this Tuesday. Those twenty five percent 215 00:12:18,320 --> 00:12:22,240 Speaker 2: tariffs on all imported autos kicking in Thursday morning, twelve 216 00:12:22,280 --> 00:12:25,920 Speaker 2: oh one am Wall Street Time. Our thanks to Steve Mann, 217 00:12:25,960 --> 00:12:30,840 Speaker 2: Bloomberg Intelligence, Global autos and industrials research analysts. Coming up 218 00:12:30,880 --> 00:12:33,720 Speaker 2: on Bloomberg day Break weekend. Calls for unity at a 219 00:12:33,880 --> 00:12:38,000 Speaker 2: NATO summit this week. I'm Tom Busby and this is Bloomberg. 220 00:12:49,320 --> 00:12:51,800 Speaker 2: This is Bloomberg day Break Weekend, our global look ahead 221 00:12:51,800 --> 00:12:54,160 Speaker 2: at the top stories for investors in the coming week. 222 00:12:54,320 --> 00:12:57,720 Speaker 2: I'm Tom Busby in New York. Up later in our program, 223 00:12:57,760 --> 00:13:01,080 Speaker 2: A big decision this week from Australia Bank. But first 224 00:13:01,160 --> 00:13:04,280 Speaker 2: at a fraud time for Geopolitical security. Defense is front 225 00:13:04,280 --> 00:13:07,760 Speaker 2: of mind for world leaders and bolstering protection will be 226 00:13:07,880 --> 00:13:10,920 Speaker 2: certainly high on the agenda at the NATO headquarters in 227 00:13:10,960 --> 00:13:14,600 Speaker 2: Brussels this week, where Allied Foreign Affairs ministers meet for 228 00:13:14,679 --> 00:13:18,120 Speaker 2: talks chaired by Secretary General Mark Ruda. Now for more, 229 00:13:18,400 --> 00:13:20,360 Speaker 2: let's go to London and bring in Bloomberg day Break. 230 00:13:20,400 --> 00:13:23,280 Speaker 2: Europbanker Caroline hepgar Tom speaking. 231 00:13:22,960 --> 00:13:26,200 Speaker 3: To Bloomberg earlier this month, the NATO chief Mark Russia 232 00:13:26,320 --> 00:13:30,000 Speaker 3: expressed his desire for relations with Russia to return to 233 00:13:30,120 --> 00:13:34,880 Speaker 3: normal once fighting subsides in Ukraine, but the body's Secretary 234 00:13:34,960 --> 00:13:38,000 Speaker 3: General was quick to acknowledge that there's a long way 235 00:13:38,040 --> 00:13:42,000 Speaker 3: to go before proceedings reached that stage. He is preparing 236 00:13:42,040 --> 00:13:46,319 Speaker 3: to share discussions between allied foreign ministers in Brussels, the 237 00:13:46,440 --> 00:13:50,280 Speaker 3: latest event on a recent packed schedule for Rutsa, who 238 00:13:50,280 --> 00:13:53,680 Speaker 3: has flown around the world to discuss the ongoing war 239 00:13:53,760 --> 00:13:58,679 Speaker 3: in Ukraine with numerous world leaders. Included in his travels 240 00:13:58,840 --> 00:14:01,280 Speaker 3: was a stop in Washington, d C. Where he met 241 00:14:01,280 --> 00:14:05,200 Speaker 3: with the US President Donald Trump. Russia has been engaging 242 00:14:05,320 --> 00:14:09,800 Speaker 3: in intense diplomacy in recent weeks to keep the Transatlantic 243 00:14:09,920 --> 00:14:14,440 Speaker 3: alliance together, as Trump has pared back support for Ukraine 244 00:14:14,520 --> 00:14:17,679 Speaker 3: and has indicated that the US will step back from 245 00:14:17,720 --> 00:14:22,800 Speaker 3: its traditional security role in Europe. The surprise move has 246 00:14:22,840 --> 00:14:27,320 Speaker 3: sent European countries scrambling to boost defense spending and to 247 00:14:27,520 --> 00:14:31,680 Speaker 3: rethink their military positioning. The NATO chief has said that 248 00:14:31,760 --> 00:14:35,840 Speaker 3: he is confident Trump is committed to NATO and that 249 00:14:35,880 --> 00:14:39,160 Speaker 3: there is no room for doubt there. In his words, 250 00:14:39,680 --> 00:14:44,160 Speaker 3: whilst also praising Trump for breaking the deadlock between Russia 251 00:14:44,200 --> 00:14:48,920 Speaker 3: and Ukraine, the delicate situation between President Trump and his 252 00:14:49,080 --> 00:14:53,240 Speaker 3: counterparts in Europe and its impact on markets is something 253 00:14:53,240 --> 00:14:56,960 Speaker 3: that we've been discussing with Carl Tannenbaum, who is chief 254 00:14:57,080 --> 00:14:59,440 Speaker 3: economist at Northern Trust. 255 00:15:00,080 --> 00:15:03,960 Speaker 7: For many reasons, a truce between Ukraine and Russia would 256 00:15:03,960 --> 00:15:06,280 Speaker 7: be very much welcome, but there are some hard yards 257 00:15:06,320 --> 00:15:10,280 Speaker 7: to be walked before we achieve that outcome. And absolutely 258 00:15:10,320 --> 00:15:14,120 Speaker 7: the forecasts for Europe are actually going up when they 259 00:15:14,320 --> 00:15:16,760 Speaker 7: for major centers elsewhere in the world they're going down. 260 00:15:17,600 --> 00:15:20,720 Speaker 7: I'm sure that the Europeans would have preferred to stimulate 261 00:15:21,960 --> 00:15:25,320 Speaker 7: other than at the end of a figurative bayonet. But 262 00:15:25,360 --> 00:15:28,040 Speaker 7: the fact is that the prompting that this did to 263 00:15:28,280 --> 00:15:31,520 Speaker 7: have the Germans and the Europeans open their budgets will 264 00:15:31,520 --> 00:15:34,120 Speaker 7: be favorable for their growth picture and their markets. 265 00:15:34,160 --> 00:15:34,640 Speaker 6: Reflect that. 266 00:15:36,240 --> 00:15:40,040 Speaker 3: You've said that it's difficult and that you underestimated, along 267 00:15:40,080 --> 00:15:44,440 Speaker 3: with many others, the reality of the tariff I'll call 268 00:15:44,480 --> 00:15:48,640 Speaker 3: it a tariff war from President Trump. In terms of 269 00:15:49,360 --> 00:15:52,200 Speaker 3: the tensions, How do you think about the tensions between 270 00:15:52,240 --> 00:15:54,160 Speaker 3: the US and the EU. The EU says that there 271 00:15:54,160 --> 00:15:57,520 Speaker 3: really wasn't any negotiation, particularly that they had no success 272 00:15:57,520 --> 00:16:00,560 Speaker 3: with negotiating with the Trump White House. What does that 273 00:16:00,640 --> 00:16:04,880 Speaker 3: mean economically that those ties are now so much more difficult? 274 00:16:06,520 --> 00:16:10,720 Speaker 7: The risk of the current strategy is that the alienation 275 00:16:11,040 --> 00:16:13,520 Speaker 7: that comes from the first steps will make it very 276 00:16:13,560 --> 00:16:17,760 Speaker 7: difficult to come back together in any meaningful way. There's 277 00:16:17,800 --> 00:16:21,120 Speaker 7: an injury felt by counterparts the United States and the 278 00:16:21,160 --> 00:16:24,840 Speaker 7: way that this is being done, and voices that might 279 00:16:24,920 --> 00:16:28,240 Speaker 7: have normally been heard have yet to be accounted for. 280 00:16:29,400 --> 00:16:32,200 Speaker 7: I certainly hope that the damage done is not lasting, 281 00:16:32,400 --> 00:16:34,440 Speaker 7: and that there is a phase to come yet this 282 00:16:34,600 --> 00:16:40,000 Speaker 7: year where there will be more consultation and less provocation. 283 00:16:41,240 --> 00:16:43,720 Speaker 7: But I hope that comes right soon. It's taken longer 284 00:16:43,760 --> 00:16:44,560 Speaker 7: than I would have thought. 285 00:16:44,960 --> 00:16:48,480 Speaker 3: That was called tannem Bound, chief economist at Northern Trust, 286 00:16:48,520 --> 00:16:52,960 Speaker 3: speaking to me and to Bloomberg's Stephen Carroll. So how 287 00:16:53,000 --> 00:16:56,960 Speaker 3: will these dynamics play out during the upcoming meeting of 288 00:16:57,160 --> 00:17:03,240 Speaker 3: foreign ministers? I've been speaking to BLOOMBERG'SMEA News director Roslyn Matheson. Well, 289 00:17:03,240 --> 00:17:06,640 Speaker 3: it's good to speak to you. What normally happens at 290 00:17:06,680 --> 00:17:09,159 Speaker 3: these NATO meetings, well. 291 00:17:09,000 --> 00:17:11,600 Speaker 8: It depends whose meeting, because some of them are minister 292 00:17:11,760 --> 00:17:14,199 Speaker 8: or level and some are obviously leader level, which are 293 00:17:14,240 --> 00:17:18,639 Speaker 8: the big shebang, And it depends which ministers are meeting. 294 00:17:18,720 --> 00:17:21,479 Speaker 8: In this case, as you say, it's foreign ministers meeting, 295 00:17:21,960 --> 00:17:24,639 Speaker 8: and their task tends to be well a little bit thankless, 296 00:17:24,680 --> 00:17:27,280 Speaker 8: to be honest, they are often the ones who are 297 00:17:27,280 --> 00:17:30,840 Speaker 8: meeting to pave the way into the leader's summit, which 298 00:17:30,840 --> 00:17:34,000 Speaker 8: we know is coming up some months later, and so 299 00:17:34,160 --> 00:17:37,200 Speaker 8: their job is to iron out any of the kinks 300 00:17:37,280 --> 00:17:39,520 Speaker 8: ahead of that, to work out what's going to be 301 00:17:39,560 --> 00:17:43,080 Speaker 8: on the agenda, to do some behind the scenes agreements 302 00:17:43,119 --> 00:17:46,199 Speaker 8: and understandings, and then take all of that back in 303 00:17:46,240 --> 00:17:50,080 Speaker 8: a way to their headquarters at home. And that's all 304 00:17:50,119 --> 00:17:53,000 Speaker 8: about laying the table for that meeting. I mean, obviously 305 00:17:53,040 --> 00:17:57,760 Speaker 8: they discuss a broad array of topics, and for foreign 306 00:17:57,760 --> 00:18:01,080 Speaker 8: ministers it can be a very broad church indeed, and 307 00:18:01,160 --> 00:18:03,399 Speaker 8: for this meeting it will be about a bunch of 308 00:18:03,440 --> 00:18:07,080 Speaker 8: stuff that's very topical at the moment, but will also 309 00:18:07,240 --> 00:18:12,639 Speaker 8: be about all those kind of sideline conversations, hallway conversations 310 00:18:13,000 --> 00:18:15,160 Speaker 8: to get a bit of an understanding about what they're 311 00:18:15,200 --> 00:18:17,320 Speaker 8: going to be looking like going into a leader's summer. 312 00:18:18,000 --> 00:18:22,560 Speaker 3: So will all member states be in attendance. 313 00:18:22,760 --> 00:18:26,200 Speaker 8: At this stage It appears so, including the US Secretary 314 00:18:26,240 --> 00:18:28,760 Speaker 8: of State Mark Rubio. I mean, it's an interesting question 315 00:18:28,800 --> 00:18:33,520 Speaker 8: because we've seen at some gatherings, including G twenty meetings 316 00:18:33,560 --> 00:18:36,240 Speaker 8: and so on, that the US has opted not to 317 00:18:36,320 --> 00:18:40,399 Speaker 8: attend or to send a lower level official questioning it 318 00:18:40,440 --> 00:18:44,080 Speaker 8: seems that you know whether these forums do anything that 319 00:18:44,119 --> 00:18:46,359 Speaker 8: matters or whether they need to be there. But it 320 00:18:46,400 --> 00:18:48,800 Speaker 8: looks like Mark Rubio will turn up. And obviously he's 321 00:18:48,840 --> 00:18:52,639 Speaker 8: been quite engaged with NATO and with Europe as a whole. 322 00:18:52,680 --> 00:18:55,360 Speaker 8: He recently met with a bunch of ministers from the Baltics, 323 00:18:55,359 --> 00:18:58,600 Speaker 8: for example. He recently met with the Turkish foreign minister 324 00:18:58,680 --> 00:19:01,880 Speaker 8: who was visiting him in the US. So he's certainly 325 00:19:01,920 --> 00:19:06,520 Speaker 8: engaging with his counterparts across Europe. So we are expecting 326 00:19:06,840 --> 00:19:08,200 Speaker 8: a full bench for this meeting. 327 00:19:08,640 --> 00:19:12,080 Speaker 3: Is it possible was that there might be something of 328 00:19:12,119 --> 00:19:15,960 Speaker 3: a tense atmosphere between the US and EU members given 329 00:19:16,000 --> 00:19:19,359 Speaker 3: that the meeting comes hot on the heels of these 330 00:19:19,600 --> 00:19:24,320 Speaker 3: leaked messages on the Signal app which featured senior members 331 00:19:24,359 --> 00:19:28,440 Speaker 3: of the Trump administration describing EU States as quote freeloaders. 332 00:19:28,880 --> 00:19:30,920 Speaker 8: What's going to be an interesting meeting in the backdrop 333 00:19:31,080 --> 00:19:36,040 Speaker 8: of those revelations around the signal chat, and for European 334 00:19:36,200 --> 00:19:39,240 Speaker 8: ministers who are there, no doubt questioning Marco Rubio quite 335 00:19:39,280 --> 00:19:43,160 Speaker 8: a bit about how secure intelligence is that they're sharing. 336 00:19:43,240 --> 00:19:46,399 Speaker 8: I mean, there's a lot of communications that have to 337 00:19:46,440 --> 00:19:48,840 Speaker 8: go on in a circle of trust and understanding that 338 00:19:48,880 --> 00:19:52,440 Speaker 8: whatever you talk about or whatever is shared is within 339 00:19:52,480 --> 00:19:55,160 Speaker 8: a certain cone of silence because you can talk more 340 00:19:55,200 --> 00:19:59,000 Speaker 8: candidly as a result. And so if you have European 341 00:19:59,160 --> 00:20:03,040 Speaker 8: ministers even more worry than they probably already were about 342 00:20:03,080 --> 00:20:05,879 Speaker 8: how to communicate with the US, how to talk openly 343 00:20:05,920 --> 00:20:11,520 Speaker 8: and honestly with officials, including Marco Ribio, what about how 344 00:20:11,600 --> 00:20:15,120 Speaker 8: secure intelligences that get shared? And so all of that 345 00:20:15,760 --> 00:20:19,800 Speaker 8: will be aired in that meeting. No doubt you're unlikely 346 00:20:19,840 --> 00:20:23,400 Speaker 8: to see Europeans stop sharing intelligence with the US. They 347 00:20:23,480 --> 00:20:26,720 Speaker 8: just need each other too much to do so. But 348 00:20:26,840 --> 00:20:30,160 Speaker 8: you will get certainly expressions of concern about that at 349 00:20:30,160 --> 00:20:30,560 Speaker 8: the meeting. 350 00:20:31,640 --> 00:20:34,639 Speaker 3: Now, we did see the NATO chief Mark Rutter in 351 00:20:35,440 --> 00:20:38,480 Speaker 3: the White House in the Oval Office with President Trump 352 00:20:38,520 --> 00:20:41,200 Speaker 3: when they had that discussion. He was talking about being 353 00:20:41,240 --> 00:20:44,760 Speaker 3: confident of the President's continued support talk US through the 354 00:20:44,800 --> 00:20:49,119 Speaker 3: complications though of the relationship. Are things still on the 355 00:20:49,200 --> 00:20:49,919 Speaker 3: right path. 356 00:20:50,760 --> 00:20:53,240 Speaker 8: What was interesting to see that meeting actually because it 357 00:20:53,280 --> 00:20:56,879 Speaker 8: seems as though Rita and Trump kind of hit it off, 358 00:20:57,320 --> 00:20:59,000 Speaker 8: like they at least had a bit of a rapport 359 00:20:59,040 --> 00:21:02,760 Speaker 8: and Ritter was treading carefully in his comments and seemingly 360 00:21:02,800 --> 00:21:06,240 Speaker 8: knowing how not to press Donald Trump's buttons, and so 361 00:21:06,359 --> 00:21:10,240 Speaker 8: that is obviously a plus to have that relationship seemingly 362 00:21:10,280 --> 00:21:13,000 Speaker 8: on a positive footing. But the overall relationship between the 363 00:21:13,080 --> 00:21:15,720 Speaker 8: US and NATO is pretty poor right now. I mean, 364 00:21:15,760 --> 00:21:19,960 Speaker 8: Donald Trump has been repeatedly critical of NATO, be it 365 00:21:20,040 --> 00:21:24,600 Speaker 8: over how much other nations spend on their defense, you know, 366 00:21:24,640 --> 00:21:27,359 Speaker 8: the collective nature of NATO, whether it's worth what he 367 00:21:27,400 --> 00:21:30,600 Speaker 8: sings as the US investment in NATO, What does the 368 00:21:30,760 --> 00:21:33,200 Speaker 8: US get out of it? I mean, it's worth pointing 369 00:21:33,240 --> 00:21:36,640 Speaker 8: out the only time that Article five, the collective responsibility 370 00:21:37,600 --> 00:21:41,000 Speaker 8: area of NATO, has been invoked was by the US 371 00:21:41,040 --> 00:21:43,879 Speaker 8: in its many decades. But you know, Donald Trump is 372 00:21:44,240 --> 00:21:48,479 Speaker 8: repeatedly called into question NATO, what it's for, what it serves, 373 00:21:48,520 --> 00:21:53,320 Speaker 8: where it's going, and so you know, personal relationship with Route, 374 00:21:53,440 --> 00:21:56,840 Speaker 8: which is quite positive, is not going to really negate 375 00:21:57,240 --> 00:22:00,159 Speaker 8: all of that. So there are fundamental questions here for 376 00:22:00,200 --> 00:22:01,960 Speaker 8: the US about their future role in NATO. 377 00:22:02,040 --> 00:22:05,880 Speaker 3: Either way, What do you think might emerge from these talks? 378 00:22:06,000 --> 00:22:08,879 Speaker 3: Will it be focused on Ukraine? Will it be again 379 00:22:09,040 --> 00:22:12,760 Speaker 3: back to the amount of defense spending. I mean we've 380 00:22:12,800 --> 00:22:15,800 Speaker 3: had Germany, for example, bring out a really big defense 381 00:22:15,880 --> 00:22:19,360 Speaker 3: Berzuka in terms of how much spending they're going to 382 00:22:19,400 --> 00:22:23,520 Speaker 3: try to enact. What do you think might emerge from 383 00:22:23,520 --> 00:22:26,040 Speaker 3: these discussions? Will there be any resolutions? 384 00:22:27,040 --> 00:22:30,679 Speaker 8: Well, I'd likely to be anything you'd call a breakthrough 385 00:22:30,720 --> 00:22:35,840 Speaker 8: because Marco Ribio has not been so centrally involved in 386 00:22:35,880 --> 00:22:38,679 Speaker 8: the conversations that the US is having with Russia and 387 00:22:38,720 --> 00:22:41,720 Speaker 8: the US is having with Ukraine. Other officials in the 388 00:22:41,800 --> 00:22:45,080 Speaker 8: US seem to be taking the lead on that, So 389 00:22:45,200 --> 00:22:48,639 Speaker 8: he's not been directly involved in many of the conversations 390 00:22:48,680 --> 00:22:51,880 Speaker 8: around that necessarily or even potentially seen as a decision 391 00:22:51,920 --> 00:22:54,600 Speaker 8: maker on it. And so you can expect a lot 392 00:22:54,600 --> 00:22:58,879 Speaker 8: of conversation, as you say, around security issues, particularly the 393 00:22:58,920 --> 00:23:02,600 Speaker 8: future of the war in Ukraine. Is there a cease far? 394 00:23:02,880 --> 00:23:04,560 Speaker 8: Is it going to be tangible? How to get it 395 00:23:04,600 --> 00:23:09,320 Speaker 8: to be broader than just the Black Sea or energy infrastructure, 396 00:23:09,320 --> 00:23:11,439 Speaker 8: and either of those don't seem to be particularly secure 397 00:23:11,440 --> 00:23:14,200 Speaker 8: at the moment anyway. And those issues, as you say, 398 00:23:14,280 --> 00:23:19,320 Speaker 8: around European defense, defense spending, NATO, but because it's foreign ministers, 399 00:23:19,359 --> 00:23:21,719 Speaker 8: it's also a pretty broad church. So you can imagine 400 00:23:22,240 --> 00:23:26,320 Speaker 8: topics around trade coming up, tariffs so obviously, and the 401 00:23:26,359 --> 00:23:31,800 Speaker 8: impact economically of the tariffs that Donald Trump is enacting 402 00:23:32,280 --> 00:23:36,480 Speaker 8: around the world, including on Europe. So the economic relationship, 403 00:23:36,800 --> 00:23:39,680 Speaker 8: because the economic relationship is a key part of the 404 00:23:39,800 --> 00:23:45,200 Speaker 8: geostrategic relationship alongside the pure defense one. So you can 405 00:23:45,240 --> 00:23:47,840 Speaker 8: imagine that at this meeting there'll be a broad conversation 406 00:23:47,920 --> 00:23:52,560 Speaker 8: about a bunch of topics involving Europe, NATO, and the US, 407 00:23:52,640 --> 00:23:55,360 Speaker 8: so not just defense. Trade will probably come into it somehow, 408 00:23:55,720 --> 00:23:59,359 Speaker 8: but again you're unlikely to see major tangible announcements coming. 409 00:24:00,080 --> 00:24:04,119 Speaker 3: That was Bloomberg's EMEA news director Roslyn matheson my thanks 410 00:24:04,160 --> 00:24:07,160 Speaker 3: to her, we will have full coverage of that NATO 411 00:24:07,400 --> 00:24:10,719 Speaker 3: meeting at the headquarters in Brussels from the third to 412 00:24:10,760 --> 00:24:14,880 Speaker 3: fourth of April right here on Bloomberg. I'm Caroline hepget 413 00:24:14,920 --> 00:24:17,280 Speaker 3: In London. You can catch us every weekday morning for 414 00:24:17,320 --> 00:24:19,879 Speaker 3: Bloomberg Daybreak you at beginning at six am in London. 415 00:24:20,160 --> 00:24:21,720 Speaker 3: That's one am on Wall Street. 416 00:24:21,800 --> 00:24:24,679 Speaker 2: Tom, thank you, Caroline. And coming up on Bloomberg day 417 00:24:24,680 --> 00:24:27,320 Speaker 2: Break weekend, the Reserve Bank of Australia meets this week 418 00:24:27,480 --> 00:24:31,400 Speaker 2: to make a decision on interest rates. Bloomberg's James McIntyre 419 00:24:31,520 --> 00:24:33,199 Speaker 2: breaks it all down from Australia. 420 00:24:33,359 --> 00:24:35,600 Speaker 9: It was a week of an expected CPI reading. We 421 00:24:35,680 --> 00:24:38,080 Speaker 9: had the headline come in at at two point four. 422 00:24:38,640 --> 00:24:40,840 Speaker 9: Consensus was two point five. We were at the two 423 00:24:40,880 --> 00:24:43,440 Speaker 9: point four, but we'd said all along that that probably 424 00:24:43,480 --> 00:24:46,040 Speaker 9: wasn't enough. It would need to be something exceptional to 425 00:24:46,080 --> 00:24:48,119 Speaker 9: pull the RBA over the line. They're going to be 426 00:24:48,280 --> 00:24:52,840 Speaker 9: delivering gradual rate cuts, and following up from their February 427 00:24:52,840 --> 00:24:55,359 Speaker 9: with an April cut was just too much, we think, 428 00:24:55,800 --> 00:24:58,640 Speaker 9: given what the rest of the economic picture is telling them, 429 00:24:58,880 --> 00:25:02,040 Speaker 9: it needed to be exceptional. It's welcome, but in our view, 430 00:25:02,200 --> 00:25:03,879 Speaker 9: it's not enough to push them over the line on 431 00:25:04,520 --> 00:25:05,200 Speaker 9: April first. 432 00:25:05,359 --> 00:25:08,000 Speaker 2: That's next year. On Bloomberg day Break Weekend, I'm Tom 433 00:25:08,040 --> 00:25:21,879 Speaker 2: Busby and this is Bloomberg. This is Bloomberg day Break Weekend. 434 00:25:21,920 --> 00:25:24,280 Speaker 2: Our global look ahead at the top stories for investors 435 00:25:24,280 --> 00:25:26,800 Speaker 2: in the coming week. I'm Tom Busby in New York. 436 00:25:27,200 --> 00:25:30,040 Speaker 2: The Reserve Bank of Australia cut its benchmark lending rate 437 00:25:30,080 --> 00:25:32,840 Speaker 2: in February for the first time in four years. Will 438 00:25:32,880 --> 00:25:35,720 Speaker 2: the RBA cut rates again when it meets this week? 439 00:25:35,760 --> 00:25:38,480 Speaker 2: For more, we turned to Doug Christner, host of the 440 00:25:38,560 --> 00:25:40,600 Speaker 2: Daybreak Asia podcast Tom. 441 00:25:40,680 --> 00:25:44,960 Speaker 4: Last week, Australia's center left government unveiled a pre election budget. 442 00:25:45,320 --> 00:25:48,159 Speaker 4: Now it included tax cuts and some other sweeteners aimed 443 00:25:48,160 --> 00:25:51,639 Speaker 4: at soothing concerns about the high cost of living. Australia 444 00:25:51,680 --> 00:25:55,760 Speaker 4: Finance Minister Katie Gallagher discussed the potential impact of inflation 445 00:25:55,920 --> 00:25:58,600 Speaker 4: and interest rates in an interview with Bloomberg. 446 00:25:58,920 --> 00:26:02,760 Speaker 10: Well, the budget's always a series of balancing decisions and 447 00:26:02,880 --> 00:26:07,600 Speaker 10: balancing requests for investment and other ways of dealing with 448 00:26:07,640 --> 00:26:10,360 Speaker 10: all the pressures on it. But we see these as 449 00:26:10,520 --> 00:26:12,639 Speaker 10: a good way to provide a bit of relief to 450 00:26:12,720 --> 00:26:16,480 Speaker 10: households their top up to the tax cuts that were 451 00:26:16,520 --> 00:26:17,280 Speaker 10: passed and. 452 00:26:17,400 --> 00:26:19,160 Speaker 11: Started flowing in July last year. 453 00:26:19,560 --> 00:26:22,840 Speaker 10: And really when they're put together in together with those 454 00:26:22,880 --> 00:26:25,560 Speaker 10: tax cuts and once fully implemented, it'd be about for 455 00:26:25,600 --> 00:26:28,480 Speaker 10: the average worker about fifty dollars a week. So we're 456 00:26:28,480 --> 00:26:32,119 Speaker 10: not pretending that they aren't modest, that's for sure, but 457 00:26:32,160 --> 00:26:34,639 Speaker 10: they're topping up the work that we'd already started a 458 00:26:34,720 --> 00:26:35,120 Speaker 10: year ago. 459 00:26:35,320 --> 00:26:35,920 Speaker 6: Well that's true. 460 00:26:35,920 --> 00:26:38,000 Speaker 12: I mean the treasurer of Jim Chalmers also these the 461 00:26:38,000 --> 00:26:40,760 Speaker 12: word modest when he was describing them. And when you 462 00:26:40,800 --> 00:26:43,239 Speaker 12: consider the size and the timing of them, was there 463 00:26:43,359 --> 00:26:46,000 Speaker 12: some consideration given to the inflation risk as well? 464 00:26:46,640 --> 00:26:49,600 Speaker 10: Well, that goes to the timing decision to have them 465 00:26:50,119 --> 00:26:54,199 Speaker 10: start next year, really to make sure that inflation is 466 00:26:54,240 --> 00:26:56,720 Speaker 10: back into ban and that you know, we are mindful 467 00:26:56,720 --> 00:26:58,840 Speaker 10: obviously we've done a lot of Australia as a country 468 00:26:58,880 --> 00:27:00,680 Speaker 10: has done a lot of heavy lifting to get inflation 469 00:27:00,800 --> 00:27:04,080 Speaker 10: back down to more normal range and we don't want 470 00:27:04,080 --> 00:27:07,000 Speaker 10: to jeopardize that. And so the timing of when they 471 00:27:07,040 --> 00:27:09,639 Speaker 10: come in was factored into our thinking and into the 472 00:27:09,680 --> 00:27:10,679 Speaker 10: Treasury forecasts. 473 00:27:11,080 --> 00:27:14,240 Speaker 12: And when it comes to forecasts around inflation that's forecasted 474 00:27:14,240 --> 00:27:17,760 Speaker 12: to be back inside the RBA's target range, making a 475 00:27:17,800 --> 00:27:20,439 Speaker 12: pretty hard hit amount an argument against further easing. 476 00:27:20,520 --> 00:27:24,440 Speaker 10: Right, Well, we obviously lead the bank to make their decisions. 477 00:27:25,000 --> 00:27:27,720 Speaker 10: You know, our responsibilities are contained in the budget, But 478 00:27:27,880 --> 00:27:31,200 Speaker 10: we are really pleased the Treasury forecasts have inflation turning 479 00:27:31,240 --> 00:27:34,920 Speaker 10: sustainably or coming back sustainably into the band six months 480 00:27:34,960 --> 00:27:37,680 Speaker 10: earlier than had been expected at. 481 00:27:37,480 --> 00:27:39,760 Speaker 11: My EFO, and so that's really welcome news. 482 00:27:39,840 --> 00:27:42,879 Speaker 10: Obviously, we'll leave the Bank to make decisions based on 483 00:27:43,080 --> 00:27:44,080 Speaker 10: the information they have. 484 00:27:44,800 --> 00:27:48,360 Speaker 12: Turning to some questions around spending as well, we were 485 00:27:48,359 --> 00:27:51,800 Speaker 12: expecting to see perhaps a substantial boost of defense spending, 486 00:27:51,880 --> 00:27:55,760 Speaker 12: considering well the geopolitical environment at the moment, potential pressure 487 00:27:55,800 --> 00:27:58,879 Speaker 12: from the US as well. Was there a temptation to 488 00:27:58,880 --> 00:28:01,040 Speaker 12: go a little bit bigger therea what we're rising to 489 00:28:01,080 --> 00:28:03,800 Speaker 12: two point three percent of GDP by the early twenty thirties. 490 00:28:04,320 --> 00:28:07,360 Speaker 10: Look, we put a lot of work into working out 491 00:28:07,480 --> 00:28:10,240 Speaker 10: the priorities in defense, and the Defense Minister has led 492 00:28:10,280 --> 00:28:14,680 Speaker 10: that in conjunction with his department. We've found an extra 493 00:28:14,760 --> 00:28:17,800 Speaker 10: fifty billion dollars over the medium term for defense. That's 494 00:28:17,840 --> 00:28:21,480 Speaker 10: not an insignificant amount of money when you think about it. 495 00:28:21,520 --> 00:28:24,040 Speaker 10: We've bought forward some money in this budget based on 496 00:28:24,080 --> 00:28:27,879 Speaker 10: a defense advice about their capability needs, so that is met. 497 00:28:28,000 --> 00:28:29,600 Speaker 11: But I also think you should look at. 498 00:28:29,520 --> 00:28:35,560 Speaker 10: Defense and national security, bringing in all of the intelligence agency, 499 00:28:35,640 --> 00:28:38,800 Speaker 10: the work that defat's doing to stabilize our relationships in 500 00:28:38,840 --> 00:28:42,480 Speaker 10: the region. It is very uncertain global times, as everybody 501 00:28:42,520 --> 00:28:47,040 Speaker 10: is witnessing, and so investments in defense are essential, but 502 00:28:47,200 --> 00:28:49,680 Speaker 10: so are investments in a whole range of other areas 503 00:28:49,680 --> 00:28:51,560 Speaker 10: to make sure we keep Australian safe. 504 00:28:51,840 --> 00:28:55,360 Speaker 12: We also have a forecast for deficits for a decade. 505 00:28:55,840 --> 00:28:57,960 Speaker 12: Is there any sense of urgency to do something about 506 00:28:57,960 --> 00:28:58,480 Speaker 12: that sooner? 507 00:28:59,080 --> 00:29:01,560 Speaker 10: Well, when you look at the you'll see under this 508 00:29:01,600 --> 00:29:05,280 Speaker 10: government we've had the biggest nominal turnaround, the most significant 509 00:29:05,360 --> 00:29:09,120 Speaker 10: no turnaround in the budget forecasts of any first term government. 510 00:29:09,200 --> 00:29:11,760 Speaker 10: So we've improved the budget bottom line by over two. 511 00:29:11,720 --> 00:29:12,880 Speaker 11: Hundred billion dollars. 512 00:29:13,240 --> 00:29:17,320 Speaker 10: Again massive numbers, I know, but we've improved the deficits. 513 00:29:17,360 --> 00:29:21,080 Speaker 10: We've delivered two surpluses, we've paid down debt and we're 514 00:29:21,080 --> 00:29:23,520 Speaker 10: paying you know, because we have lower debt, we're paying 515 00:29:23,560 --> 00:29:26,600 Speaker 10: lower interest bills on that debt. That all matters. So 516 00:29:26,640 --> 00:29:29,800 Speaker 10: we have absolutely since day one. It's probably the key 517 00:29:29,840 --> 00:29:32,160 Speaker 10: part of my job is to work out how we 518 00:29:32,200 --> 00:29:35,560 Speaker 10: make sensible savings and bring those deficits and head the 519 00:29:35,560 --> 00:29:39,040 Speaker 10: budget back into balance in a reasonable timeframe. But we 520 00:29:39,080 --> 00:29:41,280 Speaker 10: also have to be realistic that we have to pay 521 00:29:41,720 --> 00:29:45,240 Speaker 10: for services for Medicare, for defense spending. There's no shortage 522 00:29:45,280 --> 00:29:48,200 Speaker 10: of pressures on the budget and the budget balances all 523 00:29:48,200 --> 00:29:48,760 Speaker 10: of those up. 524 00:29:48,960 --> 00:29:52,560 Speaker 4: That is Australia Finance Minister Katie Gallagher speaking earlier with 525 00:29:52,560 --> 00:29:56,120 Speaker 4: Bloomberg's Paul Allen. Joining me now to explore what we 526 00:29:56,200 --> 00:29:59,800 Speaker 4: may hear from the RBA next week is James McIntyre. 527 00:30:00,200 --> 00:30:04,080 Speaker 4: James covers Australia and New Zealand for Bloomberg Economics, joining 528 00:30:04,160 --> 00:30:07,480 Speaker 4: us from our studios in Sydney. Can we begin by 529 00:30:07,840 --> 00:30:11,120 Speaker 4: kind of unpacking this weaker than expected inflation data. I'd 530 00:30:11,200 --> 00:30:14,160 Speaker 4: like to know whether or not these readings are enough 531 00:30:14,160 --> 00:30:16,200 Speaker 4: to prompt a rate cut from the RBA. What do 532 00:30:16,240 --> 00:30:16,600 Speaker 4: you think? 533 00:30:17,120 --> 00:30:20,120 Speaker 9: Well, our view is that no, it's not. It was 534 00:30:20,160 --> 00:30:22,440 Speaker 9: a week of an expected CPI reading. We had the 535 00:30:22,440 --> 00:30:25,840 Speaker 9: headline come in at at two point four. Consensus was 536 00:30:25,880 --> 00:30:27,920 Speaker 9: two point five. We were at the two point four. 537 00:30:28,280 --> 00:30:30,480 Speaker 9: But we'd said all along that that probably wasn't enough. 538 00:30:30,520 --> 00:30:32,920 Speaker 9: It would need to be something exceptional to pull the 539 00:30:33,000 --> 00:30:35,960 Speaker 9: RBA over the line. They're going to be delivering gradual 540 00:30:36,040 --> 00:30:39,760 Speaker 9: rate cuts and following up from there February with an 541 00:30:39,760 --> 00:30:42,840 Speaker 9: April cut was just too much, we think, given what 542 00:30:43,040 --> 00:30:45,520 Speaker 9: the rest of the economic picture is telling them, it 543 00:30:45,600 --> 00:30:48,640 Speaker 9: needed to be exceptional. It's welcome, but in our view, 544 00:30:48,720 --> 00:30:50,960 Speaker 9: it's not enough to push them over the line on 545 00:30:51,040 --> 00:30:51,680 Speaker 9: April first. 546 00:30:51,880 --> 00:30:54,640 Speaker 4: So where is this inflationary pressure coming from. Is it 547 00:30:54,680 --> 00:30:58,640 Speaker 4: goods inflation and if so, what are the commodities or 548 00:30:58,720 --> 00:31:02,320 Speaker 4: items involved? Or maybe it's a little bit more service related. 549 00:31:02,720 --> 00:31:05,680 Speaker 9: The mix within the Australian inflation story is very much 550 00:31:05,720 --> 00:31:10,120 Speaker 9: a services story, and goods inflation has really fallen away, 551 00:31:10,800 --> 00:31:16,240 Speaker 9: especially goods inflation around energy goods automotive fuel that's down 552 00:31:16,320 --> 00:31:19,040 Speaker 9: quite a bit. But on the services side we've seen 553 00:31:19,080 --> 00:31:25,120 Speaker 9: housing rents, insurance, new construction costs, but also medical and 554 00:31:25,360 --> 00:31:28,360 Speaker 9: education services costs. There've been some of the key ones. 555 00:31:28,600 --> 00:31:31,160 Speaker 9: There's some welcome developments on the services side, which is 556 00:31:31,200 --> 00:31:35,400 Speaker 9: allowing the RBA to move rents of ease, the continuing 557 00:31:35,440 --> 00:31:38,640 Speaker 9: to ease. New construction costs are coming down and insurance 558 00:31:38,640 --> 00:31:41,120 Speaker 9: costs are starting to kind of ease back as well. 559 00:31:41,440 --> 00:31:44,520 Speaker 9: So it's good, it's welcome, it's enough we think to 560 00:31:44,520 --> 00:31:46,960 Speaker 9: get them over the line. When the full quarterly CPI 561 00:31:47,080 --> 00:31:50,040 Speaker 9: is released ahead of the main meeting but just not 562 00:31:50,240 --> 00:31:54,400 Speaker 9: enough yet to push them over the line next for April. 563 00:31:54,680 --> 00:31:57,160 Speaker 4: So are you thinking that the next rate cut would 564 00:31:57,200 --> 00:31:58,880 Speaker 4: be in May? Is that your thinking? 565 00:31:59,400 --> 00:32:01,600 Speaker 9: That's our base case. So our base case for some 566 00:32:01,720 --> 00:32:04,560 Speaker 9: time has been that the RBA would be delivering twenty 567 00:32:04,600 --> 00:32:08,840 Speaker 9: five basis point rate cuts per quarter May August November. 568 00:32:08,880 --> 00:32:11,680 Speaker 9: They're key meetings where they do the quarterly forecast update 569 00:32:11,920 --> 00:32:16,200 Speaker 9: following the quarterly CPI readings. We still think that there's 570 00:32:16,200 --> 00:32:19,280 Speaker 9: nothing to kind of change our view on that, including 571 00:32:19,280 --> 00:32:23,160 Speaker 9: nothing really in the government's budget, which was released on 572 00:32:23,760 --> 00:32:28,200 Speaker 9: Tuesday evening by the Treasurer outlining some election policy goodies. 573 00:32:28,360 --> 00:32:31,000 Speaker 9: We don't think there's anything there that really threatens that 574 00:32:31,160 --> 00:32:34,880 Speaker 9: gradual but sustained RBA cutting cycle through the course of 575 00:32:34,880 --> 00:32:35,280 Speaker 9: this year. 576 00:32:35,440 --> 00:32:37,640 Speaker 4: So you mentioned the federal budget. What is the aim 577 00:32:37,720 --> 00:32:39,640 Speaker 4: here on the part of the government. What are they 578 00:32:39,680 --> 00:32:40,480 Speaker 4: trying to achieve? 579 00:32:40,920 --> 00:32:44,480 Speaker 9: Well, I guess the key aim is reelection, So we 580 00:32:44,520 --> 00:32:48,720 Speaker 9: think the government will swiftly follow this budget by announcing 581 00:32:48,760 --> 00:32:53,600 Speaker 9: an election, possibly with an election campaign over the coming 582 00:32:53,600 --> 00:32:57,720 Speaker 9: weeks and appolling date sometime in May. But what have 583 00:32:57,760 --> 00:33:01,080 Speaker 9: they done in this budget, Well, they have kept the 584 00:33:01,120 --> 00:33:06,160 Speaker 9: fiscal position relatively unchanged. That is that they've banked some 585 00:33:06,240 --> 00:33:10,080 Speaker 9: revenue upgrades from commodity prices and a stronger labor market, 586 00:33:10,320 --> 00:33:14,520 Speaker 9: and they've plowed those extra tax receipts into some more 587 00:33:14,560 --> 00:33:18,600 Speaker 9: spending and some tax cuts, small tax cuts for individuals, 588 00:33:18,960 --> 00:33:24,360 Speaker 9: some further support on power price relief for households, and 589 00:33:24,400 --> 00:33:28,800 Speaker 9: then additional spending on making doctors visits cheaper, some more childcare. 590 00:33:29,160 --> 00:33:34,520 Speaker 9: All very popular election goody type spending. Not a lot 591 00:33:34,520 --> 00:33:37,000 Speaker 9: of it though, and not enough spending to move the 592 00:33:37,080 --> 00:33:40,080 Speaker 9: dial from a macro perspective and worry the RBA. But 593 00:33:40,120 --> 00:33:42,720 Speaker 9: I guess the government's hoping that that spending is enough 594 00:33:43,080 --> 00:33:45,800 Speaker 9: to sound good and entice voters at the ballot box. 595 00:33:46,000 --> 00:33:48,400 Speaker 4: So you teased out some of the winners as a 596 00:33:48,440 --> 00:33:51,440 Speaker 4: result of this federal budget. Who would the losers be? 597 00:33:52,040 --> 00:33:55,800 Speaker 9: Yeah, losers in the budget, I guess Within the housing 598 00:33:55,840 --> 00:33:58,320 Speaker 9: construction sector. There had been some hopes that there would 599 00:33:58,320 --> 00:34:03,160 Speaker 9: be some further measures to help boost construction. We didn't 600 00:34:03,200 --> 00:34:07,520 Speaker 9: really see anything there. Over all, though, what the budget 601 00:34:07,520 --> 00:34:14,160 Speaker 9: didn't deliver is any concrete, sustained microeconomic reforms. There was 602 00:34:14,200 --> 00:34:18,719 Speaker 9: some good work done on competition policy, but none on 603 00:34:18,920 --> 00:34:22,040 Speaker 9: sort of the real deep seated issues around reigning in 604 00:34:22,040 --> 00:34:25,040 Speaker 9: the structural deficit for the policy. With an election looming, 605 00:34:25,239 --> 00:34:29,839 Speaker 9: the government has tried to minimize the obvious losers and 606 00:34:29,880 --> 00:34:32,320 Speaker 9: that's sort of what stands out to us from the 607 00:34:32,400 --> 00:34:33,360 Speaker 9: latest budget offering. 608 00:34:33,640 --> 00:34:35,879 Speaker 4: James, I'm curious to get your take on what you're 609 00:34:35,920 --> 00:34:39,080 Speaker 4: hearing as it relates to US tariffs that that seems 610 00:34:39,160 --> 00:34:42,319 Speaker 4: to be the looming threat right now. Australia's Treasurer Jim 611 00:34:42,480 --> 00:34:45,400 Speaker 4: Chalmers was making some comments in the last week. Is 612 00:34:45,440 --> 00:34:48,360 Speaker 4: there a position that the government has or are there 613 00:34:48,560 --> 00:34:51,839 Speaker 4: areas open to some type of negotiation should it come 614 00:34:51,880 --> 00:34:52,120 Speaker 4: to that. 615 00:34:52,520 --> 00:34:56,480 Speaker 9: The government is looking to stay friends with the administration 616 00:34:56,880 --> 00:34:59,080 Speaker 9: and do all the right things. Australia does do the 617 00:34:59,160 --> 00:35:02,239 Speaker 9: right things when it to what the US administer, the 618 00:35:02,280 --> 00:35:05,160 Speaker 9: Trump administration might want. We run a trade deficit with 619 00:35:05,200 --> 00:35:09,000 Speaker 9: the US. We have been lifting out defense spending, but 620 00:35:09,080 --> 00:35:13,799 Speaker 9: we also provide major contributions to defense bases and expenditure 621 00:35:14,040 --> 00:35:17,680 Speaker 9: for US troops that are stationed here. As the US 622 00:35:17,719 --> 00:35:21,919 Speaker 9: military has been undertaking a Pacific pivot for some time 623 00:35:22,000 --> 00:35:25,600 Speaker 9: now to count to muscle up to China, Australia is 624 00:35:25,640 --> 00:35:28,239 Speaker 9: part of that effort. When it comes to tariffs. We're 625 00:35:28,239 --> 00:35:31,840 Speaker 9: not retaliating, and what the government is doing is trying 626 00:35:31,880 --> 00:35:36,239 Speaker 9: to offer support to affected industries. There aren't many in 627 00:35:36,280 --> 00:35:40,759 Speaker 9: Australia but steel, aluminium, and possibly, depending on how the 628 00:35:40,800 --> 00:35:44,680 Speaker 9: April to Liberation Day tariffs play out, possibly the beef 629 00:35:44,760 --> 00:35:48,280 Speaker 9: sector as well. Whilst in the background doing the legwork 630 00:35:48,360 --> 00:35:52,280 Speaker 9: with the US administration to try to win some exemptions 631 00:35:52,320 --> 00:35:54,399 Speaker 9: and some favor in Australia's way. We don't know how 632 00:35:54,400 --> 00:35:56,400 Speaker 9: it's going to go yet, but that's the path that 633 00:35:56,440 --> 00:35:58,800 Speaker 9: the government is trying to very gently tread. 634 00:35:59,000 --> 00:36:01,200 Speaker 4: Before I let you go, we know that the Chinese 635 00:36:01,280 --> 00:36:05,640 Speaker 4: economy seems to be exhibiting some sign of renewal. I 636 00:36:05,719 --> 00:36:07,880 Speaker 4: don't know if it's durable or not. Yes, there is 637 00:36:07,920 --> 00:36:10,959 Speaker 4: still the problem with the property market, but certainly high 638 00:36:10,960 --> 00:36:14,920 Speaker 4: tech stocks are telling kind of an enlightening story perhaps, 639 00:36:15,040 --> 00:36:17,680 Speaker 4: and I'm curious as to whether or not this is 640 00:36:17,719 --> 00:36:21,920 Speaker 4: having any ripple effect on Australia's economy right now. The 641 00:36:21,920 --> 00:36:24,480 Speaker 4: fact that China seems to be doing a little bit better. 642 00:36:24,800 --> 00:36:29,080 Speaker 9: Nothing major in terms of signs within the economic the 643 00:36:29,120 --> 00:36:31,800 Speaker 9: hard economic data yet, but within the soft economic data 644 00:36:32,920 --> 00:36:38,600 Speaker 9: we can see that the confidence remaining relatively positive in Australia. 645 00:36:38,840 --> 00:36:41,720 Speaker 9: Domestic rate cuts are helping on the consumer side of things, 646 00:36:42,120 --> 00:36:44,479 Speaker 9: but there would be a great deal of concern within 647 00:36:44,560 --> 00:36:47,440 Speaker 9: business and consumer sentiment, a great hit to business and 648 00:36:47,480 --> 00:36:51,759 Speaker 9: consumer sentiment were was China to be showing signs of 649 00:36:52,880 --> 00:36:57,920 Speaker 9: not looking very very strong or the economy perhaps faltering 650 00:36:57,920 --> 00:37:01,560 Speaker 9: a bit. Policy moves from the Chinese authorities to deliver 651 00:37:01,680 --> 00:37:05,880 Speaker 9: more stimulus of very very welcome news to Australia. So 652 00:37:05,880 --> 00:37:08,080 Speaker 9: we're seeing that sort of in the confident side of things. 653 00:37:08,120 --> 00:37:12,279 Speaker 9: Whether that translates into the hard economic data, it still 654 00:37:12,320 --> 00:37:14,280 Speaker 9: remains a bit of a wait and see, I think. 655 00:37:14,440 --> 00:37:16,279 Speaker 4: James, thank you so much for taking the time to 656 00:37:16,360 --> 00:37:19,160 Speaker 4: chat with us as we look ahead to the RBA decision. 657 00:37:19,360 --> 00:37:23,200 Speaker 4: Bloomberg's James McIntyre. There he covers Australia and New Zealand 658 00:37:23,600 --> 00:37:26,680 Speaker 4: for Bloomberg Economics. I'm Doug Prisner. You can catch us 659 00:37:26,719 --> 00:37:30,600 Speaker 4: weekdays for the Daybreak Asia podcast. It's available wherever you 660 00:37:30,640 --> 00:37:32,280 Speaker 4: get your podcast. Tom. 661 00:37:32,760 --> 00:37:34,960 Speaker 2: Thank you Doug, and that does it for this edition 662 00:37:35,000 --> 00:37:37,800 Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning 663 00:37:37,800 --> 00:37:39,920 Speaker 2: at five am Wall Street Time for the latest on 664 00:37:40,040 --> 00:37:42,680 Speaker 2: markets overseas and the news you need to start your day. 665 00:37:43,040 --> 00:37:46,120 Speaker 2: I'm Tom Busby. Stay with US. Top stories and global 666 00:37:46,160 --> 00:37:49,440 Speaker 2: business headlines are coming up right now