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Speaker 1: This is the Bloomberg Daybreak Asia podcast. I'm Doug Prisner.

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Speaker 1: You can join Brian Curtis and myself for the stories,

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Speaker 1: making news and moving markets in the APEC region. You

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Speaker 1: can subscribe to the show anywhere you get your podcast

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Speaker 1: and always on Bloomberg Radio, the Bloomberg Terminal, and the

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Speaker 1: Bloomberg Business App. We bring in our guest, Katrina l

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Speaker 1: senior economist at Moody's Analytics, who joins us from Sydney. Katrina,

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Speaker 1: good of you to make time for us. So we've

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Speaker 1: got two stories to try to unpack here, one inflation,

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Speaker 1: the other deflation. And I'm going to begin with the

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Speaker 1: inflation story, and whether you feel confident now that we

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Speaker 1: are not going to see a re emergence of higher

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Speaker 1: prices or upward pressure on prices, that you feel relatively

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Speaker 1: confident that global central banks in countries like Australia, US,

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Speaker 1: South Korea even have done a reasonable job at getting

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Speaker 1: inflation under control. Is that a fair statement.

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Speaker 2: Yes, I think that is fair to say. I mean,

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Speaker 2: what we've seen is that inflation across most of the

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Speaker 2: developed world is really now on that nice entrench downtrend.

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Speaker 2: So what we're talking about now you know, last year

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Speaker 2: was all about how many more rate hikes are we

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Speaker 2: going to see? Whereas twenty twenty four is all about

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Speaker 2: when will this well anticipated you know, rate cutting cycle begin.

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Speaker 2: I think that's really going to be the story of

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Speaker 2: this year. And I think, you know, we're all waiting

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Speaker 2: with bated breath of when those cuts are going to

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Speaker 2: occur so that we can get you know, that constrained

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Speaker 2: domestic demands that's happening across the world start to improve.

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Speaker 3: So what's the timeline then for fit easing.

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Speaker 2: So we're expecting at this stage that we will start

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Speaker 2: to see rate cuts in the US start from May,

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Speaker 2: so you know, it could be pushed out slightly because

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Speaker 2: what we're seeing is that because inflation and because the

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Speaker 2: jobs market is cooling quite nicely, the FED doesn't actually

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Speaker 2: need to rush when it comes to cutting rates because

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Speaker 2: the economy is not falling in a heap. It's holding

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Speaker 2: quite resilient. So I think the longer they wait, the

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Speaker 2: more comfortable they'll be with making sure that inflation is

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Speaker 2: really where it needs to be. They don't need to

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Speaker 2: kind of, you know, move more quickly to cut rates

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Speaker 2: to support the economy because it is holding resilient, so

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Speaker 2: may at this stage is where we're expecting the first

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Speaker 2: rate cut to occur.

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Speaker 1: So compare and contrast what we're seeing or what you

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Speaker 1: expect to happen in the US with what you're seeing

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Speaker 1: out out your back door there in Sydney.

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Speaker 2: Yeah, so in Sydney it's actually a similar story. So

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Speaker 2: we are seeing that inflation is on that downtrend in Australia.

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Speaker 2: I mean, it's not quite as cool as where we're

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Speaker 2: seeing it in the US, but it is getting there.

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Speaker 2: It's holding about four percent, so it's not quite back

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Speaker 2: to the RBA's magical two to three percent inflation target

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Speaker 2: yet and so for that reason, because it's not as

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Speaker 2: old on that clear down trend just yet and where

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Speaker 2: it needs to be, we are expecting in Australia that

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Speaker 2: we won't see a rate cut occur until September. So unfortunately,

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Speaker 2: if our households over here, they do still have some

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Speaker 2: time with that extremely elevated rate environment.

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Speaker 3: Although of course we didn't suffer as as higher rates

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Speaker 3: here in Australia as the rest of the world did.

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Speaker 3: The RBA was a bit more gentle with us. But

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Speaker 3: we've got some jobs numbers coming out here for January

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Speaker 3: in Australia, the rate scene ticking up. Where do you

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Speaker 3: see that leveling out?

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Speaker 2: Yeah, so we're expecting that the unemployment rate in Australia

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Speaker 2: will actually end the year at about four point two percent,

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Speaker 2: So it's not that much higher from where it is

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Speaker 2: at the moment, in that sub four percent range. And

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Speaker 2: a consequence of that is that while household spending has

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Speaker 2: certainly pulled back, it hasn't pulled back as much as

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Speaker 2: we could have expected if we had seen more deterioration

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Speaker 2: in the labor market, because you know, that labor market

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Speaker 2: is really such an important firewall between households just cooling

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Speaker 2: spending and households going down a darker path, because we

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Speaker 2: all know it's one thing to be spending more on

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Speaker 2: goods and services in an elevated inflation environment, more on

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Speaker 2: repaying your mortgage, but it's quite another if you lose

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Speaker 2: your job. And because we're not seeing that mass job

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Speaker 2: setting in Australia and also in many places overseas like

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Speaker 2: the US, we have seen a slowing in household consumption,

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Speaker 2: but not a really decent pullback, which is why these

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Speaker 2: global recession odds have also been paired back quite substantially

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Speaker 2: as well.

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Speaker 1: Speaking of dark paths, I guess you could say that

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Speaker 1: about the deflation story in China. I mean, we've been

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Speaker 1: kind of in deflation on the wholesale level for more

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Speaker 1: than a year, and now it's intractable, it seems on

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Speaker 1: the retail level. Is this a significant headwind do you

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Speaker 1: think for the Chinese economy or is this something that

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Speaker 1: central bank policy, aggressive central bank policy can reverse.

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Speaker 2: Yeah, it's a really interesting question, and I think what

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Speaker 2: we've seen from from Chinese policy makers is that they're

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Speaker 2: not going to deliver that really aggressive stimulus on the

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Speaker 2: monetary fund or the fiscal front, and so we do

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Speaker 2: have a significant demand problem in China. And so you know,

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Speaker 2: it's it's problematic because on the one hand, in the

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Speaker 2: developed world, we're talking about how it's it's so wonderful

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Speaker 2: that inflation has called but in China we're almost talking

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Speaker 2: about the reverse problem of you know, prices have falling

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Speaker 2: too much. And I think what we're what we're seeing

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Speaker 2: in China is the problem of deflation. If it gets

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Speaker 2: too entrenched, we'll see policy makers have an even bigger

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Speaker 2: problem on their hand, because you know, we're starting to

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Speaker 2: see the beginnings of If households start to believe that,

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Speaker 2: you know, prices will keep falling on a sustained basis,

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Speaker 2: they'll also delay purchases, and you know that will impact

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Speaker 2: businesses and at the same time we'll also see real

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Speaker 2: rates rise, and that's problematic because the PBOC is actually

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Speaker 2: actively trying to ease that that credit environment in China.

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Speaker 2: So you know, lots of problems there that I think

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Speaker 2: we'll need to get addressed over the course of this

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Speaker 2: year if we are actually going to see domestic demand

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Speaker 2: in China start to stabilize.

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Speaker 3: Of course, it is Lunar New Year. This week in China,

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Speaker 3: market through on a holiday, and so are people, so

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Speaker 3: they're traveling, they're spending more. When the data from this

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Speaker 3: Lunar New Year gets unpacked, what do you expect to

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Speaker 3: learn about the state of the Chinese economy.

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Speaker 2: So I think that the forward indicators around Lunar New

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Speaker 2: Year travel and projected spending have been quite positive because

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Speaker 2: we're not having the same sort of restrictions domestically on

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Speaker 2: travel and also international travel as well. So that's a positive.

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Speaker 2: But it's really a question of will that improved exuberance

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Speaker 2: from this year compared to last year. When it comes

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Speaker 2: to households, if that's actually going to be sustained beyond

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Speaker 2: the lunar New Year break, and unfortunately, we're just not

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Speaker 2: thinking that it will because we're seeing that households are

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Speaker 2: still incredibly cautious. But also you know, private businesses as

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Speaker 2: well are cautious, and then that's of course holding back

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Speaker 2: the jobs market. So again we're in this problematic cycle

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Speaker 2: of weak demand that's continuing to ensure that the Chinese

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Speaker 2: economy continues to underperform. And so that's why, you know,

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Speaker 2: we're really waiting on policymakers to deliver more meaningful stimulus,

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Speaker 2: and we've seen it in some degree. We are seeing

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Speaker 2: increased support to the property market, particularly to developers, but

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Speaker 2: it is still quite constrained to the point where it's

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Speaker 2: not going to reinvigorate the Chinese economy unfortunately, it's just

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Speaker 2: going to hopefully trying to rest this ongoing decline.

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Speaker 1: It's certainly reminiscent of what Japan went through more than

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Speaker 1: thirty years ago, and I'm sure that policymakers in China

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Speaker 1: have studied the history books and when you look at

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Speaker 1: the debt to GDP numbers. I think China right now

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Speaker 1: it's around two hundred and eighty seven percent. I mean,

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Speaker 1: it's flirting with three hundred percent. And that is probably

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Speaker 1: one of the apt comparisons to make when you look

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Speaker 1: at what China is now going through versus what Japan

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Speaker 1: went through three decades ago. Is there a real risk that,

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Speaker 1: like Japan, China gets stuck in in a deflationary trap

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Speaker 1: that could last decades.

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Speaker 2: I mean, at this stage, when you know, we don't

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Speaker 2: see that as a real risk. We see that more

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Speaker 2: as a tail risk. But it's certainly a concern the

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Speaker 2: longer that China continues to underperform. And also it remains

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Speaker 2: a concern the until China can get some of these

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Speaker 2: these fundamental structural imbalances in their economy, until they can

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Speaker 2: actually improve those and I'm thinking here in particular about

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Speaker 2: the property market. If they can't kind of bring that

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Speaker 2: back to a sustainable level and come up with new

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Speaker 2: growth drivers as well, then I think we do have

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Speaker 2: a significant problem. That's kind of Japan era esque because

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Speaker 2: you know, if we're looking at the market, for instance,

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Speaker 2: it used to be such a critical growth driver, accounting

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Speaker 2: for around twenty five percent of GDP, but now, of

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Speaker 2: course it's in this deep correction territory forward indicator's point

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Speaker 2: to ongoing correction. We're seeing private businesses. Investment from private

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Speaker 2: businesses as well is particularly weak, and so we're kind

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Speaker 2: of looking around for, Okay, what's going to take the

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Speaker 2: place of the property market as such a critical growth driver,

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Speaker 2: and nothing is really standing out at this point, and

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Speaker 2: so I think we need to see that, whether it's

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Speaker 2: households coming to the party, or whether it's you know,

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Speaker 2: high tech industries, we need to see something else to

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Speaker 2: take the place to kind of arrest this beary sentiment

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Speaker 2: in China that's really seems to have taken a life

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Speaker 2: of its own in the past couple of months.

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Speaker 3: Very quickly, Katrina, thirty seconds, we've got Japan GDP this week.

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Speaker 3: You mentioned Japan. Is that economy ready for the end

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Speaker 3: of negative rates or is this pretty much symbolic?

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Speaker 2: Great question. I don't think they have a choice. I

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Speaker 2: think that nega their rates are coming whether they like

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Speaker 2: it or not, and we are looking at it at

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Speaker 2: least a zero point one percent contraction from fourth quarter

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Speaker 2: GDP data release this week.

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Speaker 1: Katrina, thanks for making time to chat. Whether there's always

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Speaker 1: a pleasure. Katrina l senior economist at Moody's Analytics, joining

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Speaker 1: us from Sydney here on a debreak Gasha.

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Speaker 3: We're joined now by Garfield Reynolds, Bloomberg chief correspondent for rates,

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Speaker 3: here to talk about what else the markets and Garfield,

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Speaker 3: I want to start our neck at the woods. We've

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Speaker 3: got Australian bonds declining right now. What's there a function

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Speaker 3: of exactly? I mean, we don't have many other markets

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Speaker 3: open at the moment. Is this is just where the

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Speaker 3: money's flowing at the moment.

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Speaker 4: Yeah, Paul. It's a bit of a follow on from

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Speaker 4: what went on on Friday when your bonds declined in

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Speaker 4: the US. That was even after some CPI revisions came

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Speaker 4: in without causing any concerns that inflation might not be

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Speaker 4: slowing down. And you even have people saying after those

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Speaker 4: came out that this cements the case for FED rate cuts.

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Speaker 4: But bonds right now are extremely nervous worldwide, as policy

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Speaker 4: makers including the FED and the RBA as well last

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Speaker 4: week pushed back hard against the idea that they're about

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Speaker 4: to cut rates. So with US CPI coming up on

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Speaker 4: Tuesday in the US and more FED speakers as well.

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Speaker 4: That's enough reason for investors to be nervous about bonds.

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Speaker 4: You could probably even add in despite the fact that

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Speaker 4: oil is down slightly today. Oil has climbed quite a

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Speaker 4: bit in recent days, and that's particularly nasty for bonds

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Speaker 4: because that has such a strong link to inflation expectations.

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Speaker 3: Yeah.

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Speaker 1: One of the other things I think that is very

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Speaker 1: much in front of mind for the market here is

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Speaker 1: the idea of stress in the financial system as it

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Speaker 1: relates to well, consumer I mean commercial real estate. But

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Speaker 1: I'm looking at a story on the Bloomberg talking about

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Speaker 1: the shadow banking industry in the US loaning more than

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Speaker 1: a trillion dollars through the end of January. Now, a

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Speaker 1: year ago that figure was less than nine hundred billion,

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Speaker 1: So there continues to be an increase in the extension

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Speaker 1: of credit beyond kind of the conventional banking system. So

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Speaker 1: put that kind of on one side, and then introduce

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Speaker 1: or reintroduce the idea that since the New York Community

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Speaker 1: Bank story kind of captured investors' imaginations, I mean, it

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Speaker 1: goes to the issue of a lot of commercial real

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Speaker 1: estate debt that needs to be rolled over, and I

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Speaker 1: think that for the FED they would like to be

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Speaker 1: able to get out in front. If there is the

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Speaker 1: potential for easing, that it needs to happen sooner rather

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Speaker 1: than later.

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Speaker 4: Well, I mean the difficulty there too is is something

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Speaker 4: that we're all used to the idea that the yield

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Speaker 4: curve is inverted, supposedly warning of a recession. It's been

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Speaker 4: inverted for almost the longest on record since July twenty

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Speaker 4: twenty two. And the thing about that is that banks

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Speaker 4: are in the business normally of borrowing short to lend long.

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Speaker 4: So if short term yields are above long term yields

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Speaker 4: in the regular markets, that makes that a much harder

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Speaker 4: your business to be in. You have to find some

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Speaker 4: way around that. How do you lend for five years

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Speaker 4: if it's going to cost you more than you can

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Speaker 4: get to borrow for two years. So in that sort

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Speaker 4: of a situation, you get people turning to the shadow

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Speaker 4: banking sector. You're trying to find people who are more

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Speaker 4: willing to lend.

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Speaker 3: As policy starts to normalize, do you anticipate that that

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Speaker 3: your curve and version is getting near the end.

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Speaker 4: You would think it would be, although again it's already

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Speaker 4: the longest on record from the trough assuming the trough

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Speaker 4: was the one hundred and nine basis point inversion back

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Speaker 4: in March, until we get back to zero, and it's

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Speaker 4: proved very very sticky. The concern for the bond market

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Speaker 4: is that you might not get the sort of rapid

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Speaker 4: resteepening which has usually accompanied an end to the yield curve.

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Speaker 4: And the big question again is do we get it

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Speaker 4: happening with the bond market selling off, because there are

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Speaker 4: a lot of risks out there that people are looking

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Speaker 4: past that could lead to yield jumping in the something

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Speaker 4: like the way they did last year. We still have

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Speaker 4: too much debt out there. We still have the concern

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Speaker 4: that Japanese investors might head back to Japan once the

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Speaker 4: boj n's negative rates there. We still have the potential

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Speaker 4: for concerns about oil if oil continues to move higher.

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Speaker 4: So the bond market and other markets are very much

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Speaker 4: positioned for the idea that the yel curve will disinvert,

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Speaker 4: and then it will do so in the standard sort

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Speaker 4: of ways. But it's not all clear that we will

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Speaker 4: get that standard this inversion because there are a lot

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Speaker 4: of things about the way things are going at the

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Speaker 4: moment that are very far from being standard.

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Speaker 1: So let's change locale and talk about risk. The deflationary

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Speaker 1: story in China. Do you think that that's a big

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Speaker 1: risk for markets right now outside of China.

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Speaker 4: I think very much. So it's not at all clear

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Speaker 4: that they can turn that around. Some of it is

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Speaker 4: to do with you talked about commercial real estate. All

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Speaker 4: real estate in China is in a problematic state. And

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Speaker 4: part of that too is that demographics have turned against China,

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Speaker 4: so they don't have that population growth that can help

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Speaker 4: them to get out of it. And the biggest concern

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Speaker 4: in a lot of ways for foreign economies is that

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Speaker 4: the latest concentration within China has been on turning the

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Speaker 4: market around, doing things like discouraging what's selling, encouraging your sovereign,

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Speaker 4: your state backed companies to buy shares, encouraging others to

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Speaker 4: bring money back from offshore to buy shares without there

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Speaker 4: being anybody going, yeah, you should bring your money back

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Speaker 4: because we know how to solve these problems. So when

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Speaker 4: you have China, the world's second largest economy and the

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Speaker 4: overwhelming driver for global growth after the last twenty years,

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Speaker 4: in that sort of a situation, that has to raise

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Speaker 4: a lot of red flags.

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Speaker 3: All right, Gunfield Reynolds, Bloomberg chief correspondent for rates. Thanks

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Speaker 3: so much for joining us here in the Sydney studio.

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Speaker 1: Well. Last Friday, Israel's credit rating was downgraded for the

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Speaker 1: first time ever. This is going to complicate the process

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Speaker 1: of the country's debt sales. Israel will have to sell

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Speaker 1: a near record amount of bonds this year to fund

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Speaker 1: its war against Hamas. Let's take a closer look. Now,

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Speaker 1: joined by Bloomberg's Michael Heath, who covers the economy and

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Speaker 1: the government. He's one of our editors, joining us from

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Speaker 1: our newsroom in Sydney. Michael, thanks for joining us. First,

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Speaker 1: the basis of the downgrade. This is Moody's Investor Service,

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Speaker 1: right Where did they cite as the rationale for lowering

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Speaker 1: the credit rating?

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Speaker 5: Good Doug, Yeah, I mean the main thing, I guess

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Speaker 5: is the fiscal impact of the war, though they do

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Speaker 5: talk about the material rise in political risk and the

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Speaker 5: potential for it to weaken the executive and legislative institutions,

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Speaker 5: which is it's a little bit unusual, I guess in

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Speaker 5: a way. I mean the fiscal side. You can understand

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Speaker 5: obviously we've had three hundred thousand reservists called up. Those

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Speaker 5: guys are at war, they're not in their jobs, they're

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Speaker 5: not earning paying taxes, that sort of thing, plus the

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Speaker 5: military expenditure, So that side of it sort of makes sense.

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Speaker 5: The political side is sort of harder to gauge. I mean,

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Speaker 5: whether it's it's directly talking about the unpopularity of the

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Speaker 5: current government, polls are showing that it would lose an

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Speaker 5: election now, or the judicial review that was causing a

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Speaker 5: lot of up people in Israel prior to the war

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Speaker 5: breaking out, it's just not clear. But obviously, the longer

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Speaker 5: the war goes on, it's a fairly the government is

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Speaker 5: fairly right wing there includes some fringe parties. So the

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Speaker 5: longer it goes on, perhaps they just worry about about

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Speaker 5: how things are going to operate legislatively and politically there.

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Speaker 5: But the fiscal side, I think is fairly clear now

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Speaker 5: with Israel, one of its advantages is it does tend

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Speaker 5: to fund its budget and its debt from heavily from

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Speaker 5: domestic sources, so it's not going to do a lot

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Speaker 5: to it in terms of the rates that's paying and

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Speaker 5: that sort of thing. But you know, the longer this

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Speaker 5: war goes on and there's talk of it lasting through

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Speaker 5: this year, the harder it's going to get for the economy.

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Speaker 1: There, yeah, no doubt about it. And with a kind

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Speaker 1: of weaker economic activity, I'm going to imagine that the

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Speaker 1: tax revenues will begin to declining, and that's only going

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Speaker 1: to put for the stress on the system, right.

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Speaker 5: Yeah, exactly when you hit from two fronts, aren't You've

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Speaker 5: got increased military expenditure, you know, Plus you've got decreased

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Speaker 5: revenue obviously from and businesses struggle obviously in a war

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Speaker 5: zone as well outside of not having those employees who

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Speaker 5: are paying tax and that sort of thing. So it's

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Speaker 5: a bit of a pencil movement on the budget there,

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Speaker 5: and it is going to get hard. But I mean,

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Speaker 5: Israel's economy is pretty impressive and it's pretty resilient, so

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Speaker 5: you'd assume that it will bounce back. I mean, perhaps

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Speaker 5: promised you know who might have been you know, studying

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Speaker 5: a bit to being a bit too sleik and saying

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Speaker 5: it's just the war and there's potentially a bit more

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Speaker 5: going on with Israel politically there. But nonetheless he does

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Speaker 5: have a good point that the war is the key

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Speaker 5: issue here.

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Speaker 1: So as we look at the future in these bond sales.

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Speaker 1: Will there be greater pressure do you think applied on

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Speaker 1: the part of the government to buy or on rather

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Speaker 1: Israeli pension funds and institutional investors.

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Speaker 5: Well, my understanding is that they're pretty good about buying

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Speaker 5: that as well. I mean, they've got a lot of money,

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Speaker 5: and the Ofment's obviously you know, don't it has a

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Speaker 5: very very good fiscal record and debt record and that

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Speaker 5: sort of thing. But yes, I think they would definitely

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Speaker 5: be very keen for domestic domestic funds to be buying

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Speaker 5: this debt because obviously, once you go off shore you're

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Speaker 5: paying higher rates. It puts even more strain on the budget.

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Speaker 5: And you know, the downgrade was sort of priced in

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Speaker 5: by markets to some extent. It hasn't had a huge

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Speaker 5: there hasn't been been much of a reaction at this stage.

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Speaker 5: But the longer this goes on, you know, as you

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Speaker 5: have to go on buying overseas, sorry, buying get overseas,

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Speaker 5: and as I guess the world starts to get more

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Speaker 5: critical of Israel with this war as well, perhaps it

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Speaker 5: causes a bit more difficulty there. So they'd definitely be

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Speaker 5: keen on the on the domestic investors buying it yet, So.

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Speaker 1: What has the central bank been doing to support economic

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Speaker 1: growth at a time of war? And I'm wondering about

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Speaker 1: the role the currency plays and all of this as well.

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Speaker 5: Well, Yeah, it's really quite interesting when Israel's currency actually

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Speaker 5: has has bounced back. I mean it took a hit

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Speaker 5: initially with the attack and with the war, and you know,

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Speaker 5: as markets globally sort of everyone's quite shocked obviously at

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Speaker 5: what happened in that early October period. It's actually since

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Speaker 5: bounced back and the Israel actually carent rates recently. So

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Speaker 5: the central Bank is a pretty pretty well regarded institution

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Speaker 5: and its response was was fairly measured as well to Moody.

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Speaker 5: So you know, I think I think that they're they're

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Speaker 5: one of the one of the strong pillars of the

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Speaker 5: of the institutional system there.

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Speaker 1: So in terms of ensuring Israeli sovereign credit, have you

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Speaker 1: seen a move in the credits default swaps market? I mean,

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Speaker 1: his insurance on these bonds become a little more expensive.

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Speaker 5: Look, I haven't looked lately, but I think they had

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Speaker 5: edged up a tad. There haven't been as I mentioned,

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Speaker 5: there hasn't been a huge, a huge response because there

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Speaker 5: had been a pricing in for the downgrade, so so

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Speaker 5: the impact should be fairly limited either way. But you'd

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Speaker 5: imagine that, you know, the longer this goes on, for

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Speaker 5: the more pressure that we'll come on those fronts.

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Speaker 1: Yeah, you mentioned the fact that the expectations are we

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Speaker 1: could be looking at another year of this. It's interesting that,

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Speaker 1: you know, from the American side, and I don't think

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Speaker 1: the United States is alone in this in calling for

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Speaker 1: a cease fire, but that doesn't seem to be something

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Speaker 1: that would would likely happen at this point, does it.

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Speaker 5: No, No, it's a really interesting one, isn't it. I Mean,

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Speaker 5: I think sometimes with President Biden, his first comments are

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Speaker 5: often his right ones, and when he was talking about

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Speaker 5: Israel's some of its military actions recently being over the top,

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Speaker 5: I think he was saying what he really thought there.

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Speaker 5: And obviously there's this discussion about Israel moving into Rufa,

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Speaker 5: which is sort of right down the end of the

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Speaker 5: Gaza Strip near the Egyptian border, and that's where most

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Speaker 5: of the refugees during the fighting have all gathered, so

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Speaker 5: you've got more than a million people there. Israel's talking

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Speaker 5: about going in there to get rid of the remaining

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Speaker 5: or the Hummust militants who are hiding among those refugees. Now,

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Speaker 5: obviously that's probably almost certainly the case that that's what

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Speaker 5: they're doing. The problem is that, you know, the US,

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Speaker 5: the UK Arab countries, they want Israel to provide a

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Speaker 5: safe area for these civilians. Now promise Natnya who said, yes,

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Speaker 5: we're providing that north of Rafa. But the problem is

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Speaker 5: that over this three months or nearly four months this

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Speaker 5: conflict's gone on, there's a bit of a credibility gap

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Speaker 5: between what Israel says is available to these civilians and

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Speaker 5: what in reality is available to them. And I think

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Speaker 5: that's really what's worrying the US and UK. I mean,

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Speaker 5: UK came out with a statement and obviously President Biden

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Speaker 5: has as well. They really want Israel to avoid really

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Speaker 5: heavy bloodshed here, and it's very difficult to see how

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Speaker 5: that will happen with so many civilian people in such

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Speaker 5: a small area. So it's really really quite concerning that

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Speaker 5: that situation, and I think Israel's going to have to

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Speaker 5: play this very very carefully because we're sort of almost

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Speaker 5: at a pivot point internationally where people are starting to

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Speaker 5: get twenty seven thousand deaths, even if it's humas reporting

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Speaker 5: that there's a lot of people who've died in that

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Speaker 5: area and the tolerance for it, I think is starting

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Speaker 5: to wane.

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Speaker 1: No doubt about that. Michael will leave it there. Thank

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Speaker 1: you so much for making time to chat with. It's

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Speaker 1: Michael Heath, Bloomberg Economy and Governor Editor, coming to us

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Speaker 1: from Sydney. This has been the Bloomberg Daybreak Asia podcast,

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Speaker 1: bringing you the stories making news and moving markets in

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Speaker 1: the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube

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Speaker 1: to get more episodes of this and other shows from Bloomberg.

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Speaker 1: Subscribe to the podcast on Apple, Spotify, or anywhere else

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Speaker 1: you listen and always on Bloomberg Radio, the Bloomberg Terminal,

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Speaker 1: and the Bloomberg Business App.