Speaker 1: Already and this is this is the Daily This is.
Speaker 2: The Daily ohs oh, now it makes sense. Good morning
Speaker 2: and welcome to the Daily OS. It's Wednesday, the eighteenth
Speaker 2: of December. I'm Sam, I'm Zara. We're almost at the
Speaker 2: end of twenty twenty four and as the impacts of
Speaker 2: the COVID pandemic started to fade, there were hopes at
Speaker 2: the beginning of the year that the economic damage caused
Speaker 2: by the three year interruption would reverse and it would
Speaker 2: be a year of economic recovery, growth, innovation and opportunity. Well,
Speaker 2: that wasn't quite the case. It was a tough year
Speaker 2: for the Australian economy, with headlines about inflation, cost of living, housing, affordability,
Speaker 2: and wealth inequality dominating the headlines.
Speaker 1: Those are a bunch of topics that we have spoken
Speaker 1: about on this podcast at various points throughout the year,
Speaker 1: and we've brought you updates and explanations and the stories
Speaker 1: behind each of those topics. But as we now conclude
Speaker 1: the year, where are we at.
Speaker 2: Well, if we look ahead, the tune has changed a bit.
Speaker 2: Australia's Treasurer Jim Chalmers says that the worst is behind us.
Speaker 2: Donald Trump has promised Americans a great economic year ahead,
Speaker 2: and the RBA has even signaled that it may be
Speaker 2: warming to the idea of a drop in interest rates.
Speaker 2: And so in today's pod, we're going to chat to
Speaker 2: Matt Grudnoff, he's a senior economist at the Australia Institute,
Speaker 2: about how the economy fared in twenty twenty four here
Speaker 2: in Australia, What do you think is going to happen
Speaker 2: in twenty twenty five and what's giving him hope. Matt,
Speaker 2: thanks so much for joining us today.
Speaker 3: Thanks for talking with me.
Speaker 2: Let's pretend that we're ten years into the future and
Speaker 2: somebody comes up to you and asks, what was twenty
Speaker 2: twenty four like economically? How would you answer that question?
Speaker 3: Oh, it was a bad year. I think it was
Speaker 3: a year that the economy only grew by zero point
Speaker 3: eight percent, So, I mean, that's the slowest growth we've
Speaker 3: had since way back in the nineteen nineties when we
Speaker 3: had a recession. Outside of the pandemic, of course, it
Speaker 3: was a year in which households struggled. We saw particularly
Speaker 3: housing increase, not just interest rates and mortgages, but also
Speaker 3: rents went up substantially. It was a year where household
Speaker 3: stopped spending, and household spending makes up about half of
Speaker 3: all of economic activity, so that's the reason why it
Speaker 3: grew so slowly. And in fact, in per capita terms,
Speaker 3: that is, per person, we actually went backwards for the
Speaker 3: entire year. So it was only population growth that saw
Speaker 3: the economy grow at all.
Speaker 2: And if I had you in this conversation twelve months ago,
Speaker 2: were you expecting the year to pan out in the
Speaker 2: kind of way that it did.
Speaker 3: Yeah, that's a good question. I don't know, is the
Speaker 3: short answer. But economists have constantly asked this, And what
Speaker 3: I say is macroeconomic forecasters exist to make astrologers look good.
Speaker 3: We are really bad at predicting the future. So I'm
Speaker 3: not going to pretend I would have known. But high
Speaker 3: interest rates were definitely part of it, and interest rates
Speaker 3: were high before this year, and so it was probably
Speaker 3: not a huge surprise. Those high interest rates have really
Speaker 3: dragged on households. It's made it hard for them to
Speaker 3: spend money because they're paying so much more for their mortgage,
Speaker 3: they're paying so much more in rent, and so they're
Speaker 3: just not able to spend as much of their money
Speaker 3: on all the other things they need to buy.
Speaker 2: And with an amazing year really of international news. I mean,
Speaker 2: we had the most people go to an election I
Speaker 2: think at any other point than history. There was international
Speaker 2: conflicts that continued very strongly throughout the year. Do you
Speaker 2: think that we can attribute a lot of the economic
Speaker 2: pain that were felt in Australia to those global issues? Oh?
Speaker 3: Yeah, absolutely. So this massive outbreak of inflation we've seen
Speaker 3: in Australia over the last couple of years has happened internationally.
Speaker 3: It's caused by supply side factors, is emerging from the
Speaker 3: COVID pandemic, the war in Ukraine, climate change sort of
Speaker 3: impacts with flooding and droughts, and it certainly, because it's
Speaker 3: happened all over the world, it has to have been
Speaker 3: caused by international factors. So yes, absolutely, the pain that
Speaker 3: households are feeling has more to do with international factors
Speaker 3: than domestic factors.
Speaker 2: And so do you think then, based on that logic,
Speaker 2: and based on the facts that we don't seem to
Speaker 2: be any closer to resolutions in some of those major
Speaker 2: conflicts around the world. We now have a president in
Speaker 2: the United States who is quite isolationist in his economic
Speaker 2: policy and wants to keep jobs and manufacturing in America.
Speaker 2: Do you think that that then will continue us feeling
Speaker 2: that sort of pain from global conditions.
Speaker 3: I think that next year will be better. And you know,
Speaker 3: again economists about it predicting the future. But with that
Speaker 3: in mind, I think it is going to be better
Speaker 3: next year. And the reason is is because inflation is
Speaker 3: ebbing away. We see it across the world. All countries
Speaker 3: are seeing their inflation rate come back down to a
Speaker 3: more normal level and that will continue in Australia. And
Speaker 3: when it gets back into the Reserve Bank's target band,
Speaker 3: the area of inflation they want to keep inflation at
Speaker 3: between two and three percent, then we'll see interest rates
Speaker 3: come back down, we'll see economic activity pick up, and
Speaker 3: things will get easier. But you know, look, absolutely there's
Speaker 3: going to be weird curve balls. Trump is nothing if
Speaker 3: not chaotic. We don't know what that's going to bring.
Speaker 3: But I have a feeling that it'll actually be more
Speaker 3: chaotic for people in the US that it will be
Speaker 3: for the rest of the world. But that said, I
Speaker 3: mean America is the biggest economy in the world. When
Speaker 3: weird stuff happens there, when their economy struggles. It does
Speaker 3: affect the world economy and we're part of that.
Speaker 2: We'll be back with the rest of the they dive
Speaker 2: after this short message from our sponsor speaking to a
Speaker 2: young Australian. How would you expect them to first get
Speaker 2: a bit of a signal in their daily life that
Speaker 2: things are getting a bit better.
Speaker 3: I think they'll notice that prices stop increasing. Now. It's
Speaker 3: really important to know that when we say inflations coming down,
Speaker 3: that doesn't mean that prices are going to go back
Speaker 3: to where they were last year or the year before.
Speaker 3: It just means they're stopped going up quickly.
Speaker 2: Coffee's not going back to three dollars.
Speaker 3: It is not. It is not that those days are gone.
Speaker 3: But what will happen is it probably will mean that
Speaker 3: they're wages which have actually been going up slower than inflation.
Speaker 3: That is, the amount of stuff they can buy has
Speaker 3: been shrinking. They'll start to see their wage increase faster
Speaker 3: than how fast prices are going up. If they have
Speaker 3: a mortgage, if they're lucky enough as a young person,
Speaker 3: there's unfortunately not very many of those, they might see
Speaker 3: interest rates fall. Rents probably won't be rising nearly as fast.
Speaker 3: We might see an easing on the housing the really
Speaker 3: acute tightness of housing. That's not to say that the
Speaker 3: affordability crisis will go away. We've spent twenty years screwing
Speaker 3: up the housing market. It's going to take more year,
Speaker 3: or even five years or ten years to fix the problem.
Speaker 3: But I think that the main thing they will see
Speaker 3: is that their wage will start increasing faster the prices,
Speaker 3: so they'll start getting a little bit of breathing room.
Speaker 2: Matt, do you think we're headed for a cost of
Speaker 2: living election? Let's say it's called, you know, April may ish.
Speaker 2: Do you think that's going to be the number one topic?
Speaker 3: I think definitely yes, that's going to be the number
Speaker 3: one topic. And interlinked with that because the two are
Speaker 3: one and the same is kind of a housing or
Speaker 3: a you know, the cost of housing kind of they're
Speaker 3: going to be the main election issues. I think we've
Speaker 3: seen that in all the elections that we've seen, and
Speaker 3: we've seen a lot of elections this year. We've seen
Speaker 3: that around the world. I don't think Australia is going
Speaker 3: to be any different. Voters are grumpy at the moment.
Speaker 3: They're grumpy because, you know, their standard of living has
Speaker 3: been going down, not up. You know, incumbents tend to
Speaker 3: face the pain, whether or not they're completely at fault.
Speaker 3: They tend to be the ones that cop it when
Speaker 3: voters are grumpy.
Speaker 2: Final question from me, Matt Here. At the Daily OS,
Speaker 2: we end every bulletin where we do headlines with some
Speaker 2: good news, and you and I have talked today about
Speaker 2: some troubles that the economy has experienced in twenty twenty four.
Speaker 2: You're saying things could look a little better in twenty
Speaker 2: twenty five, but it's far from a massive resurgence. Based
Speaker 2: on your economic astrology, is there something giving you hope
Speaker 2: about economic forecasts looking ahead or has there been something
Speaker 2: in twenty twenty four that's given you hope in the economy?
Speaker 3: Yeah. I think that the thing that's giving me hope
Speaker 3: is that because this inflation is a worldwide phenomenon and
Speaker 3: because it's going down all over the world, I think
Speaker 3: we're through relatively through the worst of it. That is,
Speaker 3: I think that you know, part of twenty twenty three
Speaker 3: and twenty twenty four are going to be the bad years,
Speaker 3: and that things will actually be better next year. I
Speaker 3: think that incomes are going to continue to grow faster
Speaker 3: than inflation. And I think that people won't necessarily suddenly
Speaker 3: wake up one day and everything will be great, But
Speaker 3: week by week, month by month, they're going to notice
Speaker 3: things getting better. And you know, we couldn't say that
Speaker 3: for the last year.
Speaker 2: Matt Rudnov, Senior economists at the Australia Institute, Thank you
Speaker 2: so much for your time.
Speaker 3: Thank you very much for chatting with me.
Speaker 1: Thank you for joining us on today's episode over the
Speaker 1: Daily Os taking a walk through the year that was
Speaker 1: and what will come with Australia's economy as we head
Speaker 1: into an election year. We'll be back later today, of
Speaker 1: course with the headlines, but until then, enjoy your Wednesday.
Speaker 2: My name is Lily Madden and I'm a proud Arunda
Speaker 2: Bungelung Kalguton woman from Gadighl Country. The Daily oz acknowledges
Speaker 2: that this podcast is recorded on the lands of the
Speaker 2: Gadighl people and pays respect to all Aboriginal and Torres
Speaker 2: Strait Island and nations. We pay our respects to the
Speaker 2: first peoples of these countries, both past and present.